Agriculture Committee on Dec. 4th, 2023

[The Vice-Chair, Conservative, John Barlow]

I call this meeting to order.

Because of potential votes, I will ask for UC, when the time comes, to do the votes virtually and carry on, as Mr. Medline has a hard stop at 4:30. To delay would inhibit our ability to carry on with this first panel today. If everybody is okay with that, we will carry on. We'll make sure that Ms. Leah Taylor Roy and Mr. Carr and Mr. Drouin are up to speed. I will have everyone's assurance there will be no shenanigans in the meantime.

Welcome to meeting number 86 of the House of Commons Standing Committee on Agriculture and Agri-food.

I have a few reminders for our witnesses, although I know that Mr. Medline has been here before.

Today's meeting is taking place in a hybrid format. The proceedings will be made available via the House of Commons website.

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

There seems to be a problem with the French and English channels.

[The Vice-Chair, Conservative, John Barlow]

Is it good now?

Good. It's working now. Does he have that channel working correctly?

Mr. Blois, it's good to have you here.

I see that the bells have started. Colleagues, I'm going to ask for unanimous consent that those of us who are here vote virtually, and then we can carry on.

[Some hon. members]

Agreed.

[The Vice-Chair, Conservative, John Barlow]

Mr. Medline, we'll carry on. We may have to stop for everyone to do their virtual voting, but, in the meantime, we'll carry on.

I have a few comments for the benefit of the witnesses.

Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting.

Mr. Medline, if interpretation is lost, you may see a hand go up, and we'll ask you to pause for a minute as we get that in order. Before you start speaking, I will recognize you, and then you can start.

You'll have five or six minutes, Mr. Medline, for opening comments. I will raise my hand when you have about a minute left just to give you a bit of a heads-up, but since you are the only witness in this panel, I'll give you a little extra time if it's needed.

Mr. Medline, I will turn it over to you for your opening comments.

[Michael Medline, President and Chief Executive Officer, Empire Company Limited]

Thank you, Mr. Chairman.

Sobeys has taken seriously Minister Champagne's September 14 call to action to do even more to combat food inflation in Canada. On October 6, Sobeys formally submitted to the Minister of Industry our plan to help further stabilize food prices for Canadians. At this committee's request, we then submitted our plan to you on November 3.

We worked diligently to put the material together in a short time frame. Our plan included an overview of the current food inflation trends and outlook, a summary of our current and past efforts to help stabilize food prices and provide value to Canadians, and most importantly, recommendations for actions to be taken by our company and by the federal government.

As we've said consistently over the past 18 months, we don't like inflation, we don't like the choices it forces our customers to make, and we are not benefiting from it. We can all agree that global inflation is hurting Canadians where it counts. Although our country's food inflation has been among the lowest in the world and Canada is among the most competitive nations on earth when it comes to grocery retail, this provides little comfort to Canadians who are struggling.

Having said that, we know that our efforts to date are helping to slow food inflation and we expect this trend to continue. The goal, as set out to us by the Minister of Industry, is to help reduce the gap between food inflation and Canada's consumer price index. We are pleased to see that since the mid-September meeting grocers had with Minister Champagne in Ottawa, as predicted, food inflation continues to decline, and we believe this gap will keep moving in the right direction.

The latest figures from Statistics Canada indicate that overall CPI was 3.1% in October, 2023, down 70 basis points from the prior month, and food inflation was 5.4%, down 40 basis points from the prior month. Overall, food inflation has been declining since its peak of 11.4 % in January 2023.

At Empire, our internal food inflation numbers show a consistent trend, with steady declines over the last several months, and our internal inflation has remained below the CPI food inflation rate. Our plan, which we began implementing in our stores across the country in early November, is designed to help bring meaningful relief to Canadian consumers. The proposals were novel and detailed, and contained timelines.

As you are likely aware, it has been our practice, historically, to freeze the majority of our prices on all packaged products between November and January, in partnership with our supplier partners. This practice has never been an external or public commitment, nor was it a mandatory practice internally. Typically, we would hold prices on approximately 90% of packaged products during this time, subject to exceptions in select instances.

This year we have expanded this practice by freezing everyday prices on the totality of our packaged product portfolio, representing approximately 20,000 items, between the first Sunday of November 2023 and the first Sunday of February 2024. This is a meaningful step up from prior years and has resulted in the cancellation of price increases on approximately 1,700 additional products that were initially planned to occur during this time frame. This commitment will remain in place regardless of any internal or external conditions that might cause those prices to go up.

