Dr. Sylvain Charlebois, Senior Director of the Agri-Food Analytics Lab at Dalhousie University, and Kirsten Cirella discuss Canada’s grocery sector and intersections with competition law.
This episode focuses on current hot topics relating to Canada’s grocery sector and intersections with competition law, with a focus on rising food prices. Dr. Charlebois provides insights into food price forecasting and its challenges, food inflation trends, the affordability of groceries and whether Canada’s large grocery chains have engaged in profiteering. He also shares his views on how competition law should - and should not - be used to encourage food affordability and spur competition in Canada’s grocery sector.
CBA Counterfactual Podcast – Grocery Sector Interview with Sylvain Charlebois
00:01:57 Kirsten Cirella
Hello and welcome to Counterfactual the podcast produced by the Competition Law and Foreign Investment Review section of the Canadian Bar Association. My name is Kirsten Cirella, and I'm an associate in the competition group at Stikeman Elliott in Toronto.
00:02:14 Kirsten Cirella
In this episode, I'm very excited to be speaking to Dr. Sylvain Charlebois about Canada's grocery sector and intersections with competition law at a time when rising food prices are top of mind for many Canadians.
00:02:29 Kirsten Cirella
So, before we get started, just a few words about our guests who has been quite involved in many recent developments in this space. Dr. Sylvain Charlebois is a professor and the director of the Agri-Food Analytics Lab at Dalhousie University. His research touches on a wide range of issues related to food distribution, security and safety. He has written extensively on these subjects and has appeared in a wide range of Canadian and international media. Each December, Doctor Charlebois published Canada's food price report with a number of colleagues at Dalhousie and across Canada. He's known online as the food professor and has a podcast with the same name which has been running since 2020.
00:03:18 Kirsten Cirella
So, as I said, welcome, Dr. Charlebois. And I'm very excited that you're here today. And I thought maybe we could get started with a couple of introductory questions about you.
00:03:29 Dr. Sylvain Charlebois
Sure. Yeah, absolutely. And thank you for the invitation.
00:03:31 KC
Of course. Yes. OK. So just going way back. How did you get started with the study of food and what drew you into this area of focus in the first place?
00:03:43 Dr. Sylvain Charlebois
Oh my goodness. OK, so I mean, I was. I grew up in a very small town in a rural community, just south of Montreal and worked on farms all my youth. And then of course, like anyone else in those days, you left your small town to go to the big city, so studied, and over the years I became a lobbyist for the food industry and as a lobbyist, if you've never been a lobbyist, you kind of have to understand who's influencing who in the system depending on the topic or issue that you're looking at and so as a lobbyist for the food retailer's association in Quebec, I got to learn exactly who had power, who didn't have power, like within the supply chain. And you get a better appreciation of all of the moving parts affecting food prices, affecting regulations affecting anything we eat really. And that's when you realize consumers have little say. When you look at it and so from farm-gate to plate, I mean there's lots going on there. So that's why distribution has become my passion and went back to school of course and did my master's and PhD and my thesis was on traceability.
00:05:14 Kirsten Cirella
OK.
00:05:16 Dr. Sylvain Charlebois
That was about 25 years, when traceability really wasn't a word recognized by Microsoft Word the software, but now it's much more common. And yeah, so and over the years we've been doing a lot of great work with different organizations, including, well, the Bank of Canada, the World Bank. I've been working with the CFI for many years now in Ottawa. I've testified before Parliament Senate several times.
00:05:49 Kirsten Cirella
18, I heard, right?
00:05:51 Dr. Sylvain Charlebois
Actually, today is number 19 and tomorrow is number 20. Yeah.
00:05:56 Kirsten Cirella
What? Oh my gosh. OK. There's been some developments. Wow.
00:05:59 Dr. Sylvain Charlebois
Yeah. So today I'm testifying before our foreign affairs about Ukraine and economic development. So and tomorrow's about the Ukrainian, about Bill C 56, which is the trade deal we're working on with Ukraine. So it's been busy for sure. And yeah. So that's kind of how I got involved in food distribution and policy.
00:06:23 Kirsten Cirella
Yeah, and has your role changed in recent years, do you think especially since COVID, do you see differences in the type of work that you're doing or have you always been this active in the same sort of efforts?
00:06:41 Dr. Sylvain Charlebois
I think I've always been very active. It's just, I think what has happened over the last few years, because I I do get this comment before COVID, I didn’t know who you were. I do get that comment and it's fair because in the Agri food sector, around Canada, I think most people would know who I am. But outside of agri-food, probably people don't know who I am, but now I mean the difference between our work and the work of most academics is that we try to influence policy a little bit.
00:07:20 Kirsten Cirella
Yeah, a little bit, yeah.
00:07:22 Dr. Sylvain Charlebois
A little bit. And we actually we push, politicians and policymakers, we force them to be more accountable and more transparent. I suspect that you've been listening to our podcast, you've been reading some of the stuff that we write. And it’s all about accountability. It's all about making sure that Canadians are aware of what's going on, because it's getting confusing with social media and most academics, basically will just write an op-ed once a month, maybe once a year and publish. We publish, but we also give life to the scientific work we do to better serve Canadians.
00:08:09 Kirsten Cirella
Yeah. And that transitions really nicely into my next question, which is obviously you have a really big following on social media, you know on X, you're really active there (formerly Twitter). And then also your podcast. So what attracted you in the first place to social media to talk about your work? And also, why do you think it's resonating with people so much?
00:08:35 Dr. Sylvain Charlebois
I don't know. So I am on X. I'm never sure whether I should leave X because it's the jungle. I don’t know if you’re on X yourself, but it’s just...
00:08:49 Kirsten Cirella
I have a fake account that I just you know, I'm a ghost on there. I just watch.
