David Staples: In blame game over high food costs, Superstore mogul scores win over NDP’s Singh

It’s easy to see how grocery store mogul Galen Weston Jr. has become a target.

Weston is one of Canada’s wealthiest people, we know his face better than that of any other grocery store kingpin due to his advertising campaigns, he’s charging us far more than we’d like with food inflation at 10 per cent, and his gargantuan company, Loblaw, parent company of outlets such as No Frills, Real Canadian Superstore and Shoppers Drug Mart, makes enormous profits, with $556 million profit in the third quarter alone, up 29 per cent from last year.

Little wonder Leader Jagmeet Singh and his federal NDP have painted a target on the “greedflation” of Weston’s Loblaw empire.

The NDP pushed to get Weston before a parliamentary committee to answer questions. But I reckon that when the two faced off in Ottawa on Wednesday, Singh got far more than he bargained for in the one-two punch of Weston and fellow grocery store executive Michael Medline of Empire/Sobeys.

Medline pointed out food inflation is happening around the world and is driven by factors such as soaring energy costs.

In the last three years, all input costs in food production and distribution have gone up, Medline said, including butter (up 59 per cent), corn oil (140 per cent), wheat (109 per cent) and four (63 per cent for baked goods, and tin (53 per cent) and pulp (45 per cent). “Freight, fuel, labour, every inputted cost has gone up.”

When a customer buys $25 in groceries, his company’s profit is just $1, Weston said of Loblaw. “That means even if the industry had zero profits, a $25 dollar grocery basket would still cost $24. So the claim that Canadian grocers can correct food price inflation is simply wrong.”

Other products such as financial services, clothing and, most importantly, pharmaceutical sales make up more than half of Loblaw’s business, Westin said, and they drove its higher profits. “It’s the efficiency of our business and the strength of categories like cosmetics, even cough and cold, that have been driving our growth, not food.”

Singh asked Westin the same pointed question repeatedly. “We have families that are struggling to buy food for their kids in a G7 country and they look at you and they see you making record profits. How can you justify that?”

Singh accused Loblaw of making “excess profit” of $1 million per day.

Loblaw is a big company so the numbers are large, Weston said. “Reasonable profitability is an important part of operating a successful business. I think a dollar (profit) out of $25 of sales is reasonable.”

To test the credibility of Singh and Weston’s claims, I went to Prof. Sylvain Charlebois of Dalhousie University, who testified previously on food inflation.

Charlebois said Dalhousie agri-food lab researchers have dug deeply into financial statements and have found Weston’s claims about Loblaw making a small profit on food but far more in other areas to be accurate. “Loblaw is making money on lipsticks and drugs.”

It now costs more to ship food, Charlebois said, with unstable energy costs, unstable geo-politics and drought all playing a role.

“It’s a bit bizarre to see people pointing fingers at either a company or a man. Is Galen Weston responsible for Germany’s 20 per cent food inflation rate? I don’t think so… When I see a guy like Jagmeet Singh attacking the grocers, I just don’t know where he’s coming from.”

Canadian grocers have margins of 4.5 to 6.0 per cent on food sales, Charlebois said, but the profit margins for U.S. grocers is just 2.5 per cent, mainly due to increased competition in the American market. “The real task is how do we make Canada more competitive. How do we attract more investors into Canada?”

The hearing dug into this very question when John Barlow, a Conservative MP from rural Alberta, referenced the expert testimony that inflationary government spending and an uncompetitive tax regime, including the carbon tax, are drivers of food inflation. “Unfortunately the leader of the NDP is completely complicit in those policies which are helping to drive up the cost of food,” Barlow said of Singh. “He’s part of the problem.”

Barlow might also have mentioned Singh’s steadfast support of policies that have made energy scarce and expensive, such as the NDP’s dogged opposition to nuclear power and oil and gas production.

Other progressive governments around the world have also embraced energy scarcity policies. This is a root cause of food inflation on a global scale, given how critical our previous low fuel prices were in pushing down input costs.

If Singh is in need of a scapegoat for families not being able to feed their kids, he would do well to first look in the mirror. I find his preferred policies are more to blame than Weston.

dstaples@postmedia.com