What’s going on with sky-high food prices? - The Fifth Estate

on this edition of The Fifth Estate it's everywhere you can't escape it high food prices are a reality but are companies profiting they've passed on the higher costs that they themselves are paying and then some MPS have tried to get an answer how much profit is too much profit you're making more money than you've ever made now it's our turn what's the worst case scenario complete removal from store shelves we've teamed up with APN investigates to find out what's going on with food prices we go to a place where high prices are a fact of life I call it the Wild Wild West because anything goes pretty much and government efforts to lower prices may actually be adding to a company's bottom line it appears that the retailer may be keeping the extra money I'm Steven desuza this is The Fifth Estate you feel about being we're Hing for a productive meeting thank you the CEOs of Canada's big Grocers are in The Haun seat thank you chair thank you witness how much profit is too much profit you're making more money than you've ever made how much profit is too much profit we're a big company and the numbers are very large as an angry public and angry politicians look for answers about high food prices the idea that grossers are causing food inflation is not only false it's impossible POS we at Empire are not profiting from inflation it doesn't matter how many times you say it write it or tweet it it is simply not true but for every question the CEOs had an answer our revenues have gone up expenses have gone up margins have not gone up they've been stable for a long time and food margins have actually declined so those are facts the message from the big grossers was clear they're coping with record inflation just like everyone else everyone in there wants the same thing which is uh we're continues to have better repricing and for that to to cool down and it will but is that the reality they went up there to Ottawa and tried to pretend like they're victims of inflation like the rest of us are that's a laughable claim to make in terms of it being a serious investigation of how this industry works the Parliamentary committee did not succeed Economist Jim Stanford has studied how food prices have gone up and what it means for Grocers bottom line the supermarkets have contributed to this inflation absolutely they have done more than just pass on the higher costs that they have paid for their own inputs they've done more than that and their profits in aggregate in Canada have more than doubled since before the pandemic pre pandemic the entire retail food sector in Canada made about $2.4 billion in net income last year that number more than doubled to over 6 billion a record for the industry and while inflation reached a 40-year high after the pandemic food inflation was even higher for those who say Grocers are profiteering the math just doesn't add up Jim Stanford has some math of his own he says his research shows that grocery profits are going up even though Canadians are buying fewer groceries than they did before the pandemic and that's all the more astounding because our population is grown a lot since then there are 2.5 million more miles to feed in Canada today than when the pandemic hit yet we're buying Less groceries precisely because so many Canadians can't afford it a key problem consumers can't escape the big Grocers the three biggest Supermarket chains own almost 2/3 of the market The Big Three have multiple Brands covering everything from discount to the higher end for instance L Blas owns Shoppers drugmart provigo in Quebec and no frills soes took over Independent Grocers like Longos and farm boy and Metro owns grocery store Adonis and John coutu Pharmacy in Quebec all of them s Pharmaceuticals and cosmetics in their stores too at the hearings in Ottawa gayen Weston told MPS that's where labl was making its profits we've been clear it's the efficiency of our business and the strength of categories like Cosmetics even cough and cold that have been driving our growth not food these are facts the fact that a giant company like La Blas doesn't just sell food they sell pharmaceutical products and drugs and all kinds of other other things in a way just reinforces our concern that this is a company with too much Market power checking Weston's math isn't easy the big grossers did give Parliament their public financial statements but the numbers aren't broken down by category so it's impossible to tell where they're making money if the big grossers say they're not profiting from inflation then who is it became clear we needed to go beyond the numbers and start at the beginning of the supply [Music] chain it's in my blood I love this way of life I love working with my family four generations of lesle Kelly's family have worked this land every year they must decide what will grow better best to feed the family and the business this season they're growing wheat canola and lentils I love creating food from a little seed that is grown uh at our farm but shipped across the world that loaf of bread you buy at the grocery store the one where the price has gone up 20% it's made with wheat from farms like this but Kelly says very little of what you pay makes it back to her family what percentage of the what we pay for a loaf of bread actually goes to you or is your share of that based on a loaf of bread whether it's whole wheat or um white it could be 8 to 15 cents that a farmer uh like me would would get out of that loaf of bread what do you think about that number well when some types of bread are selling in grocery stores for for $6 it can it can hurt farmers like Kelly are what's