00:08:55 Dr. Sylvain Charlebois
Sometimes it can be very risky and conversation can go in many different directions. And there are bots and you never know who you're talking to. And it's really bizarre. I like LinkedIn personally. I think LinkedIn is more sober, and I post my op-eds and post our research there and it's a safer place. It's a more predictable place, but social media to me is quite important just to inform the public and again influence public opinion as much as possible. I tend to realize a lot of people just don't know what's going on, and because I'm in the media a lot, people call me. People say hey Sylvain, you may want to know this, you may want to know that. And so I get informed about things that are about to happen that nobody knows or things that are happening that nobody knows. And sometimes I'll, you know, sometimes I'll pay attention to some of the information that I'm given and sometimes it's just people trying to influence my voice. They're just trying to influence that. It happens a lot. But it's been interesting, but there are risks. I mean, absolutely as an academic there are risks when you engage with the public and sometimes with people who are, because let's face it, you have to accept the fact that not everyone will agree with you and some people will see you as an enemy and will attack you.
00:10:32 Kirsten Cirella
Yes, a lot of emotions, yeah.
00:10:35 Dr. Sylvain Charlebois
A lot of emotions, and especially academics. Academia, is dominated by left-leaning thinking if you will. To be on campus and give businesses the benefit of the doubt is a very dangerous thing today, which is what I do. I actually do believe that business is there for the betterment of society. That's my belief. But it's a very unpopular mindset on campuses these days.
00:11:11 Kirsten Cirella
Yes, yes, I can imagine.
00:11:17 Dr. Sylvain Charlebois
So academics, as soon as you basically say for example. Loblaws is not profiteering. There's no evidence of profiteering.
00:11:21 Kirsten Cirella
Yes, exactly, yes.
00:11:23 Dr. Sylvain Charlebois
Then you'll get attacked by academics who actually, truly believe that I'm wrong. I fundamentally wrong and profits should be disallowed in some way. Especially this year, in 2023, it's been a very difficult year to me because, I mean a lot of people just weaponize your words, the stuff you’ve done over the years. And that's why, on one side it's great to engage with the public on social media, but at the same time, you do expose yourself to some risks.
00:12:08 Kirsten Cirella
Yeah. No. I can see that for sure. That's why I'm ghost on Twitter. So next month we'll see the 14th edition of Canada's food price report.
00:12:24 Dr. Sylvain Charlebois
You’ve done your homework.
00:12:26 Kirsten Cirella
I know right? There you go. So what led you to start this in the first place and then, from there, what have you learned over, you know, the last decade of publication?
00:12:40 Dr. Sylvain Charlebois
Right. Well, that's an easy question to answer because the one thing I've learned about Canada's food price report is that it's very, incredibly, hard to forecast and be open about it and the following year be accountable to yourself, because the first chapter of every report the following year is how did we do this year and nobody does that. Nobody.
00:13:10 Kirsten Cirella
And I'm sure everyone tells you on Twitter if you're wrong
00:13:15 Dr. Sylvain Charlebois
Yeah, exactly. And but I mean, this year, thankfully, we're right.
00:13:21 Kirsten Cirella
Excellent. Great. OK, a little preview before December.
00:13:24 Dr. Sylvain Charlebois
Honestly, I think there's an under appreciation for how difficult it is to forecast. I mean, we're four universities working together, Guelph, Saskatchewan, UBC. I was at UBC last week and Dal. It's been so much fun to work with all of them, but forecasting is hard and why we started it, well, I actually started the report when that with my good friend Francis, who's now retired. He's an economist at Guelph, so I was at Guelph at the time. Over beer, we were talking about...
00:14:06 Kirsten Cirella
The best ideas, of course.
00:14:08 Dr. Sylvain Charlebois
The best. And we were talking about, you know, food prices - and it was after the financial crisis you remember in 2008-2009 - it was a huge bump and you could feel in those days that people just didn't understand how the world actually works.
00:14:17 Kirsten Cirella
OK. Yes.
00:14:27 Dr. Sylvain Charlebois
And Francis was a macroeconomist and so him and I got this idea of kind of creating a dashboard of factors affecting food prices, from climate change to global supply chains to, you know, embargoes, geopolitics, tax, fiscal policy, environmental policies like the carbon tax, for example. I mean, all of these things. So we had to look at all of these elements and forecast prices by 12 months. The first year it just took off, I mean there was an appetite for this. And then instead of just him and I working together, we grew as a group. And now we're four universities working together with anywhere between 26 to 30 academics. And so it's been great. And we use AI and machine learning and so that's why I'm a bit of a fan of machine learning.
00:15:36 Kirsten Cirella
When did you start using that for what edition?
00:15:38 Dr. Sylvain Charlebois
I'd say it was probably edition number 3 or 4.
00:15:43 Kirsten Cirella
Oh wow, so you're ahead, you already have experience with that. Wow.
00:15:47 Dr. Sylvain Charlebois
And I'm not a computer scientist myself, so it was really something that was foreign to me. And of course the lab here at Dal, was created in partnership with agriculture management and computer science. So that that's where we're getting our AI knowledge. So yeah, AI is a big topic this year, but it's been topical for us for many years.
00:16:11 Kirsten Cirella
Oh yeah. And so you said that you gave us a little preview that this year, you're right on your forecast. That's good to hear.
00:16:22 Dr. Sylvain Charlebois
So I just finished the draft on the weekend.
00:16:27 Kirsten Cirella
Oh, wow. Congrats.
00:16:36 Dr. Sylvain Charlebois
So we write the draft, but of course it has to be approved by all 26. But everyone involved in this project have the right mindset. This is more about, you know, it's not just an exam or defense, it's more about informing the public and setting the tone. And so yeah, so every year when it's released, it's going to be released on December 7th. And we do get a lot of media attention. So yeah, it's been great.
