Agriculture Committee on Dec. 5th, 2022

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Fair enough. Thank you.

Do you have an idea of the reason why food prices have risen much less in restaurants than in grocery stores?

The increase at restaurants is 13.9%, compared to 18.1% at grocery stores.

[Pierre St-Laurent]

It doesn't involve the same range of products.

In a grocery store, there are between 25,000 and 30,000 products. I don't think that is the case in every restaurant.

As well, each product is different. I can find you 25 different cost prices for chicken breasts. Agricultural producers in that field are well aware that there are different qualities and different processes. Sometimes people think it is the same product, when it is not the same.

Personally, in fact, I tend to hear the opposite. As a consumer, at least, I find that my restaurant bill is climbing faster than my grocery bill. That is a personal comment, however.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you for your answers.

Ms. Lee, you spoke earlier about a significant increase in costs, including in the case of fertilizer.

Is the 35% tax imposed on Russian fertilizer by Canada, the only G7 country to do that, seriously hurting your producers?

[Dr. Rebecca Lee]

Undeniably.

Some producers had already ordered their fertilizers before the tax was imposed. They were able to bring their products in before the new tax came into force. However, those who had not yet placed their orders had to pay that difference.

I would have to check, but from what I have heard, the other fertilizer suppliers have also raised their prices by 35%.

So yes, it has had a big effect on our producers.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Lee and Mr. Perron.

Mr. MacGregor, you have the floor.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Mr. Chair, and thank you to all of our witnesses for appearing today.

I'd like to start with you, Mr. St-Laurent.

I was looking through Empire's publicly available records. In the last prepandemic year, 2019, your company announced net profits of $387.3 million. In 2021, that jumped up quite significantly to $701.5 million. This year, it's projected to be $745.8 million. With all of the pressures of the supply chain, the increased costs, your company has still managed to approximately double its net profits.

You did say in your opening statement that your company is working on all available ways to address cost issues. I'm just trying to fit that statement within the context of your net profits going up by this considerable margin. Are you really trying to use all available ways? If your net profits are going up in such a significant way, is there not a way to redirect those profits to try to ease some of the pain that so many consumers are feeling right now?

[Pierre St-Laurent]

If I go back, our margins were even lower in 2017. The company was having serious problems.

Then we announced a fairly major restructuring project called Sunrise. We made the announcement publicly. That three-year program, from 2017 to 2020, enabled us to start over with profitability, but at a level that was still lower than our peers'. If we compare ourselves with our main competitors, our 2.5% to 2.6% margin is still lower than theirs.

In addition, over the last two quarters—I think we really reached the peak of inflation in the last six months—our net profit margins have not risen. So we have to distinguish between a corporate restructuring activity that started in 2017 and the situation in the last two quarters. It shows that we are not profiting from inflation; quite the contrary. Regardless of inflation, even at 10% or 11%, our sales were flat over the last two quarters. We are not making more sales because of inflation. Our margins and our sales are stable. Those figures appear in our quarterly reports.

I made a statement about giving the customer value. I said earlier that there were between 20,000 and 25,000 products in the store. That is the best example I can give you: a private label as opposed to a national brand. The private label will cost between 10% and 20% less than a national brand. Our job is to promote them. That is an easy way for customers to mitigate the effect of inflation on their budget. That is one example, but there are others. I could spend all afternoon telling you about them.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you. I'm sorry for giving you the signal. I want to get another question in.

We noticed that in 2015, the United States had the Congressional Research Service do studies into the relationships in retail prices. In particular, they looked at patterns of consumer behaviour. They noticed that consumers, when they're presented with two identical products at two different retailers, will, in theory, choose the one that's offered at a lower price. However, the evidence shows that they will continue to purchase products at higher prices from a preferred retailer due to constraints like time savings or convenience. They will also accept higher retail prices if there's inconvenience associated with travelling to different stores.

What I want to ask you is whether your company takes advantage of those well-documented consumer behaviours. Knowing that when a consumer is in one of your stores, they're more likely to stay there rather than suffer the inconvenience of travelling elsewhere, has your company ever taken advantage of those patterns of consumer behaviour to benefit from higher prices?

[Pierre St-Laurent]

The factors you are talking about relate to customers' purchasing preferences.

Price is a very important criterion for consumers. However, what that study shows is that consumers place value on other factors, such as customer service, the variety of products, and proximity to their home. Consumers make choices based on their preferences. Everyone around the table here makes different choices based on their preferences. That is what the study showed.

