Are grocery shoppers being gouged? Analyst suspects inflation 'profiteering'

Companies see soaring profits despite inflation While Canadians are seeing rising costs for essentials, we look at how the companies that sell these products are faring amid sky-high inflation.

As grocery shoppers face sticker shock week after week, some are questioning whether inflation is fully to blame for rising prices.

Nationally, inflation was at 6.7 per cent in March when comparing prices to the same period last year – hitting families in the pocket book at a time when wages remain stagnant.

In grocery stores, shoppers have especially felt the pinch at the produce section, dairy aisle and meat counter.

“I’m a single parent of two kids and it’s not cheap,” said father Marc Maynard. “I can notice it in my budget, you know what I mean?”

While working-class Canadians make difficult choices in order to feed their families, it’s a different story for corporate shareholders closely watching their portfolios.

“I think there’s also a little bit of profiteering going on,” said retail analyst Bruce Winder. “Some companies will say, ‘Hey, you know what? Inflation’s up seven per cent so let’s make sure we raise our prices because we’re going to get less pushback right now.’”

Loblaw, the country’s largest grocery company with brands like Superstore, T & T and No Frills, made a profit of $459-million in the first quarter of 2022 – up 17 per cent over the first three months of last year.

The company disputes the notion it is gouging Canadians or profiteering at a time of high inflation.

“We strongly object to the basic premise of this storyline. The accusation that our food prices are leading inflation is completely false. In fact, for many years, including through the heart of the pandemic, our prices have increased less than inflation, on average,” Loblaw said in a statement. “The grocery industry is one of the lowest-margin sectors in the entire country, and is now facing a range of unusual inflationary forces. Last quarter, we made less than four cents for every $1 we sold. For reference, our higher recent profits were driven by higher-margin sales, like cosmetics, not food.”

For some consumers, the idea of shareholders making more money while they pay higher costs doesn’t sit right.

“They’re making profit. They could pass it on to us consumers, you know. But they don’t,” said shopper Jason Reiswig. “They just keep it for themselves and they get richer.”

UBC Sauder School of Business economist James Brander says corporations have a duty to maximize profits for their shareholders and are under no obligation to forgo profits in order to pass additional savings on to consumers.

“These companies are in business to make profits. That’s what they’re supposed to do for their shareholders,” Brander said. “The profits also allow them to make further investments down the road and that’s actually crucially important.”

He also said the government should avoid instituting any sort of price controls or dramatic tax increases on corporate Canada because that could have negative impacts on the economy.

Instead, he suggested the government target additional assistance directly to those who need it most.

“If there are people experiencing genuine hardship, and there are, the right policy is to help those people directly, as we did for COVID,” Brander said.

Statistics Canada is expected to release the April inflation numbers on Wednesday.