00:17:18 Dr. Sylvain Charlebois
Yeah, I basically can tell you that we are expecting a a 2024 to be a little bit easier on consumers. Yeah, and that's a relief and frankly whenever we release the report, yeah, the forecast is important, but what most of our conversations are about the future of food, like our relationship with food and so in December and January, typically we get into interviews and we talk about, you know, what does food mean to people now? And I would say that we're just leaving a year that has been extremely difficult for a lot of people.
00:18:01 Kirsten Cirella
And that also transitions well into the next topic I wanted to talk about. So food prices and affordability, like many around the world, we know Canadians are struggling with cost of food. What can you tell us about the food inflation and the trends you're seeing? You said that it looks like it'll be a better year, which is again obviously a relief, but is there anything else? Can you can give us some more insight just on inflation and affordability?
00:18:32 Dr. Sylvain Charlebois
Well, I mean, you can just look at markets right now and you can see that things are much calmer. You know, it's funny because over the summer in August, Bloomberg was announcing that it was going to be a disastrous year for corn growers in the US in August and just a few days ago, Bloomberg, the same news outlet, was announcing that America will have a record crop.
00:18:48 Kirsten Cirella
Oh, OK. Interesting. Yep, yep.
00:19:03 Dr. Sylvain Charlebois
The reason why I'm mentioning this to you is because I think markets for a very long time were influenced by headlines. Very negative headlines around climate change, and, you know poor crops and bad news essentially. But in the summer we saw the end of the Black Sea deal in Ukraine. We saw the India issued embargo on rice we thought “Oh my God, commodity prices would skyrocket and it would impact prices in Canada”. Never happened. It never happened. And I was very comforted by what happened. Investors, market are trying to cut through all the headlines and really understand what this all means, what different events, geopolitical events…
00:20:03 Kirsten Cirella
What are the drivers then? What would you say?
00:20:05 Dr. Sylvain Charlebois
What are the actual drivers? They have faith in markets, for example with the Black Sea deal, they knew that Ukraine and Russia would find a way to get to market with their grains. With India, they knew it was all about politics in the next election and that other countries like Vietnam for example and Thailand would pick up the pace and export, which is why our rice prices were never impacted in Canada at all. And rice is the most used food ingredient in the world after water.
00:20:39 Kirsten Cirella
Yeah. Wow. Wow. OK.
00:20:41 Speaker 2
So rice is very important, but it never it was never an issue this year. So I thought it was a bit of a miracle to be honest. And so I think to answer your question, I actually feel way more confident for the next year because there's less, there's less panic.
00:21:00 Kirsten Cirella
Yeah. And what do you think in the year to come? What will be driving prices the most, what would you say for the year to come?
00:21:09 Dr. Sylvain Charlebois
Climate change, for sure.
00:21:10 Kirsten Cirella
Climate change? Is it? Yeah, yeah.
00:21:20 Dr. Sylvain Charlebois
I mean it's always that one wild card. I mean, depending on the vertical you look at, I mean. Every time like…I was actually in Parliament a few weeks ago in front in, in front of the Finance Committee and they asked me, you know, is climate change, a big factor. And I said, well, if you look at the three things that we are expecting to become more expensive the next six months: Beef, coco, and sugar. And those three things are impacted by climate change right now, droughts. And of course, with other verticals, you get a different story, but climate change is always going to be a huge wild card and that’s not going to go away. Now, of course, there's lots of debates in terms of how to mitigate the impact of climate change. How do you actually solve this issue as a species? If you will.
00:22:14 Kirsten Cirella
Yeah, yeah.
00:22:15 Dr. Sylvain Charlebois
And that's why we've been talking a lot about the carbon tax and is the carbon tax the best mechanism? And we've been looking at the cost of the carbon tax and how it's impacting food affordability in Canada and there's lots of flawed discussions on this issue, like it's just it's been mind blowing and frankly I think the Bank of Canada made a mistake in quantifying the impact of the carbon tax on inflation. I think they shouldn't have done that because they misled the public in terms of telling, well, there is an impact, but in our in our studies we can't really find some sort of coefficient that would actually tell us.
00:22:55 Kirsten Cirella
Yeah, yeah.
00:22:58 Dr. Sylvain Charlebois
The carbon tax is impacting affordability in Canada and we looked at food. What we're finding out though, is that the carbon tax is impacting our supply chains competitiveness.
00:23:10 Kirsten Cirella
Ohh okay.
00:23:15 Dr. Sylvain Charlebois
So if you look at industrial prices, not retail prices, industrial prices have gone way up compared to the US since 2020. And nobody's talking about this. Everyone's focusing on retail and so many things can impact retail prices. The weather, consumer behavior, I mean supply and demand. I mean, there's so many things that can actually impact prices at retail but up the food chain, it's much easier to extract different factors that could actually push prices higher, including environmental policies like the carbon tax. So that's what I think. That's where we need to go when it comes to any conversation related to environmental policy in this country and frankly, it's been so politicized. Both conservatives and liberals are doing a disservice to the public just because of that.
00:24:09 Kirsten Cirella
OK. Yeah, that's some good insight there. There's also been a lot of talk about profiteering and greed-flation in the grocery sector. So, what has your research found there? So, your research didn't find the correlation in the carbon tax. What about in this area? What have you been observing here?
00:24:29 Dr. Sylvain Charlebois
Yeah. So, essentially the one thing that needs to be underscored here is the fact that I personally think that the three traditionals - so Empire, Loblaws and Metro are very well managed companies.
00:24:45 Kirsten Cirella
Yeah, 100%.
00:24:45 Dr. Sylvain Charlebois
I mean, they understand the market, the Canadian market in my, in my view, OK. And I don't want to talk about Costco and Walmart because they're a bit different.
00:24:54 Kirsten Cirella
OK.