called price takers the processors they sell to get to determine the price and for decades it's barely [Music] moved since 1975 the price of a bushel of wheat has stayed relatively the same but the price of the loaves of bread made with that bushel of wheat has risen steadily according to the National Farmers Union the gap between the two continues to grow I wish we were getting more of that share wallet me as a mom I'm paying I also see that I'm paying way more too in order to have food um I need to to make money and um to see that in the grocery store um only getting 8 to 15 cents is is is a gut check on this field this was lentils that we harvested a few weeks ago so if grain farmers are not making more money from higher food prices who is before we could go further on that question we needed to step back did we have a clear picture of the problem the competition Bureau says Canadians need more choices that we don't have enough information to make the best decisions when buying food and as we found out even the information we do have may be underestimating just how expensive food has [Music] become Katherine ma is a professor at dollhous University in Halifax she wants Canadians to know more about what they pay for [Music] food she and her team analyze the prices of items in Canada's national nutritious food basket the basket helps monitor the affordability of healthy eating stats can gets pricing information from 38 large Urban centers ma chose a different approach our study used Digital Data from uh larger uh sample of stores using L laws Canada's biggest grocery chain M scraped its websites and got prices from 610 Urban centers of all sizes across the country over a 2-day span she found that statistics Canada may actually be underestimating how much prices have gone up the overall cost of the basket in our study which used digital food prices across a large number of stores nationally uh we found that our cost estimates for the basket were approximately 4,200 to $6,000 a year higher than statistics cidate estimates so 4 to $6,000 on average on average higher than what statistics candidates saying what did you think when you saw those numbers it's a high number so it's really important for us to have a conversation her research found Atlantic Canada is among the most expensive regions the other the north a place where one chain in particular has a huge advantage and it's a company many in the South likely have never heard of and they almost doubled the price when we come back nobody knows what's going on I call it the Wild Wild West because anything goes pretty much none of it grocery prices part 48 eight if Canadians in the South think their food costs are high they need to take a look up north goodday here's what $600 worth of groceries look like in [Music] nun high prices are a fact of life here and the sticker shock fills an entire corner of social [Music] media Norway house is a community in Northern Manitoba with a population of almost 9,000 we're just pulling into Norway house creation my colleague Britney guo from APN investigates went there in late November to find out how locals are dealing with food prices that are even higher than before like the sunsets are awesome CU most of the houses are located along the shore or along the rivers of Norway house so it's it's it's beautiful un peaceful beautiful peaceful and very expensive have you noticed this The Strain on you know your your wallet in that sense for me yeah because I'm uh I'm an old age pensioner and that's what I have to survive on shopping choices in Norway house are limited because there's only one store in town the northern they prices are Sky High and they they don't have their uh their shipments coming on a plane and like it comes by we have a all weather Road here that comes all the way here and that's what I don't really understand like why they would keep their pric is so high the northern store is at the center of daily life here how many people are you going to be able to feed with this uh I I I chop it up and I I may a big pot of stew and prob it on 10 people 10 people okay yeah as part of our co-production APN investigative reporter Britney guo and I met in Toronto to go over the Northwest company's numbers yeah it'll be interesting so it looks like in 2022 uh they reported 1.3 billion in sales in Canada which is a pretty significant number supplies are taken to Historic Fort Norway house the store is part of a chain owned by the Northwest company a a billion dooll business with operations around the world and it's the biggest player in Canada's North the Northwest company traces its roots back to the 18th century they're still operating stores on the same site of their original trading posts Tracy Galloway is a health researcher from the University of Toronto she's published a number of peer-reviewed papers on Northern indigenous communities and often encounters the Northwest Company the company has more than 100 stores across Northern Canada there's really limited competition in Northern Communities um in terms of retail stores in our recent research we were looking at a subset of those communities 83 of them and in those communities there were 35 communities that had only one store in 30 of those 35 communities it was a Northwest Company Store the company has a big presence in a cou one former employee tells The Fifth Estate the Northwest Company Store there set its prices any way it wanted nobody knows what's going on I call it the Wild Wild West because anything goes pretty much and they take advantage of that that nobody's really looking and it's pretty much freefor all almost wait up until recently Alexis do worked for Northwest in