A new report prepared for the federal government in Ottawa says that Canada's grocery industry lacks competition and that is leading to exorbitant food prices for consumers.
The Competition Bureau says in its report that the grocery sector in Canada is controlled by a few large companies and that new entrants are needed to foster competition and bring down prices for products ranging from meat to dairy.
The report comes amid skyrocketing grocery prices, a situation that has frustrated many Canadians.
The most recent inflation data showed that the overall increase in consumer prices across Canada declined to 3.4% in May from 4.4% in April. However, the cost of groceries increased 9% in May from a year earlier, virtually unchanged from the previous month.
The Competition Bureau report notes that Canada’s grocery industry is dominated and largely controlled by three domestic players— Loblaws (L), Metro (MRU) and Sobeys owner Empire Co. (EMP).
Foreign companies such as Walmart (WMT) and Costco (COST) play a smaller role in the domestic industry across Canada.
The Competition Bureau recommends four policies for the federal government to pursue to increase competition in the grocery industry.
1. Establish a Grocery Innovation Strategy aimed at supporting the creation of new types of grocery businesses, specifically ones that sell online.
2. Policies to encourage new independent and international players to set-up shop in Canada.
3. Legislation to mandate harmonized unit pricing requirements, which will make it easier for consumers to shop for deals.
4. Limit property controls that restrict how real estate can be used by competing grocers, making it difficult for new stores to open.
The Competition Bureau noted that while other most countries are currently grappling with high food prices, the situation in Canada is different because the market is more consolidated.
The federal agency also said that, in Canada, the main grocery chains own discount rivals more than they do elsewhere, often unbeknownst to consumers. Loblaws owns No Frills and Maxi, Sobeys owns FreshCo, and Metro owns Food Basics and Super C, for example.