00:24:55 Dr. Sylvain Charlebois
Costco is more of a wholesaler and Walmart is not a traditional grocer.
00:25:01 Kirsten Cirella
Yes. Yeah, exactly.
00:25:02 Dr. Sylvain Charlebois
But they do sell a lot of food now, but if you stick to Empire, Loblaws, and Sobeys, and Metro, I would say margins have remained somewhat the same over the last five years, but every now and then you do see one of them go beyond the five year average. So last year I would say Loblaws was making more money than their five-year average for a while - for two for two quarters. OK, this year it is metro. OK. Yeah. So that being said though, when you actually look divisions, what divisions are pushing profits higher? It's not food, it's pharmaceuticals. Uh, the non foods
00:25:54 Kirsten Cirella
Cosmetics.
00:25:56 Dr. Sylvain Charlebois
Cosmetics, of course. So if you want to accuse Loblaws, of profiteering, selling Chanel #5 and Ozempic…
00:26:09 Kirsten Cirella
Yeah, yeah, yeah.
00:26:11 Dr. Sylvain Charlebois
Then yeah, you have a case, probably. But they're not profiteering selling sandwiches or turkey or cranberries or whatever. We don't see it. We just don't see.
00:26:17 Kirsten Cirella
Right. That's really interesting.
00:26:25 Dr. Sylvain Charlebois
And by the way, I mean the food inflation rate in Canada is one of the lowest in the G7, only the Americans have a lower food inflation rate. So, in the grand scheme of things, we're not doing too badly. I know a lot of people are hurting out there, but at 5.9%, we have a very low inflation rate. It's a global phenomena, and people tend to forget that all nations around the world were impacted by what happened in the last couple of years.
00:26:51 Kirsten Cirella
Yeah. So speaking about the, you know, the big five largest Canadian grocers, there was a meeting among them in September and you were invited to attend by Minister Champagne himself. You spoke about this on your September 21st episode. And I thought that segment was really interesting. So I was wondering, maybe you could just give a little brief overview about like how it came to be that you were called by the Minister himself and your discussions and how it led you to being at the meeting. And then you've also spoke about the meeting and said it was constructive and you said it went as good as it could have. So I was wondering just if you could elaborate on your thoughts there.
00:27:40 Dr. Sylvain Charlebois
Oh yeah, absolutely. Of course, I can't say more than what I said on the podcast, but…
00:27:43 Kirsten Cirella
Of course.
00:27:47 Dr. Sylvain Charlebois
I mean, it was last summer. I was at the cottage and my phone rang, and it was Minister Champagne. And he just called out of the blue.
00:27:53 Kirsten Cirella
Yeah. And you didn't know him before?
00:27:56 Dr. Sylvain Charlebois
No, I never met him, never met him and so he basically asked me - listen, France is looking at regulating the price for 5000 food products. What do you think? Like, should we do that in Canada? And I said, well, no.
00:28:13 Kirsten Cirella
And I was wondering, I wanted to ask you, why don't you think that? Why was your immediate reaction just hard no?
00:28:21 Dr. Sylvain Charlebois
Because Canada is – we're prisoners of our own geography. I mean, we're just north of the Americans. If you scare away businesses, they'll go south. I mean, in Europe you have many different options. You got over 20 countries. If you're, dissatisfied with one country or one company, you can go elsewhere - you have options in Europe. Not in Canada. And so if you basically make the market less competitive - because that's exactly what Minister Champagne wanted to do - companies will leave and they're already leaving. I mean, in the last several years, we've seen Target leave, Lowes leave, Sears, Nordstrom. I mean it's a tough country to do business in. I mean if we want more competition, we need to make Canada a more attractive place to invest. I mean the bottom line and right now we have TNT, a grocer owned by Loblaws, going to the United States, they're opening up, I believe, two stores in the next few months. Nobody's coming to Canada.Little is not coming to Canada. Aldi is not coming to Canada, because it's hard. I mean, the cost of distribution are very high and so.
00:29:47 Kirsten Cirella
And why? Why is it so tough in Canada? What do you think those factors are? Do you think it is just regulation or do you think there's other, you know non political or regulatory factors that are making it harder for businesses to come to Canada and be successful.
00:30:03 Dr. Sylvain Charlebois
By population density is one of the lowest in the world, OK. And when you think about cold chain or any chains, basically we have one of the coldest environment in the world, and so all of these things are just making the market less attractive to be honest. And you have interprovincial barriers as well, although a lot of different foods, starting with alcohol. And so it's just very difficult to do business without looking at all regulations. And in different provinces you have different set of rules related to HR related to labeling related to all sorts of things and so it's been very it's been very difficult to attract more businesses and that's why I've always encouraged the government to enable conditions to encourage investments and not do the opposite. So that's why I basically said to Minister Champagne that it was a really bad idea to intervene like this. And if you've looked at some of the things that are happening in France, that regulation is not going well.
00:31:14 Kirsten Cirella
Really?
00:31:14 Dr. Sylvain Charlebois
Compliance is a problem. I mean, you're talking about 5000 products, I mean.
00:31:20 Kirsten Cirella
Right
00:31:22 Dr. Sylvain Charlebois
I mean competition is I think a notion that is misunderstood in Canada and people say Canadians want more competition. They always want more competition regardless, even if you have deflation, people want more competition.
00:31:33 Kirsten Cirella
Yeah.
00:31:39 Dr. Sylvain Charlebois
Competition is a good thing to make products more - to offer more choices to Canada. Better quality as well, and that's why there's no perfect equilibrium when it comes to competition, but as a state, as a government, you want to really you want to create conditions to get more companies interested in your market, not conditions that would actually make your market less attractive, like a windfall tax and price fixing. The other thing is confidence.
00:32:12 Kirsten Cirella
Yeah, yeah.