aalow now she works for a local food program helping feed Elders in the community this is the first time she has spoken publicly about her former employer why did you feel it was necessary to speak out um what I do for the elders I see how much they struggle I see every day like the community they're all my family like it's it's really hard to see people not even be able to afford an actual orange like literally having to go and put an orange in their pocket because they can't afford the $7 Orange from northmart it's it's very sad people a key part of her job change the price tags on products in the store and soon she says she noticed a worrying Trend and I noticed there was consistent price increases of almost double and I started mentioning that to head office and head office started fighting back a little bit because it's not my job to question the pricing she was so outraged by price increases that she decided to document them herself taking hundreds of pictures before changing stickers like this one for olive oil yeah so what are we seeing here so we're seeing the original cost of the olive oil on the bottom the 1640 9 that was originally what the cost was on November 9th 2022 and if you go look at the top one that is the new price that's been dropped from head office in a batch on December 31st 2022 and it's gone up $6 or so she points out that non-p perishables come in by ship so-called sea lift deliveries happen only once or twice a year so Transportation costs for those sea lift items shouldn't fluctuate and a effect price what do you think when you see this kind of price increase over that amount of time um it makes you ask a lot of questions cuz you know that they aren't paying more for receiving their Freight from down south so it makes you wonder why that cost has gone up so significantly in a statement to The Fifth Estate the Northwest company said when items like olive oil have their sea lift stock depleted it can be the case that an item will increase in price when it is flown in via air given the higher cost of transportation did you ever show any of these photos to uh your managers yes I would also create tickets and send some of these in and be say this pricing just doesn't look right and what was their response to that often I was told it's not my business just deal with it yeah down here it says while in the short the company insists it's facing the same struggles as other Northerners that it has much higher expenses than Southern Grocers everything from Rent utilities and construction materials to Transportation the company will say that Transportation fuel costs you know getting items up to the north is not an easy task and that justifies the price increases do you agree with that absolutely not no in that pricing system you can see how much the freight and everything cost to bring it up and typically I can understand water being expensive because it is heavy but other items that is what the northern subsidy is supposed to be for so it's not over really expensive that subsidy is provided by a federal program called nutrition North Canada Tracy Galloway is the country's top expert on the program nutrition North Canada is a federal subsidy and its goal is to make sure that food is available and affordable in remote Northern Communities and it's been around since 2011 but in fact we've had a subsidy in Northern Communities for decades the previous program called food mail was run through Canada Post prior to 20112 uh the goal of the subsidy was to to make sure freight costs were managed right um in 2012 the new subsidy nutrition North Canada came into effect and the subsidy dollars are paid directly to retailers and it's up to the retailers to make sure they manage their own freight arrangements in ways that keep the cost of food down for people living in Northern Communities the idea of the new program was to improve Nutrition address food insecurity and bring prices down Galloway says it failed to deliver not only did food insecurity go up after the implementation of nutrition North Canada which is you know totally not what it was supposed to do but fruit and vegetable consumption went down and part of the reason for that is people cannot afford fruit and vegetables and those are subsidized items right so we really need to do something better for these folks who live in these remote Northern Communities and we have to do it now since 2011 the federal government has spent almost a billion dollars on this subsidy money that goes directly to several Northern retailers but Galloway questions how much has passed through to Consumers she found that for each dollar of subsidy the retailers are passing on an average of only 67 cents so a third of the subsidy can't be accounted for and where does the rest of that money go we don't know I mean uh in our write up we call it leakage but it appears that uh the retailer may be keeping the extra money a 2020 study from researchers at the University of galf found about 91 cents of every dollar gets passed along Galloway says her research method was different so they were comparing the prices in communities to some baseline pric in the city of Ottawa we haven't done that we actually um looking at prices in the same community so in the same Community if a basket of goods receives an extra dollar in subsidy funds does the price of that basket of goods go down by a dollar and what we find is it goes down by about 67 nutrition North has long been a source of controversy in the north the federal government established an Advisory Board in 201 11 to give isolated communities a voice born in a cow Beth kutuk is a Nook and a civil lawyer she joined the Advisory Board in 2021 I