Are big grocery chains profiting from inflation? CEOs say no — but the truth is more complex

It's not hard to find Canadians upset with the skyrocketing cost of filling up a grocery cart.

"It's depressing, it's really depressing," Alex McCourt told CBC News this week, shopping for groceries at his local store in downtown Toronto. "Over the last several years, it's just way too much."

While high inflation has hit all aspects of Canada's economy in recent months, pushing the overall cost of living up by almost six per cent according to the latest data, the pain at the grocery store is most acute, where prices are up nearly double that pace in the past year.

"Quantity wise it has gone down," fellow shopper Ahamad Huq said of his just-completed grocery shop. "But price wise it has gone up."

The reasons offered for those spikes have been all over the map lately, from the war in Ukraine driving up the cost of commodities like wheat and oil, to logistical bottlenecks and an endless stream of natural disasters throwing the normal balance between supply and demand out of whack.

While all those excuses played legitimate roles to varying degrees, lately it has been the retail grocery chains shouldering much of the blame, as they rake in record profits.

"I feel like they're all in cahoots," said Caitie Butterworth, summing up a view held by many Canadians. "They think they can get away with such a deep deception, I think is really what it is."

She isn't the only one. Parliamentarians summoned the heads of Canada' three biggest domestic grocery chains to Ottawa this week, to testify in front of an agricultural subcommittee tasked with finding solutions to the ongoing food affordability crisis.

To Canadians like Butterworth, the problem of high food prices has a simple explanation: corporate profiteering. But the CEOs of Empire Company, Loblaws and Metro say nothing could be further from the truth.

"We are not profiting from inflation," said Michael Medline, the head of Halifax-based Empire Company, which owns Sobey's, Safeway and other chains. "It doesn't matter how many times you say it, write it or tweet it — it is simply not true." 

His compatriot at Montreal-based Metro Inc., Eric La Flèche, was singing from the same songbook in his testimony, saying it is "simply untrue" that the company is using food inflation to inflate its profits, noting that their costs are up by a similar amount.

He noted that the company's profit margin on food items actually declined last year, a slowdown offset by improving margins at the company's Jean Coutu pharmacy chain.

Galen Weston, the head of the Loblaws chain, echoed that sentiment in his remarks, noting that while sales, profits and margins are up overall across the company's various holdings, most of the improvement has come from booming trade of higher margin goods like cosmetics and medicine at Shoppers Drug Mart, clothes at Joe Fresh, and the company's financial services arm, PC Financial.

On food alone, Weston says Loblaws profit margins are as thin as ever — about four per cent.