00:32:17 Dr. Sylvain Charlebois
I would say the biggest problem right now is - and that's your thing and it's the Competition Bureau - and the fact that we haven't seen any action against companies which are actually breaking the law I mean and that's why it's hard to blame Canadians for not having. Not trusting grocers right now.
00:32:42 Kirsten Cirella
Yeah. No, that that all makes sense. So going into that meeting, the deliverable was we need a plan and they said, you know, the government was very public, we want to plan by Thanksgiving. So now that I know you can't talk about exactly what was said in the meeting or anything, but we've heard about, you know, just around Thanksgiving, I think the Minister came and said what was 5 deliverables or five promises that were going to be rolled out by the grocery CEOs that they agreed to and we'd start seeing in the coming weeks after Thanksgiving. Can you talk about what those were and just any development since the meeting and how you think, you know, the plan has been materializing?
00:33:34 Dr. Sylvain Charlebois
Yeah, I think that some of the things that, that were discussed were already mentioned by the Minister in public. So I mean, some of the things about discounts, but nothing was out of the ordinary like some of the things that are going on right now, some of the things that were mentioned, it was already happening and, I mean, let's face it, I mean, it was a very awkward meeting because you were basically asking the big 5 to meet with the Minister to discuss what is arguably the most sensitive issue in the industry - prices. And so, there were more lawyers in the room than CEO's.
00:34:18 Kirsten Cirella
I can imagine, I can imagine, just to make sure.
00:34:21 Dr. Sylvain Charlebois
It was, it was awkward and nobody was talking to each other at the very beginning. So cause like I came in with Minister Champagne and Minister Freeland, we basically through the room, sat down and nobody was really talking. And so Minister Freeland actually offered opening remarks, she left and then Minister Champagne took over. And then I basically briefed the group for about 15 minutes or so and what I recommended essentially were things like, you know, getting rid of sales tax on 4600 products, the Code of Conduct is another issue. I think it's a necessity and I think it should be mandatory and I think most people or all people wouldn't know that some companies - Loblaws and Wal-Mart - are now favorable to the Code of Conduct and I think they should be. And I basically said in front of all of them and the Minister that there is no profiteering going on. There's no evidence of that. So can we move on please and focus on real problems like the Code of Conduct? And I think the code of conduct should be mandatory and of course some CEOs did not agree with me. Starting with Galen Weston and so I respect his point of view because he's got a lot to lose, but my take is that if you actually implement a Code of Conduct, you will make price volatility in Canada at retail less of an issue. Why? Very simple. Right now, grocers are implementing new fees all the time on suppliers. Suppliers are raising prices to mitigate the impact of higher fees. And so you got this rat race going on up the food chain, impacting retail prices. That's what's going on. And so we need to stop that, allowing people to go to a safe place to negotiate and settle disputes. Right now, the only thing that manufacturers can do is to suck it up. I'm sorry to say, but that's the only thing. Or leaves like PepsiCo did last year. The stop sale with PepsiCo. Yeah. Classic. That was, that was a wake up call, so people couldn't find their frito lays at Loblaws. Oh my God. That stop call was really classic. It really got people to think - Ohh maybe there are some issues in the supply chain that is impacting consumers.
00:37:07 Kirsten Cirella
No, that that makes a lot of sense. So then if it's not the grocery CEO's you know and the margins that are causing these issues, what is it that you think, you know, what role can the CEO's play in affordability, you know, other than that they can implement the Code of Conduct and things like that. Is there anything else? Like direct action that they can take that would help what's going on?
00:37:35 Dr. Sylvain Charlebois
Beyond what they're doing right now, not really to be honest. I think it's more - what I'm expecting. Is an unconditional endorsement of the Code. And I suspect that it's a very unpopular thing for Canadians because they, most people don't have a clue what the code is. But I see the benefits.
00:37:48 Kirsten Cirella
Yeah.
00:37:58 Dr. Sylvain Charlebois
Countries where there is a code you can see inflation is less of an issue. It's an issue, but like I said, what really hurts consumers is not food inflation per se. It's volatility.
00:38:15 Kirsten Cirella
Right, right.
00:38:16 Dr. Sylvain Charlebois
So the more - and in economic theory, the more vertical coordination you have within the supply chain the less likely you'll see prices fluctuate. That's the nature of vertical coordination. That's why co-ops work. That's why when you see companies vertically integrating, you can absorb shocks better and that's why grocers and manufacturers need to work together with the code.
00:38:45 Kirsten Cirella
Yeah, and that's what you're - because there are arguments, you know, that efforts to coordinate stabilization of grocery prices between these major players, that is just fundamentally in conflict with efforts to increase competition.
00:39:01 Dr. Sylvain Charlebois
That's right.
00:39:04 Kirsten Cirella
Is that like - you get a lot of arguments there?
00:39:08 Dr. Sylvain Charlebois
Well, yeah, I mean, a couple of weeks ago, I mean, I spoke about this during our last episode. What Loblaws did last week, stating that the Code would actually make food prices more expensive is absolute - without providing any evidence or data - is absolutely irresponsible. That was not the right thing to do. It would only divide the industry even more and he said that because he was, he's on his way out, like he's out now as President. So I get it. And but my sense is that it's just not accurate. I don't think that food prices will be more of a problem with the code. It's going to be less of a problem with the code and the data is actually pointing in a totally different direction. What Loblaws did was just misinformation.
00:40:02 Kirsten Cirella
And what do you think about Minister Champagne's direct intervention in an unregulated market? Like, do you think there's any, any world or any ways that the threat of government, you know, micromanagement, could reduce business confidence and predictability in any way?
00:40:22 Dr. Sylvain Charlebois
Well, Minister Champagne's portfolio, he has the Competition Bureau as you know. And I think there's some work to be done there.
00:40:32 Kirsten Cirella
Yeah, we'll get into that.