always knew that it needed Improvement and I think when I joined I was a little bit more optimistic that I would be able to learn more about how it works and then also steer it in a way that it could become more effective but after two and a half years this past December KK resigned do you think nutrition North Works no no I don't think it works that subsidy itself does uh is given to the retailers and it does not pass food to individuals or family members or households uh people that are in need of that subsidy she says when she raised questions or tried to get more information about the subsidy and how it worked she was stonewalled by the program's bureaucracy we're trying to find ways for it to be more transparent and more accountable and it really felt like it was just being put off put off put off you can ask a question sure go ahead ask all the questions you want but we're not actually going to do anything about it so at the end of the day why bother um that's really how I felt she says the lack of oversight and transparency behind pricing at Northwest stores became obvious during the 2021 Water Crisis in aalt so there was a lot of people posting at that time saying I went to uh Northern to go by uh or North Martin and to go bu water um and it was much more expensive than it used to be so there's a lot of like these murmurs and these rumors of um water prices being jacked up while we're in a Water Crisis and and that's unfortunately the nature of it right we can have our suspicions that that's what they're up to but then at the end of the day who's who's got the evidence residents have been scrambling to get water from the river and from the stores who have unsurprisingly jacked up their water prices North M had the audacity to double their water prices Northwest disputes that in a statement to The Fifth Estate it says the information you have received is completely inaccurate and not based on facts When the Water Crisis was announced we locked in water prices at Sea lift prices despite working to fly in product which is a higher cost of Transportation water is not covered by the nutrition North subsidy and Alexis DOD says during her time at the company the price would fluctuate in the two years that I worked for North or just under two years I worked for northmart I've seen the price increase from $36 on a pack of 24 uh bottles of water up to $56 wow yeah that's almost done double it's almost double yeah like Canada's other Grocers the Northwest company was reporting record earnings its earnings in Canada increased by 120% in 10 years rising from 69 million in 2011 to 153 million in 2021 however it dipped slightly to 119 million in 2022 so if they made a profit of $119 million I can tell you that they also received about 67 million dollar in federal subsidy to sell food in those communities so um that subsidy is appears to be contributing to their bottom line what do you think when you see that yeah I think that's pretty concerning and I think what it tells us is this form of subsidy paying the retailers directly and then expecting them to act in good faith and pass on the value of the subsidy may not be working we may need stricter accountability measures within the subsidy to make sure that in fact happens but all of this is happening far from ottawa's eyes despite numerous parliamentary hearings on food prices none of the northern retailers testified well I think that just sort of replicates an old habit of not thinking about the north not looking toward the north because the population is smaller but uh the Acuity of the problem in the north is really high and it's been high for a long time the situation has meant some Northern residents are returning to the old communal ways to get by I watch my grandparents uh make a meal out of nothing like uh they can have a few potatoes and like vegetables and like a chunk of meat and they can feed a whole family and then they used to just leave a a big pot and whoever came in like they were free to uh eat so I I still live by that when we come back while consumers are struggling to make ends meet another group is also feeling the squeeze from the big Grocers because there's so much power and volume accumulated within so few hands they are The Gatekeepers of who succeeds and who doesn't who reaches the average Canadian and who [Music] doesn't in 1986 there were eight large groceries chains across Canada each was owned by a different company today we're down to five and three of them labla Empire and Metro control close to 60% of the market it gives them a certain level of control over consumers but also over other parts of the supply chain when you've got an industry where a small number of players three big players in the case of supermarkets has so much power they can stick it to to everyone they obviously can stick it to the consumers with higher prices they can stick it to suppliers particularly smaller suppliers uh who they can you know basically say look if you want to get your products on our shelves you're going to have to make a deal with us because there's so much power and volume accumulated within so few hands they are The Gatekeepers of who succeeds and who doesn't who reaches the aage Canadian and who doesn't this supplier manufactures a packaged snack and sells it to one of the biggest grocers in Canada I'm talking to you now and there's a screen we're seeing you in Shadow why aren't you able to reveal your identity there's very few of any people in the supply chain who are willing to actually speak out against the practices with retailers for fear of some form of negative reaction or retribution that could come back and completely damage their business yeah what