Good evening, Mr. Chair and committee members.
My name is Paul Cope. I'm Save-On-Foods' senior vice-president of retail operations, and I'm part of the senior executive team for the broader Pattison Food Group.
Originally established in New Westminister, B.C., in 1915, we are one of western Canada's largest private employers. With support from over 30,000 team members, we are proud and thankful to service the needs of western Canadians as far east as Winnipeg, north to Whitehorse, and west to Vancouver Island. Our largest and signature brand is Save-On-Foods.
Pattison Food Group also operates in grocery stores under several other banner names, each built to meet the unique needs of the communities they serve. Our wholesale businesses support nearly 2,000 independent grocers, and we operate several food and pharmacy production and distribution facilities.
As a group, we look for synergies that strengthen our ability to compete against national and multinational giants, against whom we have significant cost disadvantages, given their size and scale and their market dominance.
We serve over 2.3 million Canadians every week, and we're proud to be recognized as leaders in customer service, innovation and community support. Our customers depend on us to consistently deliver safe and affordable products and services. We take that responsibility very seriously. Our mission statement is simple: “always customer first”.
We make it a practice to source from local growers and producers first. We carry thousands of locally made products from more than 2,500 local growers and producers, including goods we bring to market under our private label brand, Western Family, many of which are made in our home province of British Columbia.
National brands are, of course, a critical part of our mix. We depend on our suppliers and partners to work with us to ensure we are delivering the goods, services and value our customers expect, no matter where they live.
The food supply chain is long, and we are at the very end of it, in the west. The majority of these products are produced more than 4,000 kilometres away in the eastern parts of the country. The incremental costs of transporting products we depend on from the east have been millions of extra dollars in expenses every month. They're separate from increases from the manufacturers. These are immense costs for a company of our size. As an example, fuel costs alone climbed 174% last year. There is no doubt inflation is a serious concern.
As a retailer, we are working hard to reduce costs by increasing efficiencies, and our suppliers are doing the same. However, the consolidation and movement of manufacturing out of the country actually do the opposite.
Supply is a major concern of ours. We're still on allocation with many suppliers, and service levels have not returned to pre-COVID levels—at least, not here in the west. We just need to look at the challenges we've seen with things such as children’s Tylenol and baby formula, which are recent examples of this.
In the face of all this, we continue to do everything in our power to keep retail prices as low as possible. Like all other grocers, we are in the penny-profit business. Our margins are slim and continue to be slim; we are projecting them to be even tighter next year. Like most conventional grocery stores, we're already selling approximately 40% of our items on deal every week—a number that is climbing. These goods are typically sold below our cost. Because of rapid inflation, the consumer is not recognizing the value.
The pace and number of cost increases we've seen from suppliers since the start of the pandemic have been unrelenting and ongoing. Since the start of last year, we have accepted nearly 20,000 unit-level cost changes from suppliers. That's up 200% from the prior year, which, because of the effect of COVID, was already precedent-setting. That's just under 10,000 cost increases at item level in the third quarter alone.
Yes, we push back to ensure these are justified. However, for a company of our size, this is a huge task. In many cases, we simply have no choice. Because our earnings average just over two cents for every dollar we sell, we have no choice but to try to adjust prices when we are hit with these costs.
If you ask whether we at Save-on-Foods are benefiting from inflation, the answer is simply no. However, we are focused hard on increasing efficiencies and reducing costs in all areas, so we can reinvest these savings in our prices, people and community support efforts, and in the healthy growth of our business.
We ask the federal government to partner with industry to help us fix the problems where they lie. What's important is that, in our hunt for solutions, we do not add unnecessary costs—costs that will ultimately get passed on to the consumer.
Thank you. I would be happy to answer your questions.