00:40:32 Dr. Sylvain Charlebois
Oh my God. We've actually worked with the Competition Bureau three times. On the bread price fixing scandal, on the acquisition of Farm Boy by Sobeys and the acquisition of Longos by Sobeys. And every time I left conversation with the Competition Bureau, I always felt like they actually have no understanding of food distribution and how a transaction like that can impact the market over time. And I remember when Farm Boy was acquired, I think it was in 2018, we had a conversation, I said well, I'm not too concerned about that, not too concerned because I mean it, it could actually elevate the position of their stores. And Sobeys actually would be a good buyer. So our analysis was very favorable. But when Longos came along, we were called in again, and I basically said listen for the GTA, the acquisition of Longos kind of changes our conversation about Farm Boy two years before. I mean, you have to look at the series of transactions and they didn't do that. All they focus on was on food prices and to be honest, I just, I felt really uncomfortable. With the bread price investigation, which is still ongoing, we basically provided a report to them. It was about six years ago now. Well, maybe five years ago it was in five years ago, in 2018. Yeah, 2018. And our thesis was pretty simple. We were asked is a bread cartel possible in Canada? Basically. OK. Is it possible? And our answer was yes, it was possible given prices that we were seeing. But it's impossible to have a bread price fixing scheme without Loblaws. And that's why they disclosed, they knew that if someone was going to be caught, Loblaws would have been really the one holding the bag. And that's why they disclosed, and they threw everyone else under the bus, which really created a lot of tension within the industry. And as you know, just recently Metro has decided to sue Loblaws as a result of these accusations. So things aren't great in the food industry right now, just because there's no, there's no, there's nobody providing any forceful oversight over any of this.
00:43:31 Kirsten Cirella
First could we just go back and talk about the Competition Bureau and the Competition Act. There have been a number of developments over the past couple of years. You know, first there was the Competition Bureau’s retail grocery market study and then now there's proposed legislative changes going through the process. So maybe just starting with the retail market report. So the report was published in June and you commented on Twitter, eureka, when it was launched in October 2022. So what were your thoughts? Just seeing this news. One, were you expecting it and what did you mean by that?
00:44:30 Dr. Sylvain Charlebois
What I meant was, is that uh, for me it was a public recognition that the Bureau really didn't know much about the food industry and they needed to do their own work. That's what I saw. To me, the report was more for them than for the Canadian public. And of course, when you read the report that was released in June, you kind of see that like. They went through many documents. They interviewed many people including us and you can sense that they really did their homework instead of just listening to the noise and stuff out there. But again, I do think that Minister Champagne should really make sure that, uh, instead of focusing on fines - because that's, that's the NDP's agenda, you know they're looking at fines and making sure that people are penalized. My focus would be very much on how you can subpoena a company, how you can get to the data. And because in the United States and I've, mentioned this several times, I mean, I've used some examples in the US, they don't really mess around. I mean, they go after executives, and they go to prison and they get fined. Like there was a this price fixing scheme on canned tuna. The executive got 40 months of jail time and I found out $100,000. He actually went to jail. And what Loblaws and Weston did was even worse than that because the scheme lasted allegedly 14 years. And right now, so you have seven companies involved in the investigation. Three of them have now come forward with an admittance guilt, and so one of them, we know Canada Bread. Canada Bread paid a fine of $50 million, but Canada Bread was owned by Maple Leaf during between 2001 and 2014. And now you say, OK, so if Maple Leaf was the owner of Canada Bread, what else is going on at the grocery store that we need to know? And so and there was this one e-mail published by The Globe and Mail this summer, an e-mail that was, I think, written by Michael McCain or his assistant back in 2007 suggesting that perhaps we should look at other verticals beyond bread to do this and so you can feel that there isn't, to me, it's always been clear there is a price fixing culture problem in the industry. The blackout period in the fall from November to February is another example. We've normalized these things and it's not right. It's just not right. And I think I think the Competition Bureau should look into some of these things. And I did say that to the Big 5 by the way. In September, the blackout period should not happen anymore. There's no need for a blackout period anymore. Their argument is that during the holidays, it's busy. We can't change prices, but most prices are digitalized, now. You don't need to put stickers on all cans and every different products. So that's what annoys me a lot because I do believe that there are some old practices that are no longer acceptable.
00:48:15 Kirsten Cirella
Yeah. No, that makes sense. And so just on the Competition Bureau's report, were there any of the four main recommendations, were there any that you think really would be helpful to spur competition? And if not, do you think there's any specific legislative changes that can be implemented? You know, to the Competition Act, like legislatively that can help with affordability?
00:48:45 Dr. Sylvain Charlebois
Well, I think that I actually didn't disagree with anything. I think it was a good report overall and some changes are required. But of course if you're the Competition Bureau, you're not going to be asking for more power because, I mean, I think it needs to be recognized politically and right now the narrative is around punishment, it’s not about empowering the Bureau. And the Bureau is about, the report was about empowering the Bureau. And that's why I think that's where Minister Champagne needs to go. He needs to make the Competition Bureau relevance and forceful and authoritative. People aren't scared of the Bureau. If the Bureau shows up at 1 President's choice in Brampton…
00:49:38 Kirsten Cirella
They're not scared? You don't think they're scared?
00:49:42 Dr. Sylvain Charlebois
I don't think so, no. I mean all we want, we want your invoices, we want, we want emails and things like that. Talk to our lawyers. That's it.
00:49:54 Kirsten Cirella
Right, right. I guess that's maybe that's why I'm scared of the Bureau.
00:50:00 Dr. Sylvain Charlebois
But I don't see it. I honestly don't see it. I actually do think that that grocers aren't necessarily… and that's why there's some I mean… Metro felt, the reason why Metro was suing Loblaws is simply because it doesn't have faith in the Bureau to settle this investigation. I mean this investigation has been going on for 8 years. And there's been rumors about canned tuna. There's been rumors about some fish species. There's been rumors around meat products as well. Nothing is going on. So if you're Metro and you're being accused out in public. The only choice you have is to sue.
