Evidence of meeting #86 for Agriculture and Agri-Food in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was grocery.
A recording is available from Parliament.
Liberal
Heath MacDonald Liberal Malpeque, PE
Thank you, Chair.
Thank you, Mr. Medline.
It's very interesting to hear some of the conversation that's transpiring here today relevant to groceries.
I'm going to start by saying it's nice to hear you support the code, and you're obviously very passionate about it and about how it is required.
Can you elaborate as to where this code has set precedent before? Was that in the U.K., in Europe? What is it leaning towards and what are the benefits of it?
President and Chief Executive Officer, Empire Company Limited
The U.K., Ireland, and Australia have great examples of codes that work. What ends up happening is that instead of fighting each other and having unfairness to the supplier partners, that conversation is taken out of it, because people are fair to each other. They don't do things retroactively. They negotiate. They converse.
What ended up happening in these regions was that they started having conversations about how to take extraneous costs, like supply chain costs, out of the system, which could help lower grocery costs.
It was Michael Graydon of FHCP and the president of a very large company who came to me three years ago, and I said, “Take me through everything that's going on around the world. Let's look at what a code could do here.” They convinced me, a retailer, that this would be good for Canadians and good for the whole industry. That's why we got behind it.
Liberal
Heath MacDonald Liberal Malpeque, PE
In your preamble you mentioned world inflation and you said that Canada has possibly some of the lowest grocery costs relative to inflation in the world.
Has that always been consistent? We know that since the epidemic started, supply chains have been an issue, as have been many other factors, including climate change. Has that been consistent for the past number of years?
President and Chief Executive Officer, Empire Company Limited
I have to admit that I don't know the answer to that one, because until inflation took off it wasn't always so much on our minds. We were looking around the world to see if there was something wrong with Canada or if there were things we could do, and we looked at best practices.
With respect to food inflation in 2022, out of seven—France, Canada, U.S., all of Europe other than France, U.K., Mexico, and a group of other countries—we had the second-lowest inflation rate, and in 2023 so far we have the third-lowest. If you averaged it all out, we'd be probably the second-best overall for those two years, but I would have to do the math.
That's a great question, Mr. MacDonald. I'll take a look at it and I'll get back to you privately.
Liberal
Heath MacDonald Liberal Malpeque, PE
Going forward, what is the biggest or most consistent issue facing price fluctuation? I know there is the unexpected, because we've just gone through all that, but to your mind, relevant to producers or manufacturers or whatever, what's the biggest issue we're going to be faced with in Canada going forward with respect to price fluctuation for groceries?
President and Chief Executive Officer, Empire Company Limited
You've seen that the gap between grocery and the regular CPI has come down appreciably. When I was last with you, I think the gap was 5.4% between grocery and CPI, and now it's down to 2.3%. It's still not good enough. We have to get it to be lower than normal CPI.
It's hard to say what's going to happen. I think climate shocks in the United States during peak produce season, when we depend on that so much, could have an effect. As you said, there are world affairs, and if large multinational suppliers try to pass on every single one of their cost increases, which they never did before this period of time, that could be a problem too, and that worries me.
Having said that, I think the vast majority of our supplier partners do the right thing.
December 4th, 2023 / 4:10 p.m.
Conservative
The Vice-Chair Conservative John Barlow
Thank you, Mr. MacDonald.
Mr. Medline, you did have a response there to Mr. MacDonald's question. You said that you would get back to him privately. If it's okay, as it was a question that arose in the committee, you can provide a written response to the clerk of the committee so that all members have a chance to see that response.
President and Chief Executive Officer, Empire Company Limited
Yes. That's great. I meant that I couldn't do it right now and I'd pass it on.
Having said that, I have to make sure that I can get this information. It only became widely distributed during inflationary times, but I should be able to get something that would help you.
Conservative
The Vice-Chair Conservative John Barlow
Yes. I'm not putting the pressure on you in any way. We just want to make sure that Mr. MacDonald doesn't have privy information that no one else gets.
President and Chief Executive Officer, Empire Company Limited
I won't give him any insider information.
Conservative
The Vice-Chair Conservative John Barlow
It's more for your benefit. I just don't know know what he would do with it.
Conservative
The Vice-Chair Conservative John Barlow
Thank you.
Now we go to Mr. Perron for two and a half minutes, please.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
Thank you, Mr. Chair.
Mr. Medline, I'll pick up where we left off earlier.
You talked about measures you took after your meeting with Minister Champagne. Specifically, you said you extended the price freeze.
Have you taken other measures you can tell us about?
President and Chief Executive Officer, Empire Company Limited
Right now, prices are frozen on all packaged goods, so that's approximately 20,000 items in a store of 26,000 to 28,000 items, to give you some sense of proportion.
On the other one—which you know about, because I think it was given to the committee confidentially, and thank you for keeping it confidential—we'll let you and every Canadian know in the next couple of months. It's because of the federal government's Competition Act and other competitive reasons that we can't share it.
You also know that I think the code, if we can get that through, would have perhaps not an immediate effect but certainly would have a medium-term impact.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
Thank you very much.