Additionally, and as you will have read in our confidential submission, we also have meaningful plans in development to continue to help stabilize food prices past January, but we will not discuss these publicly, as they remain commercially and competitively sensitive until launched in our stores. We have been advised by external counsel that sharing such plans could be in contravention of Canada's Competition Act.

Our submission also includes recommendations on real measures the federal government can take to address food inflation and strengthen Canada's food supply chain. This includes actively supporting the implementation of a grocery code of conduct, which many of us have been advocating and working towards for over three years.

As you know, an effective code of conduct is a key pillar of our plan to help further stabilize food prices for Canadians.

Let me say this, however: Although we are ready, willing and able to sign the code today, we now have serious doubts as to whether the code will actually come into effect, due to recent opposition by some retailers.

In no way do we believe, nor does evidence show, that a grocery code of conduct would lead to higher food prices or less choice for Canadians. In fact, it's quite the opposite. We would be pleased to see more immediate action from the government on this issue and would urge you and your colleagues to be even more engaged on this file in order to ensure the swift adoption of the ready-to-go code by all stakeholders.

We at Sobeys are on board to help lower food prices, but I also believe that there are short- and medium-term actions Parliament can take to relieve affordability pressures on Canadians.

Thank you for your time and for having me here today.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Mr. Medline. I appreciate that.

We will now go to the Conservatives for six minutes, please, with Ms. Rood.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Chair.

Thank you, Mr. Medline, for being here with us today as we discuss these important issues of food inflation and the cost of food for Canadians.

The current government promised Canadians that they would lower the price of food for Canadians by Thanksgiving, and they broke that promise. You mentioned in your opening remarks that you have put price freezes on some additional 1,700 products to keep those prices static until at least 2024. I've heard from some suppliers that they're not allowed to ask for price increases regardless of whether their costs go up.

I have a couple of questions. Is it standard practice to freeze prices at this time of year? What should consumers be preparing for in 2024, when the price freeze is lifted? How much are food prices going to go up?

Also, could you clarify? You mentioned that it's just a price freeze on packaged products. Does that include fresh produce and meats?

[Michael Medline]

These are great questions. Thank you very much, Ms. Rood, for your interest in this, as always.

It's the standing practice to freeze around the holiday period, for both the stores and the customers, price increases on packaged goods. However, that only applies, historically for us—and I don't know what happens to our competitors—to about 90% of the packaged goods. Sometimes, under extenuating circumstances, there have been, I'd say, 1,700 to 2,000 price increases that go through in that period, so it's not a full freeze. This year, because of what's going on with inflation and because of the interest of Parliament and this committee, we have decided at Sobeys to freeze all packaged goods for the entirety of the period.

The reason we say “packaged goods”, which make up approximately 20,000 out of a normal store's 26,000 to 28,000 items, and not fresh, is that.... They're very different. The cost for fresh items can move daily in some cases, and certainly weekly. We're buying on the market, and the world and North American price can change, especially, as you can understand, for produce in the winter. It can change very quickly.

To be able to import and to make sure that we have fresh goods in our aisles, especially during the winter, we have to make sure that we can buy the product, and the price moves all the time. It can move up and it can move down. Since I talked to you last March, some of the products have moved up and some of the fresh products have actually moved down—

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Medline. I'm sorry, but my time is short here.

[Michael Medline]

That's okay. Go ahead.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

I'm going to move on to the next question.

[Michael Medline]

Sure.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Recently the Prime Minister summoned you to Ottawa. I understand that they have given you a list of asks, but could you tell this committee what specific asks or recommendations you asked the Liberal government to initiate and how many of those recommendations have been acted upon?

[Michael Medline]

Well, we said what government could do. We said that when we were summoned and we said it in the submissions we made. To get this code of conduct done is the first one. Get it done. Get it in place. It's taken way too long since we called for it three years ago.

We talked about over-regulation and labelling and packaging at a time when costs are rising. Front-of-pack labelling, nutritional labelling...these costs add up and go on the grocery bill. Although some of them may be important in the medium and the long terms, they do hurt consumers in the short term.

Strengthen the Canadian dollar so that Canadians can pay less for fresh goods.

Help fund national food rescue or food diversion programs.

Adopt food diversion through tax incentives for donations.

Ensure the potential downstream cost impacts of new policies and regulations on grocery prices are considered as part of the decision-making process of Parliament.