00:50:49 Kirsten Cirella
Yeah. Yep. So, you mentioned just earlier about, you know, you think the Competition Bureau needs more power and that's where the focus should be now. What are your thoughts on Bill C56 with the affordable housing and Groceries Act that the Liberals introduced, because part of that is to give the Competition Bureau the power to, and more enforcement action when they see unfair behavior, such as price fixing. Do you think that's a good fix? Do you think it goes far enough? Or what else would you recommend besides you know this legislation?
00:51:30 Dr. Sylvain Charlebois
It sets the tone for sure. I mean, it's hard to be against Bill C 56 because that's kind of where we need to go, but we need more. We need more and like I said, I think it's important to reform the Act and make sure that the Bureau has authority over anything. And it's not just the food industry that would benefit from that. It's many sectors that would benefit from that, of course. The thing about Canada compared to the US is that we do have a funny relationship with competition, the concept of competition. We love monopolies. We love oligopolies. Until prices become a problem, you know, because we think that monopolies cause that we have government monopolies everywhere. I mean it's just, they're everywhere and we have like a public bank like FCC in the Ag sector, it's a crown corporation. It lends money, competes against banks. I mean, we have this really bizarre relationship with competition until prices become an issue. Now, when prices are going to drop, and they will drop, will Canadians still care? That's the worry, I mean and I think there is some traction. I think we're about to end the era during which we were politicizing food inflation. I hope. I think people are starting to really understand that this green inflation campaign was just based on a very false and bias narrative, in my view, and people are starting to really are trying to understand why prices are so high and why they're so volatile. So I think we're getting there at some point and but I think at the end of the day, we just need a Competition Bureau that can settle problems very quickly, much more quickly than now, because their track record is just horrible.
00:53:42 Kirsten Cirella
Yeah. No, that's all really helpful. So kind of shifting , I think it was around the same time the Bureau’s report came out, you were also involved in the development of the “Grocery Affordability: Examining Rising Food Costs in Canada”, the report published by the Standing Committee on agriculture and Agri food. So just maybe I know you've spoken about this, but what was your overall sense of the report? Where do you think it was the strongest? And, I already know the answer to this, but where do you think it fell short? I think there's two specific parts that you've critiqued.
00:54:27 Dr. Sylvain Charlebois
Yeah. So I honestly, I vaguely remember what I said about this. Yeah, since there's been so many.
00:54:33 Kirsten Cirella
I do. I just listen so.
00:54:38 Dr. Sylvain Charlebois
Yeah. Well, maybe you should remind me what I said and then I'll comment.
00:54:39 Kirsten Cirella
OK, well, what about the windfall tax? What are your thoughts there?
00:54:45 Dr. Sylvain Charlebois
Yeah. No. OK, so the yes. OK. There are two recommendations I didn't like yes, the windfall tax to me. I mean, at the end of the day with small margins, I suspect that a lot of Canadians realize now that they would pay for that tax. There is a windfall tax in banking now in Canada over the last two year. I didn't see profits drop in banking and my banking fees haven't dropped either. I don't know, maybe yours, but not mine. And so the windfall…But they had the luxury to have huge margins in banking, so they can afford it. Not in grocery. Groceries, you kind of have to charge more, so you could actually make inflation a worse problem. So that's why I was not very impressed by that recommendation. What's the other one?
00:55:38 Kirsten Cirella
The recommendation that the government collects and publish data about cost.
00:55:44 Dr. Sylvain Charlebois
Yes, that's the other, of course. Yeah. Yeah, yeah. I'd like to know how much money Loblaws is making when I buy a loaf of bread, but I certainly would love to see Metro see Loblaws - how much they're making on bread. I mean, you're basically you would encourage price fixing.
00:56:05 Kirsten Cirella
Right. And the impacts on competition too, right?
00:56:10 Dr. Sylvain Charlebois
And you kill competition. You could actually make prices even higher. I mean, that recommendation just to me. And MP Kody Blois is a MP from Nova Scotia. He's the chair of the committee. Great guy. When I saw those two recommendations, I saw a political compromise with the NDP. Yeah, because Alistair wanted something in there and they just made a compromise. That's what I saw. Yeah.
00:56:40 Kirsten Cirella
OK, OK. Yeah, yeah, yeah. And do you, was there anything? What were you involved in? Any of your recommendations? Did you see any of those end up in the final report?
00:56:52 Dr. Sylvain Charlebois
I believe so. So I actually testified last year in December, when CEOs were supposed to show up but they didn't. Which was interesting. Yeah. So they didn't sent in their CFO's and the committee was incredibly insulted and half of the session was about that.
00:57:10 Kirsten Cirella
Yeah, I can imagine.
00:57:14 Speaker 2
But I did testify and I and talked about, I mean the Code of Conduct was something and it is, it was, mentioned briefly, but again I don't think that MP's fully understand what the Code is. It's like supply management, you know, supply management, it is complicated policy. A lot of people know what supply management is, but they don't know how it works. And so I think it's the same thing with the Code. People will listen to things they can, and will actually write, about things they understand.
00:57:50 Kirsten Cirella
Yes, that makes sense.
00:57:52 Dr. Sylvain Charlebois
That's the difference between Parliament and Senate. At Senate, you have the luxury of time to explain the code. Parliament, your comments get politicized, and even sometimes weaponized.
00:58:09 Kirsten Cirella
Wow, yes.
00:58:10 Dr. Sylvain Charlebois
So when I'm when I'm testifying today, that's what I'm expecting. And it's fair game or else if you don't want to do that you just stay home.
