Agriculture Committee on Dec. 5th, 2022

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Mr. Chair.

I want to thank the witnesses. We appreciate your time and your testimony in this important conversation, because what we're talking about is food, and that is a fundamental need. Households have less flexibility to reduce their spending in this area compared to others.

I will begin my questioning with Empire Company.

Mr. St-Laurent, we appreciate your being here. Just for our listeners, Empire owns supermarkets, convenience stores and drug stores, including Sobeys, IGA, Safeway, Farm Boy, Foodland and FreshCo.

To go back to history, in 2014 the Competition Bureau began an investigation that Loblaw had abused a dominant position within the grocery sector by adopting unfair business practices with suppliers.

Back in 2017, the Competition Bureau executed a search warrant to investigate charges that five Canadian grocery chains, including yours, had conspired with two bread producers to fix prices on bread sold in stores between 2001 and 2015.

In 2020, the House of Commons and Standing Committee on Industry and Technology had meetings to investigate allegations that the larger grocers had coordinated to end bonus payments for frontline staff who worked in the stores in those first few months of the pandemic, and now we hear the Competition Bureau is looking to further investigate.

Given this history, this track record, in conjunction with the fact that Canada's three biggest grocery chains have all posted these profit increases much higher than the rates of the wages of workers, one can see why the perception exists among Canadians that these conversations we're having are necessary, yet Mr. Michael Medline, the CEO of Empire Co. Ltd., said that public criticisms of grocer profits were “reckless and incendiary attacks”.

Do you support that opinion? What measures do you think are necessary to show this change in perception and to show Canadians more transparency from your company and the grocery industry as a whole?

[Pierre St-Laurent]

I'm going to try to answer all your questions.

First, Empire never engaged in bread price fixing. I want to be clear about that. We opened our books, and investigations were done. To my knowledge, there was never any price fixing. We do not talk to our competitors about retail prices because the competition is too strong.

Second, as we said earlier, our initiatives to support the adoption of a code of conduct might result in more transparency in society. The goal of the code of conduct is not just about transparency, it is also about helping all actors in the supply chain. Canada is a very big country to cover, in terms of distribution, particularly with a population per square kilometre that is lower than other countries.

It is really very important to create an environment in which there is predictability. I think Mr. Charlebois also said that earlier, and he is entirely correct: we need to put a code of conduct in place that would govern practices. That would help processors and farmers plan budgets and program investments, in order to have a much more resilient and better coordinated supply chain in the future. It would mean having fewer surprises, and also fewer nasty surprises.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

In the last minute, you speak of your company's gross margins and talk about the numbers being within the scope of other industries. Some sectors in your company, the non-food sectors, have higher margins.

When I tell people that and explain it, they say literally, “Oh, come on.” You have the ability to address that lack of trust. Would it be in your best interest to separate the margins in reporting profits from different sectors so Canadians can see the price fluctuation of food?

[The Chair, Liberal, Kody Blois]

Please answer in 30 seconds.

[Pierre St-Laurent]

We are in the food business, and our profit margins are on the order of 2.5%. I don't know where 2.5% is considered excessive for turnover like ours. The margin of error is very narrow. We have to pay our 130,000 employees, invest millions of dollars in capital to renovate our stores, and build distribution infrastructure to cover a country the size of Canada, while remaining profitable.

So 2.5% profit, I don't call that "excessive".

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. St‑Laurent and Mr. Louis.

Mr. Perron, you have the floor for two minutes.

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

Thank you, Mr. Chair.

Thanks again to the witnesses for being with us.

Mr. St‑Laurent, I am very grateful to you for the clarity of your answers.

I'm going to ask you a simple question.

What is the first thing the government should do to help control food prices at the grocery store?

[Pierre St-Laurent]

There are several.

The cost of goods is extremely high. Labour is increasingly scarce, and this puts enormous pressure on all businesses, be they farmers, processors or retailers. As I said before, we have to encourage technological innovation.

We have to invest in everything we call "productivity" in a country as big as ours, particularly when it comes to the cost of the energy for supplying many small communities in Canada, where Empire is present, with food. We don't do business only in the major urban centres, where the cost of delivery is low. Supporting all that would probably be the priority.