what is the fear what is what what's the worst case scenario complete removal from store shelves if the retail section was very dispersed among many small companies no single company would be able to do that because the the food manufacturer would just go down the street and say well if you won't take it I think I've got a good product and I think this store down the street is going to take it The Fifth Estate spoke with some medium and small suppliers who say they don't stand a chance against the big grow ERS first there's the fees suppliers pay listing fees just to get their products on store shelves thousands of dollars and there's something called chargebacks where the grosser makes a supplier pay extra for issues that arise everything from delivery and packing issues to the product not selling they tend to often seem like they're made up to pad sometimes their profits but but again obviously not 100% are a lot of them could be legitimate it's just the ones that aren't it gets very frustrating and difficult to actually get any sort of backup or answer as to what they are this supplier says the response they get from the company rep isn't always helpful you'll see a charge back and you'll question it but you won't get any answers sometimes no and sometimes they'll just try and justify it and that's all there is to it but you can't really win only giant multinationals seem to have leverage over the big three Grocers take the battle over potato chips in 2022 pepsic Co which owns Major Brands like lays Cheetos and Ruffles wanted to raise its prices due to higher costs law BLS refused said it needed to keep prices low for consumers So pepsic Co pulled its product from La Blas shelves eventually the two sides reached a deal our source says in their company's case the battle over pricing played out in a much different way you had an instance when you went into the store uh to see your product tell tell me what you saw the price had been elevated at one particular retailer how much it had gone up at least $1 and then the week after it was $2 and were these prices that you had set no so how how did you explain or how did you find out what happened just by going into the store that's how you find out generally and we have no control over how the pricing is set at the retail level generally how did it make you feel definitely upset because it wouldn't sell at that price and if it doesn't sell like I said I'm liable it would hurt me in my business and were you ever given an explanation as to why the price was increased they don't have to give any explanation and you asked you tried oh yeah so how can suppliers even the field with the big players in Canada the industry is drafting a grocery code of conduct the goal create new rules to ensure fairness and transparency between large retailers and suppliers lowering prices isn't necessarily the goal of the code but it could be a result if Grocers follow the rules but right now the code as it's being debated in Canada is voluntary the UK started looking into this more than two decades ago so we wanted to talk to Christine taken the UK's first grocery code adjudicator her job make sure the code actually worked and companies complied I had the power to arbitrate and I also had the power to investigate and to find even though she only only needed to conduct two investigations in 7 years she said her role had a major impact grossers paid suppliers on time could no longer threaten to take Products off shelves and on price I mean if you look statistically prices went down you know as as a nation but whether that was driven by the code or not I think that's going to be very hard ever to to try and pull out what I am totally confident in is that I pointed out to loads of inefficiencies at the parliamentary hearings in Ottawa all the grocery leaders were on board with a voluntary code including gayen Weston of lbla we're active participants uh in the development of the of the code of conduct but in December as a draft neared its final stages and was endorsed by Metro and Empire lbla dropped a bombshell in a letter Chief Financial Officer Richard duin sounded a seemingly dire warning we believe that the draft code runs a significant risk of contributing to higher food prices for Canadians potentially leading to product shortages and empty shelves concluding that the code could potentially add over $1 billion in cost for consumers and we had a few scare stories like that in the UK and uh none of it actually came into effect the retailers were were saying that there would be a cost of implementation and that there would be an impact on consumer prices which would go up if if uh you know if the code was enforced by an adjudicator no opposite happened in a statement to The Fifth Estate on the grocery code the company said our goal is to ensure it's in the best interest of everyone particularly consumers we remain laser focused on delivering lower prices for Canadians so could you tell this committee um why you won't sign the code and what needs to be done to get you to sign the code um yes please so we absolutely will sign the code we've always said that we would sign the code um we just need to sign a code that doesn't increase uh the risk of higher food prices to Canadians and as the code is currently drafted um you know our strong conviction is that it will do so the UK's experience offers a hint as to why companies may not welcome a code of conduct take all those fees and charge backs grossers hold over suppliers they can add to a company's bottom line but when their code of conduct came into Force many of those charges were eliminated I think one one of the retailers said they found out they had 