Amend part III of Schedule VI of the Excise Tax Act to ensure that fresh prepared foods such as salads are zero-rated.

Incentivize Canadian greenhouse farming to lower costs, shorten our supply chain and make us less dependent on other nations.

Those are a taste of some of the recommendations we have made. I don't know how many are under consideration by the government. Perhaps you could ask the government that, or Parliament. I'm not an expert on that.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much.

Mr. Medline, one thing I didn't hear you mention is the carbon tax.

Could you explain to this committee how the carbon tax would affect the price of food at the retail level, and where along the supply chain your company would pay the carbon tax?

[Michael Medline]

Thanks.

As you know, it's not my role, Ms. Rood, to comment on the specifics of government tax policy. However, from what I've seen, I agree with food professor Sylvain Charlebois that there hasn't been enough significant research in this area. We need more. Obviously, any tax flows through the entire supply chain and affects everyone, from the farmers up through the supply chain.

What I know is that any time input costs are added to the food supply chain, they will inevitably impact consumer prices. Government taxes, regulations and requirements of any sort, of course, make food more expensive.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Ms. Rood.

Thank you, Mr. Medline.

Ms. Taylor Roy, go ahead for six minutes.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you, Mr. Medline, for being here again and for your submission to the committee.

You met with Minister François-Philippe Champagne and have co-operated with, and participated fully in, his efforts to help us address the rising cost of food and stabilize prices. There were five actions Minister Champagne announced. One of them was securing commitments from the five larger supermarket chains. It seems, from what you have said, that you are expanding price freezes on many more items than you have in the past. From your submission, it's clear you're taking this seriously.

One of the other things that were mentioned—my colleague just mentioned it—is the grocery code of conduct. You referenced that you're worried about whether this code of conduct will go forward, given that certain grocers are not seeing the benefit of it or willing to participate fully.

Are you worried the code of conduct might be implemented by each province individually? If that were to happen, what effect would it have on you, as a national chain?

[Michael Medline]

I just spoke to Ms. Rood about too many rules and regulations at a time when Canadians are struggling. I think it would be unfortunate if we couldn't come to one common code across the country. If we can't, it would put a level of complexity and cost into the system that would hurt Canadians. It would be incredibly complex to put into effect and regulate. We would have different codes in different places. We know how that works: It doesn't work at all.

We have a code that's ready to go. Almost everyone is ready to sign on. I ask you, because you're interested—thank you for your interest—to please help us push this code past the finish line. I wouldn't say it's on life-support, but it's in dire straits, because those who don't like the code are stalling. They're saying things that aren't true and hurting our chances of putting the code forward.

I can't think of any party that doesn't support the code, either provincially or federally. This is a great idea; it's just taking too long. Let's get to it.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much for that suggestion.

In line with some of the elements of the grocery code of conduct—that was something Minister Champagne also highlighted—is the imbalance between smaller producers and suppliers and, of course, the larger grocery chains.

I know that right now, on the plan you put forward, there's concern about price reductions being passed down to manufacturers or producers.

How do you plan to support smaller producers and suppliers in negotiations with the larger grocery chains, outside of the grocery code of conduct? What are you doing now?

[Michael Medline]

We're leaders in this field at Sobeys. I think the chair would kill me, but I could take up the entire hour talking about everything we're doing to support smaller and local businesses across our great country. We have put in place an organization in our business to make it simpler for smaller supplier partners to do business with us. I have to tell you that we don't need a code to treat them well. We treat all of our supplier partners well. We just want a level playing field. That's all we're asking for here. Everyone should treat people with respect in this industry.

As I said, when I came into this business, I was surprised there wasn't more respect for all levels of the supply chain—from the farmers on up—in terms of making this a better business—

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Absolutely. I'm sorry to interject, but I have one last question.

[Michael Medline]

I get passionate.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

You do, and that's great to see.

You mentioned that you have respect for the suppliers and the farmers, which I greatly appreciate. We all do. I'm wondering, though, in terms of respect for the consumers.... As you say, prices have been high. We're trying to stabilize them and bring them down.

There are record profits being made by the grocery chains. I understand that margins are the same, but because of inflation, of course, the dollar amounts of profit have gone up and extraordinary profits are being reported. Do you feel there's any lack of respect or anything you could to do to address what the public sees as perhaps your chain making excess profits while they're struggling to put food on the table?