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

Thank you, Mr. St-Laurent.

Ms. Lee, could you answer the same question, please? What should we do on an urgent basis?

[Dr. Rebecca Lee]

I would go back to the recommendations from the supply chain task force. They are very valid: addressing, particularly, labour shortages and making sure that there is adequate transportation.

Also, with regard to looking carefully at what is causing the increase in the cost of the inputs, I think more in-depth study of exactly what's happening there should also be a priority of the government.

[The Chair, Liberal, Kody Blois]

Mr. Perron, since you have only 15 seconds left, we will move on to the next member, if you don't mind.

Mr. MacGregor, you have the floor for just two minutes.

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

Thank you, Mr. Chair.

Ms. Lee, I want to raise this question with you.

In Australia—I have in-laws in Australia—it's dominated by two big companies, Woolworths and Coles. The farmers there right now are in a total uproar, accusing those two companies of massively inflating the costs of fruits and vegetables while they themselves are not getting....

Can you just quickly...? Have you been shocked at times when you've seen the wholesale price that farmers sell for, compared to the price of the very same product that you see on grocery store shelves?

[Dr. Rebecca Lee]

“Shocked” might be the word. Certainly I'm curious to understand what happens along the chain, exactly, once the producer has supplied his or her product. I would really like to know what happens throughout. I don't know where the problem is. I can't guess. It would really help—also going back to public trust—to know what happens, piece by piece, throughout the supply chain.

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

Thank you.

Mr. Chair, in my final minute, I actually want to raise a point of order.

In the first panel, I asked Loblaw why Mr. Weston has not appeared as a witness. In our witness list, we specifically named Galen Weston Jr., Michael Medline and Eric La Flèche, the heads of all those individual companies. We have since received correspondence saying that the invitation that was sent out was sent out to Loblaw as a company.

I just want some clarification from you, Mr. Chair. Was the invitation sent out to Loblaw as a company, or was it respecting our request for an individual person? I need clarity on this, because if in fact it went to the company, I would like to know if this committee is going to now submit an invitation to Mr. Weston personally, as was requested in my top witness list.

[The Chair, Liberal, Kody Blois]

My understanding, Mr. MacGregor, is that those invitations would have been sent to the corporate entities themselves, asking for the individuals in question to be invited.

Madam Clerk, you might be able to clarify that. However, that is my understanding.

Of course, it's in the purview of this committee, if you're not satisfied, Mr. MacGregor, to indeed extend another invitation if you so wish.

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

Can I add to that—

[The Chair, Liberal, Kody Blois]

However, if I could, Mr. MacGregor, I would like to ask my clerk to clarify that situation so that we can be clear for the record.

The clerk is going to pull up the invitations so that we can see exactly what they were.

[The Clerk of the Committee, Ms. Stéphanie De Rome]

The invitations would have been sent out to the emails provided. They would have been sent out to the corporate entities, as the chair stated, to the emails provided by each MP who provided a witness list.

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

I think a copy was sent to us from Loblaw, and it does say that the House of Commons would like to invite Loblaw to appear. Mr. Chair, I requested a specific, named individual. I would like this committee to honour the request for that specific, named individual, so I would like to request that the invitation go to Mr. Weston specifically, please.

[The Chair, Liberal, Kody Blois]

Okay. I think that can certainly be accomplished.

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

Thank you.

[The Chair, Liberal, Kody Blois]

Is there anything further, Mr. MacGregor? Is it just Mr. Weston you're asking for?

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

No. We specifically named Mr. Michael Medline as well, for Empire, and Mr. Eric R. La Flèche for Metro, I believe.

[The Chair, Liberal, Kody Blois]

Okay. I will work with the clerk on that.

Of course, each party is delegated certain witnesses. That would reflect who has appeared here today, but I can certainly work to make sure that for the spaces the NDP and you are allotted, those invitations can be sent accordingly.

That will depend on how long the study goes. Indeed, we are scheduled to be coming back on December 12, and then ultimately it's the purview of this committee to decide how long this particular inquiry will continue.

Okay?

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

I appreciate that.