30 different ways of charging suppliers for things and then by the time they' finished looking at all the issues I was Raising they'd got down to three taken underlines a voluntary code doesn't work it needs to be mandatory and have someone enforcing it well we had the code for three years and they didn't it was only when when we had an adjudicator that things started to change when we come back who's holding the Northwest company accountable isn't that your [Music] job hunting for food in the north has been the traditional way of life here some believe more support for hunting and Gathering is one way to address Rising food prices another idea work together to compete with the Northwest company at this time I'd like to invite uh everybody that's going his name's on the document to come up an idea hashed out at a meeting in Winnipeg in December what we're looking to do is actually as a collective as a group to actually start buying wholesale and once we're able to buy wholesale that's an additional savings for our um community members as well as the the local uh store owners a member of constance Lake first nation in Northern Ontario David Negan is one of the initiative's leaders he says their hope is to lower prices but also increase access to nutritious and healthy food there's going to be competition and then the prices are going to drop and you know for what that means for families is that um they have more buying power to buy milk or the basic uh Staples for for life the Harvester support program is being done in cooperation with nutrition North that's a controversial program that some say isn't adequately overseeing the companies receiving its subsidy now you welcome them to the your communities at the conference we met Wayne Walsh he's in charge of nutrition North Canada he sat down with APN investigates to address some of the concerns over whether the nutrition North subsidy is working we started with Tracy Galloway's 2023 findings that retailers like the Northwest company aren't passing along a part of the subsidy a University of Toronto Professor has come out with new research uh that suggests for every $1 in subsidy 33 cents is not passed down to the consumer how do you respond to that finding so we're aware of the the report and uh the program officials are reviewing the report um and doing the analysis there's also another report that's out that uh their findings showed that there was over 90% of uh the subsidy was passed down so we got to look at both reports and if there's an issue we'll definitely have to address it to make sure that the subsid is passed on so the Northwest company um reported $119 million in profits and they received $67 million in subsidies what's your reaction when you see the Northwest company's profits I mean there the Northwest company Arctic Co-op I mean all the retailers under the program are for profit organizations I'm not in a position to determine whether that's appropriate or not it's um you know I think it's also up to the consumer to decide uh if the level of profit is acceptable or not and make choices where they can who's holding the Northwest company accountable isn't that your job so our job is to ensure that the money that we provide under the subsidy is used according to um the parameters of the program what we find when we review those measures are Tracy Galloway says nutrition North's oversight needs work there's no teeth right there there aren't punishments there's no threat that a retailer would be removed from the program because ultimately that would have a negative effect on consumers in a you know in a place it would further lessen competition in these remote Northern Communities we contacted the Northwest company which has its headquarters in Winnipeg the company refused our repeated request for an on- camera interview in a statement it said that Tracy Galloway's report did not accurately take into account all factors which impact pricing and that a recent government audit found the funding provided was spent for the intended purposes the federal government says it's working on lowering food prices it's given the competition Bureau more power to oversee the big grossers and the industry Minister says he's looking for foreign companies to set up here to give Canadians more choices uh the government has said you know if we don't see some satisfactory response we're going to look at an excess profits tax like we've done in other Industries or other more uh powerful measures uh to try and reduce food prices for Canadians and um so I think the CEOs understand that this is a real challenge to them and we'll see whether they respond with anything meaningful or not every night during harvest season farmer lesie Kelly Works to put healthy food out for her family and her crew she hopes she can keep farming for a long time and just maybe some of those record profits others in the food system seem to be enjoying will find their way here to bring out supper for my family and our friends that help us out at Harvest this is really all that it comes down to uh fueling our Farmers that uh and feeding feeding our Farmers that feed Canadians and those across the world this what I feel like is where I'm supposed to be and what I'm supposed to be doing this is all what it's about for [Music] me all

Channel: The Fifth Estate

Views: 914,949

Keywords: Food prices, Who’s minding the store?, The Fifth Estate, APTN, Steven D’Souza, affordability, cost of living, grocery prices, high food prices, Loblaws, Metro, Sobeys, Galen Weston, investigation, why are food prices so high, why are groceries so expensive

Id: Zuz5SgcHnrQ

Length: 41min 42sec (2502 seconds)

Published: Fri Feb 23 2024