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Delivering Community Power CUPW 2022-2023

Profits, paycheques and the financialization of Canada’s grocery chains

Canada’s growing food insecurity crisis requires solutions that go beyond asking grocery store CEOs to temporarily freeze prices

Economic CrisisLabourCanadian Business

Photo by Stephen Weppler/Flickr

The news that workers at more than a dozen No Frills stores in Ontario could be on strike if wage demands aren’t met is becoming a regular reality in Canada. Headline grabbing waves of labour actions taking place in grocery chains across Canada in recent months keep coming while supermarket CEOs, who are enjoying windfall quarterly profits, still blame ‘supply chain’ issues for spiralling food prices.

It’s not as if warehouse workers and cashiers are seeing a share of those profits–their paycheques are shrinking from the inflated prices and many say they “can’t afford to shop” in the very same grocery store aisles they stock. Bargaining victories are certainly emboldening organized grocery workers to serve up strike notices to get the goods, but this renewed militancy is about more than just fair wages. A strong labour movement is needed more than ever to push back against the financialization of the grocery industry.

Statistics Canada. Table 33-10-0225-01 quarterly balance sheet, income statement and selected financial ratios, by non-financial industries, non seasonally adjusted (x 1,000,000). Chart from Canadian Grocery Profitability: Inflation, Wages and Financialization, Broadbent Institute, 2023.

A new report by the Broadbent Institute entitled Canadian Grocery Profitability: Inflation, Wages and Financialization looks to understand how we got to this point and examines how the financialization (the process by which business elites gain greater control over economic policy) of the grocery retail industry has raised prices on the shelves while suppressing wages.

According to economist Isabella Weber, who has popularized the framework of “seller’s inflation,” a more nuanced illustration of what others have named “greedflation,” large corporations use the opportunity of economic shocks like pandemic lockdowns and other geopolitical events to coordinate industry-wide price hikes. These price hikes may be more anticipatory rather than reacting to real changes in supply or demand, and end up translating into increased profits. Applied to Canada’s grocery industry, CEOs pointing to anticipated supply issues for their record-breaking earnings reports certainly fit this mold. Meanwhile, the same grocery CEOs were slapped with a meagre $50 million fine earlier this year after competition investigators found they were fixing the price of bread.

Weber’s seller’s inflation also includes a “conflict stage” wherein “labour responds by trying to fend off real wage declines.” While some may continue to propagate the wage-price spiral myth against workers’ push for fairer paycheques, the opposite dynamic would appear to be taking place here, albeit without the pricing power workers have compared to their corporate employers. To protect their newfound levels of profits after the price hikes, however, the corporate grocery industry is incentivized to hold fast against wage increases, introduce more policing and automation in retail stores, or simply hike prices even further.

The financialization of Canada’s grocery industry

Much of the impetus behind this race for profits is influenced by the financialized shareholder ownership framework that governs the highly concentrated supermarket industry. The incredible market concentration of the sector doesn’t exactly make the chains uncompetitive for prices–the correlation between competition and concentration is ambiguous at best. With their market power, it’s a competition for profits, rather than prices.

Derived from: Gaucher-Holm, A., Wood, B., et. al. “The structure of the Canadian packaged food and non-alcoholic beverage manufacturing and grocery retailing sectors through a public health lens,” Globalization and Health 19(1), March 2023 (available online). Figure from Canadian Grocery Profitability: Inflation, Wages and Financialization, Broadbent Institute, 2023.

Global investment firms have a significant stake in all of the major Canadian grocery chains, and so considerable incentives to maximize profits are built into corporate structures. While the federal government puts on a show calling for more competition among the retail industry by reducing concentration, it does not address exactly what the grocery industry is competing for. Like the much more diluted housing market that has also experienced incredible price increases, without tackling financialization, it is difficult to see how the government’s weak prescription for grocery inflation—requiring that chains offer more discounts and price freezes to stabilize costs—will keep prices down, let alone help workers wages keep up.

Canada’s real and worsening food insecurity crisis requires solutions that go beyond asking grocery store CEOs to temporarily freeze prices. Policies including windfall profits taxes, price controls, and even city-owned grocery stores (as is being proposed in Chicago) would go a long way towards improving food security while backing labour’s enduring struggle for better wages and working conditions.

Clement Nocos is the director of policy and stakeholder relations for the Broadbent Institute. He also serves as editor-in-chief of the newly-launched Perspectives Journal.

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