Canada’s grocery industry is concentrated in too few hands, Competition Bureau says

Canada’s grocery trade is controlled by big players and needs government support to encourage new entrants to lower prices, according to a report from the Competition Bureau.

The report, published Tuesday, is the culmination of an investigation Canada’s top competition watchdog launched last year as concerns over food prices reached fever pitch.

The agency has spent months investigating many aspects of Canada’s grocery trade, which is dominated by three domestic giants – Loblaws, Metro and Sobeys owner Empire – along with foreign players like Walmart and Costco.

In the reportthe agency found that the industry is not as competitive as it could be, and consumers are paying the price for it.

“Canada needs solutions to control food prices,” the agency said. “More competition is an important part of the answer.”

To that end, the agency has recommended four broad policies to fuel competition in the industry. They are:

• Establish a grocery innovation strategy aimed at supporting the creation of new types of grocery stores, particularly those that only sell online.
• Policies at all levels of government to encourage new independent and international players to establish themselves in Canada.
• Introducing legislation to impose harmonized unit price requirements, making it easier for consumers to compare deals.
• Restrict property controls, which currently limit how real estate can be used by competing grocers, making it difficult or even impossible for new stores to open.

“Change takes time,” the agency said. “These solutions won’t lower Canadians’ bills immediately. But by acting now, governments at all levels can take steps to create a more competitive grocery industry in Canada.”

The agency’s research found that while most countries are currently grappling with high grocery prices, the situation in Canada is different because the market is more consolidated than elsewhere.

A big problem is that the big chains own more discount competitors in Canada than elsewhere.

“Loblaws owns No Frills and Maxi, Sobeys owns FreshCo, and Metro owns Food Basics and Super C,” the agency said. “This is different from other countries where large grocers compete with cheaper options, such as Aldi and Lidl.”

Big chains have unfair advantages

Independent supermarket chains are often a good alternative, but they don’t take up as much of the market as elsewhere, the agency said. That’s because many of them are forced to buy their wares from the big chains in the first place.

According to independents, this dependency makes it more difficult for them to compete on price.

Large chains are also paid by suppliers to put their products on the shelves at all.

“Independent shops generally are not, and that can put them at a disadvantage,” the agency said.

Even finding real estate to open a new store can be challenging, as they generally require a large, accessible space with ample parking.

“Many of the locations that could support a new supermarket are already controlled by the supermarket giants,” the report said.

The agency noted that the level of competition in Canada depends heavily on where you live, as large cities generally have many more options for shoppers, while remote and rural communities often rely on available stores.

While shopping at one of the big chains in Calgary recently, customers told CBC News that while they felt they had plenty of options, they doubted that new entrants could do much to lower prices.

“At the moment I find in the leaflets that they are all the same,” said Mary Januszczak. “Everyone is copying each other – these guys are the same price as Safeway, Save-On [has] the same price.’ “It used to be…someone had something better on sale, and you went there. Now everyone is the same.”

If a new store opened, Januszczak said it would cost a lot for her to go there, because of the convenience factor of her current store. “Even if they were cheaper, I’d spend more money on gas to get there.”

Shopping at the same store, Kalvin Lau said he doubts much can be done about higher prices.

“As long as the supermarket chains dominate the market, I don’t think there will be any major changes,” he said.