00:58:21 Kirsten Cirella
Yeah, that's true. Well, good luck. I'll be thinking about you.
00:58:27 Dr. Sylvain Charlebois
And also it depends. The other thing about, so this is going to be my 19th and 20th.
00:58:32 Kirsten Cirella
Right.
00:58:34 Dr. Sylvain Charlebois
A lot of the experience really depends on who else is testifying with you. That's the other thing. Yeah.
00:58:40 Kirsten Cirella
Ah yes, I never thought about that, but that that makes sense.
00:58:44 Dr. Sylvain Charlebois
And the fact that I'm in Halifax today also changes the dynamic and I can't - so if you're in the room, you're more influential. You're. Yeah. Yeah. And so that's the other thing that really will impact your influence as a witness, if you will.
00:59:04 Kirsten Cirella
Yeah, that's interesting. That makes sense. OK. So I think we might have time for one last topic. Just maybe talk a bit about food security. Just as a general, you know, concept because I know you speak about that a lot. Could you maybe provide a baseline of just what we're talking about when we say “food security”?
00:59:26 Dr. Sylvain Charlebois
Yeah, so food security is defined in many different ways, but the way I define it is a little bit more simple. To me, there are three pillars to food security. One is access, so if you have access to food, if you're producing food, if you're manufacturing food. If you're importing food, access is very important. Two safety. You can import all the food you want, but if it's not safe, you're going to kill people. And if you kill people, it's not a good business model. So you need safety. And three, affordability. So you want your food to be as affordable as possible, so you have to kind of look for options and not be dependent on one source or a couple of sources. So you want to you want a varied portfolio of sources if you will. So you need options basically for your population to be food secure.
01:00:27 Kirsten Cirella
And so my last question is: what are some trends and factors and events, even, affecting food security at the moment? And I guess maybe a second part of the question, how does competition work into that? How can competition improve just, you know, the three pillars of food security in Canada?
01:00:50 Dr. Sylvain Charlebois
Yeah, like in Canada, I would say, I mean climates, as I mentioned earlier, I think is a big one and we saw that with BC over the last couple of years and droughts in, in the Prairies. I mean it just goes on and on and on. Too much water. I mean, this year with wildfires and floodings. I mean, again, it's just incredible how Mother Nature, reminds us of how powerful she is But the other thing that a lot of people don't talk about is infrastructure. Yeah, I don't know if you drive around a lot or if you take the train or you go to the airport. I mean our infrastructure, our logistical infrastructure is pathetic in Canada. If you look at ports, BC ports were on strike this summer. If you look at the most recent global ranking of ports around the world, there are 348 major ports in the world. OK. All Canadian ports, major ports, Montreal, OK, Halifax and Vancouver are ranked at the bottom. In fact, out of 348 ports in the world, Vancouver is number 347.
01:02:05: Kirsten Cirella
Wow.
01:02:06 Dr. Sylvain Charlebois
Yeah. So, so that's what - airports aren't great, we hear a lot about Pearson and you know, I go through Pearson, I'm going through Pearson on Wednesday and it's just not a great experience overall, typically. And roads, roads are not great in Canada. And so we need to invest more infrastructure. And when you invest more infrastructure, you get to see more companies using infrastructure. I know workers have rights. They have the right to strike. But strikes affecting the Saint Lawrence Seaway, for example. Strikes affecting railways. I mean, those are problems for Canada's reputation. I actually spoke at a Tampa Bay conference. I think it was last year and I was asked to talk about the Canadian landscape around supply chains. And let me tell, I was talking to 350 Americans. They see Canada as a problem.
01:03:13 Kirsten Cirella
Really?
01:03:14 Dr. Sylvain Charlebois
Yes, our reputation - and by the way, I mean, my talk happened a couple of months after the Ambassador Bridge in Windsor was closed - remember that? With the truckers.
01:03:24 Kirsten Cirella
No. Oh, yes. OK. Yes, yes, yes, I do. Yep.
01:03:29 Dr. Sylvain Charlebois
It was closed for six days.
01:03:31 Kirsten Cirella
Yes, yes.
01:03:31 Dr. Sylvain Charlebois
You know much money that cost American companies?
01:03:33 Kirsten Cirella
Yeah. Wow.
01:03:35 Dr. Sylvain Charlebois
I mean, we don't realize it, but those are all…
01:03:37 Kirsten Cirella
But they remember.
01:03:39 Dr. Sylvain Charlebois
Of course, yeah, I was. I was actually in Florida teaching at the University of South Florida. And people were asking me what's going on with Canada.
01:03:48 Kirsten Cirella
Ohh my gosh. Come on. Yes.
01:03:51 Speaker 2
Yeah. And I was in Tampa Bay, so I said well, Canada is upset because we haven't won the Stanley Cup in 30 years.
01:03:56 Kirsten Cirella
See, that's a good, good response. There you go. It’s true.
01:04:00 Dr. Sylvain Charlebois
But beyond the laughter, I mean, I think we have, we have a serious problem here with logistics. And if you invest more on logistics, I think we'd be better off. And servicing regions like the north, like the Atlantic, you know, it'll get easier because right now everything that we eat in the in the Atlantic is trucked in. And we also need more manufacturing. Manufacturing is key and frankly food processing has been a problem in Canada.
01:04:37 Kirsten Cirella
Well, honestly, you've made some great points and I just want to say again, thank you so much for joining us today. This has been extremely insightful and a great, great conversation. So on behalf of all of us, the Counterfactual Podcast, thank you so much.
01:04:55 Dr. Sylvain Charlebois
My pleasure. Thank you for inviting me.
01:04:56 Kirsten Cirella
Yeah, of course. OK, so good luck. The rest of the week, and I'm sure we'll hear more from you.
01:05:02 Dr. Sylvain Charlebois
All right, take care. Bye. Bye.