Historically, and for a host of reasons, we are more concentrated in what are called full service stores. There are butchers, cashiers, packers, and so on. Obviously, that means that our payroll on sales, as a percentage of sales, is probably double what it is for a discount store.

Some people want to get customer service when they go to a store, and I am one of those people. I also want variety, choice.

I don't judge other types of consumers. We also have discount stores to meet those needs. Variety is more limited there, prices are lower, customer service is different.

The chains chosen are different, and the study you are referring to clearly shows that each consumer chooses their supermarket based on their personal criteria.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. St-Laurent and Mr. MacGregor.

Mr. Lehoux, you now have the floor, but for only four minutes, because we are very short of time.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

Thanks to the witnesses for being here this afternoon.

My first question will be for Mr. St‑Laurent.

Do you agree with the idea of instituting a code of conduct?

[Pierre St-Laurent]

Not only do we agree with it, but we were the first ones to recommend it, two years ago.

We sat down with our suppliers...

[Richard Lehoux, Conservative, Beauce, QC]

Forgive me for interrupting you, but I have a supplementary question to ask you.

Should the code of conduct be mandatory?

[Pierre St-Laurent]

Yes, absolutely.

If you agree to a code of conduct, it has to be applied by everyone, including the American companies that do business in Canada.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you for being the precursor of the code of conduct and for recommending it.

[Pierre St-Laurent]

We were inspired by a code of conduct that already exists in the United Kingdom.

[Richard Lehoux, Conservative, Beauce, QC]

Exactly. We should perhaps look more closely at how to institute it as quickly as possible. I am pleased to hear you say that. That is what we would like to see.

You raised the question of labour, which is also a very important factor. I think it has also been mentioned by all witnesses this afternoon.

It is an issue that is raised very regularly: the problems associated with recruiting workers, particularly immigrant workers, who could come to Canada to give us a hand.

Can you provide more details about this issue?

[Pierre St-Laurent]

Everything we do to recruit more workers will be a benefit for the farmers, for the processors, and for us, the retailers. There are unfilled positions in our stores at present. In some provinces, we have as many as ten or 15 positions that are not filled.

The other factor I would like to mention is the fact that immigration can solve a large part of the problems, and so we encourage people to facilitate that. However, I also wanted to add that we are going to have to look at productivity, both for farmers and processors and for ourselves. We are going to have to reduce our dependance on labour. Given the aging of the population, that is going to become an issue in the long term, I think.

[Richard Lehoux, Conservative, Beauce, QC]

I understand that on this point, it would call for additional help from the government, in particular for the entire question of automation, robotization and research, to go a bit further.

[Pierre St-Laurent]

It could help us in terms of labour, in its broad sense, that is absolutely certain.

[Richard Lehoux, Conservative, Beauce, QC]

Perhaps Ms. Lee could add some comments about the labour issue.

The Standing Committee on Agriculture and Agri-food has asked several times to meet with the Minister of Immigration, Refugees and Citizenship to try to break out of the deadlock we find ourselves in at present. The backlogs are incomprehensible.

Is there a particular dynamic for your members when it comes to labour, Ms. Lee?

[Dr. Rebecca Lee]

There are many items that we can work on in the labour area. As I mentioned before, the recognized employer program would be a very quick win and a quick step forward. It would generally make it easier for employers to bring in workers, and then, once we have them here, it would lessen the burden of the audits. That would be a significant step.

There are multiple audits and different layerings of them, often on employers that are not the problem. If they were to free that up, they could put more people onto bringing in the workers we need.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you for your testimony, Ms. Lee. It is very important for our study.

That might encourage our Minister of Immigration, Refugees and Citizenship to come and meet with the Standing Committee on Agriculture and Agri-food. In fact, we have requested that repeatedly. I might dare to think that this time we will be heard.

Is it the same thing for your members when it comes to labour, Mr. Graydon?

[Michael Graydon]

It's a systemic issue in manufacturing. There are over 40,000 vacant positions within food and consumer goods manufacturing in Canada. That number is growing, unfortunately, and it's impacting our capacity for output. It is very difficult to attract people to the industry.

I think through immigration that is focused on economic immigration toward the manufacturing sector, a portion of the people coming in would be very helpful.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Graydon.

Thank you, Mr. Lehoux.

The time remaining is tight.

Mr. Louis, you have four minutes.