If I understand correctly, there aren't any other measures besides the price freeze that you can tell us about today.
About that price freeze, the committee did a study on grocery price fixing. We were also interested in seeing what would justify implementing a grocery code of conduct, which you seem to be strongly in favour of. Thank you for that, by the way. During our study, we heard about a problem related to somewhat unfair practices. Apparently some of the major players can influence the definition of conditions, for example.
To what extent is your price freeze a disadvantage? Is it a disadvantage just for your suppliers, or are you also shouldering some of the burden of not raising prices, of this supposed price cut?
President and Chief Executive Officer, Empire Company Limited
As you know, and as you alluded to there, we haven't price-fixed. We have not had a charge of price fixing. I just want to be clear on that.
While we took the extra 1,700 items in our store, we decided to.... I'd have to check. Whenever I say “everything”, I have to check, because that's 1,700 items, but I believe that we ate the cost on those items. We'll take that on ourselves during this period of time so we can say that 100% of our packaged goods are frozen in that period.
Conservative
The Vice-Chair Conservative John Barlow
Thank you very much, Mr. Perron.
Thank you, Mr. Medline.
Now we go to Mr. MacGregor for two and a half minutes.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Thank you, Mr. Chair.
Mr. Medline, in my earlier question I outlined the struggles that many of your striking workers have reported publicly and just the fact that they are having extreme difficulty in even affording to shop at the store they work at. The latest offer from your company was only a 5¢ increase on their minimum wage pay.
We also have a situation of seven million Canadians using food banks to some extent or other.
I do know that in one of quarters this year, your company posted a $261-million profit. That's roughly a 39% increase over the $187 million that was made in the same quarter of last year.
You talked to this committee today. You've said that in many cases you've had to “eat the price”. Given the situation that so many Canadians find themselves in and the difficulty they're experiencing, how often is it that your company is eating the price and how often are you making an effort just to sell food at cost?
From what Canadians see right now, two things are true: Your company is making more profit at a time when they're struggling. They just want to see how sincere your efforts are at the food division of your company. How often are you doing things like eating the price or just selling at cost?
President and Chief Executive Officer, Empire Company Limited
Thank you.
I know the numbers probably better than anybody else in our company and I cannot figure out where you're getting that data from. However, I still get what your question is about. As I said, last year we made less money in net earnings than the year before—the out-take over two years was 1.8%—and our earnings margin went from 2.5% during inflation down to 2.4%, so I'm not quite sure about that.
I think I would stick up for a company making some money. You asked before about paying teammates fairly, which we want to do, and we do. To do that, you have to make some money to employ people, to give them pay raises, to invest in Canadian stores and Canadian warehouses, to support, in our case, the 939 communities that we're in, to pay dividends to hard-working Canadians and their pension plans, and to pay taxes.
Paying taxes is important. When we weren't successful.... When I came on in 2017, we were struggling mightily. It's a tough, competitive, low-margin, high-capital business: a small stumble, and you're heading toward unprofitability. At least now that we're stronger, we can do all of the five things I talked about, which a company should be able to do to support its country, support its teammates and support its customers.
Conservative
The Vice-Chair Conservative John Barlow
Thank you, Mr. Medline.
Looking at the clock, we have about six minutes left. I'm going to go three minutes for the Conservatives and three minutes for the Liberals to wrap up this first panel.
I know you have a hard stop at 4:30, Mr. Medline. Let us know if we're impinging on that. We'll try to get through that as best we can.
Ms. Rood, you have three minutes.
Conservative
Lianne Rood Conservative Lambton—Kent—Middlesex, ON
Thank you, Mr. Chair.
Mr. Medline, earlier this year, the Minister of Environment and Climate Change sought, and I will quote, “feedback on the development of a pollution prevention [or P2] planning notice for primary food plastic packaging” in respect of “Canada's large grocery retailers to prepare and implement pollution prevention plans...for primary food plastic packaging.”
Did your company participate in those consultations on the proposed plastic ban for fresh food? Can you give this committee an idea of what it will mean for consumers from the retail perspective? We've heard from industry that the plastic ban is going to cost an enormous amount and will also leave us with potential food security issues. Do you know what this will do to food costs or food availability?
President and Chief Executive Officer, Empire Company Limited
Thanks for your question.
We did give feedback through our industry rep at the Retail Council of Canada, so feedback was given to the government.
Like almost every retailer, we're seeking to reduce our use of plastics. However, I am concerned that the legislation regulation is running way ahead of the packaging innovation and available technology. I was reading that a study commissioned by the Canadian Produce Marketing Association said that the proposed rules would add a 30% increase to the cost of packaging. That's supported by the Retail Council of Canada's preliminary estimate. This would obviously exacerbate inflation if it were to occur.
I'd also, as you mentioned, be very worried and uncomfortable about moving too fast. The number one job we have is to ensure food safety. That's our number one job in this country. We have a great country in terms of food safety. We have to be careful on that. I'm worried that if we act in haste, food waste could increase, which is really bad.
We'll always look to eliminate plastics wherever we can, but let's make sure we're doing the right things and not acting hastily. We have to think things through.