Evidence of meeting #143 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cards.
A recording is available from Parliament.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Yes, please send it to us. Just because it's on the website doesn't mean it'll get into the.... If you could table it with the committee, I'd appreciate that. I think it provides some valuable insight.
You talk a lot about how taxes should be removed from the purchase of groceries. Can you elaborate on that a bit more? What specifically are we talking about? What taxes are we talking about?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
It's often referred to as the snack tax.
When you walk into a grocery store, there are about 4,600 products that are taxable. Most Canadians actually don't realize that.
There's one province in the country that is looking into making sure that people are aware of what's taxable when they visit a grocery store, and that would be Quebec with Bill 72. I testified in Quebec a few weeks ago about this bill, and I was very supportive of what they were trying to do. It's transparency in the aisles, telling consumers what is taxable and what is not. Most people don't look at their receipts.
The biggest issue with taxation, as far as I'm concerned, with CRA rules, is that there is an increasing number of products that are now taxable that weren't before. Granola bars is a good example. If you have six bars in a box, that's not taxable, but if there are five bars, it becomes taxable.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
I have three kids, and we go through a lot of granola bars. Just about every single box of granola bars you buy doesn't come with six; it comes with five.
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
That's right, and move on to muffins and ice cream. Ice cream under 500 millilitres is taxable, but over 500 millilitres os not taxable.
A lot of people just don't look at their receipts. For some grocers you need almost a Ph.D. to understand what you've been taxed on. Some of them actually do a better job, but with some of them, it's not clear. You have to go to customer service—I've done that myself—to verify what you're taxed on. In some provinces, it's an extra 15%. It's a lot.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Wow. Okay.
You had a report back in, I think it was 2023, on when people buy food, how they typically pay. There were four or five different provinces where credit card use was higher than debit card and cash. That's obviously a huge problem. What's leading people to do that?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Essentially it's cash flow issues affecting households. When you go to a grocery store, you tend to use whatever means you can, because you need to buy food. It's a necessity of life.
One of the reasons that I think this particular problem is only going to get worse is that the battleground for all grocers right now is loyalty. Because of inflation, people have now grown their portfolio of stores where they buy food. They'll go to dollar stores. They'll go to Giant Tiger. Grocers, the main chains, are fighting. They're trying to get people back into their stores, and the best way to do that is by amplifying loyalty programs through credit. If you use cards, you can get points. That's why I think that combination of loyalty and credit is going to be quite lethal for many, many consumers.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
When I look at food inflation, there are a few products I just wanted to pick your brain about. One of them is infant formula. I think you've talked about this before.
Can you talk a bit about how much inflation on infant formula there has been and what that would mean for a mom or a family?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
When you look at all grocery items, the one item that has increased the most in the last two years is olive oil at almost 80%, but the second is baby formula, at 57%. The reason we've seen an incredible increase in baby formula prices is that we used to manufacture baby formula in Canada, but now we import it from the U.S., and there were two manufacturers in the U.S. that actually had some issues with food safety: Abbott and Nestlé. We started to import baby formula from Europe for a while, but it really didn't push prices lower, so prices basically just increased.
Now we do have a plant in Kingston, Ontario, manufacturing baby formula. It's called Canada Royal Milk. It's owned by China. It processes Canadian milk, and it now sells formula at $41 for 900 grams, which is the cheapest baby formula you can find in Canada, but it is a plant owned by China, so right now sales aren't necessarily robust.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Obviously, today is Halloween, which is an exciting day for a lot of kids. Because of shrinkflation, I've even noticed how much more I'm paying to buy boxes of candy for Halloween, but then I look inside the packages and see how little is actually in there. It's a double whammy when we look at where inflation has hit people and what they're actually getting for value has shrunk. I'm just wondering if you can elaborate on that point a little.
October 31st, 2024 / 9:05 a.m.
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Shrinkflation is a strategy. Of course, sugar prices have gone up 24% since May. Cocoa prices have gone up 119% since last Halloween. We were expecting manufacturers to reduce. This year, there's a double-barrelled shrinkflation phenomenon, so you get fewer items per box and you get smaller candies. It's expected, unfortunately.
We have also seen that most categories at the grocery store have been impacted by shrinkflation over the years. We're at the end of a cycle right now because of commodity prices, which are lower, except for meat. We are expecting another wave of shrinkflation probably in a couple of years from now.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Okay.
If we were to get the federal government to pause the carbon tax, particularly on food production, what benefit would that have for Canadians and also for food prices?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
That's exactly what I recommended to the finance committee a few months ago: Pause the carbon tax to better understand how the policy is impacting food affordability in Canada. Right now, it is very difficult. As a lab, we've been trying to assess the impact. Unless you have firm-level data, it's practically impossible to assess, but I would suggest pausing it for now to understand, just for the food chain, because right now I do believe it's putting way more pressure on wholesale and retail and making the industry less competitive.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
You said that since 2019, over the last five years, food inflation has risen drastically.
What year was the carbon tax implemented?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
That was in 2019.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Okay.
When we look at the way it's going to quadruple in price over the next number of years—just the carbon tax alone—does that not send the wrong signal to consumers, when we have a price on production, transportation and energy, about what that will do long-term to consumers going forward? To me, it's actually quite obvious. I'm from Saskatchewan. We're an agriculture region, but we're also an energy-producing region, so we have the two main components right there.
I see it first-hand on my own bills. I grew up on a farm. I know what our costs were. I know how detrimental these taxes are and can be. They say there's an exemption on agriculture. There is on some aspects of it, but not on all aspects of it. Even just those parts of it are devastating to producers. When you look at the way that economics works and the trickle-down impact of who ends up paying all the bills, producers like farmers are price-takers, and then consumers are the ones who get stuck paying the bill at the end of the day, because everything gets passed down to the consumer. It's a double whammy.
I guess I would end by saying I simply agree with you—
Liberal
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
I was waiting for the question, but—
Liberal
The Chair Liberal Joël Lightbound
I'll grab just a bit of time. I feel generous to myself with time today.
Liberal
The Chair Liberal Joël Lightbound
Thank you, colleagues.
You mentioned, Professor Charlebois, that you anticipate another wave of shrinkflation in a couple of years from now. What is that based on?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
When commodity prices go up, typically we see manufacturers review their costing structures. It happened in 2008 and 2009 when oil went up to $147 U.S. A bushel of wheat was at $9, and wheat is 20% of all calories consumed on earth. Ukraine basically pushed manufacturers to really review their procurement strategies and packaging strategies as well.
My concern about shrinkflation is at three levels. One, I don't think that Statistics Canada actually properly measures food inflation. It underestimates it because we don't see how it's embedded in how they're reading inflation, which is a big problem, as far as I'm concerned. Two is packaging. When you buy a shrinkflated product, you're buying a mirage, and there's too much packaging being used. Three is the taxation issue. There are more and more products being taxed as a result of shrinkflation.
Liberal
The Chair Liberal Joël Lightbound
Are you saying that basically the basket of goods that's used to calculate the CPI is not taking into account shrinkflation?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Statistics Canada says—and we've met with them—that they actually look at shrinkflation and how it's impacting inflation, but we don't see the evidence.
Liberal
The Chair Liberal Joël Lightbound
That is interesting, and so you anticipate that commodities can go up over the course of the next couple of years, which would lead to another wave of shrinkflation, if I understand correctly.