Good evening, Mr. Chair, and members of the committee.
Thank you for the invitation today to discuss dairy processors' views on food inflation in our country.
As you mentioned, I am the board chair of the Dairy Processors Association of Canada. As well, I'm the president and CEO of Vitalus Nutrition. With me today is Mathieu Frigon, president and CEO of DPAC.
DPAC represents more than 90% of the milk processed into dairy products in Canada.
There are two key areas we would like to discuss with you today from the perspective of the dairy processing industry. We would first like to discuss the inflationary factors affecting our industry, and second, the importance of a grocery code of conduct to promote contractual certainty and fair trading throughout the grocery supply chain.
As you know, the causes of inflation are multifactored. Geopolitical pressures, weather-related events and the pandemic with the associated macroeconomic stimulus all played a role.
In dairy processing, between 2020 and 2023 the cost of raw milk increased by 10.6%. The cost of energy more than doubled. Packaging and material rose by 24%, while the cost of machinery and labour increased by more than 10%. Dairy processors strive to make efficiency gains and work to mitigate the impacts affecting customers and consumers, but with cost increases of this magnitude, it is obvious that costs have had to be passed down the supply chain.
Statistics Canada data shows that prices for dairy products sold by Canadian processors increased by 9.5% from 2020 to 2022, which is still below the inflation cost pressure faced by dairy processors over the same time period. For reference, the average profitability of dairy processors as a sector has, for many years, been lagging behind the average of all CPG—consumer packaged goods—manufacturers in Canada.
The factors that have been at play in Canada have also been seen in the U.S. If we compare the evolution of the price of dairy products at retail in Canada and the U.S. between 2020 and 2022, we see that dairy products overall have increased by 11.7% in Canada, while prices have risen 13.6% in the U.S.
Over the last 10 years, the inflation on dairy products in Canada has been less than half that of the other foods at retail. Food prices have risen by 27%, while the price of dairy products has increased by 11%. Cost, including farm milk prices, has definitely risen more than 11% in the dairy sector, so the 11% increase in dairy retail prices over the last 10 years reflects the efficiency gains that have taken place in the dairy supply chain over that time period, most notably at the dairy processing level.
I will now have Mathieu Frigon, president and CEO, speak on the grocery code of conduct.