Conservatives take aim at food inflation

Conservatives put breadbasket issue on table

The Conservatives recently promised to control food inflation, an odd promise for a party typically known to embrace free-market conditions.

What's making this even more atypical is that Canadians have access to one of the most affordable food baskets in the world, No. 18, according to the Global Food Security Index. It could be better, but it's not bad. Canada is ranked almost similarly to Switzerland, France, the United Kingdom and Israel, and is No. 10 in food quality and safety, according to the same index.

So tackling food inflation as a government may seem a little strange. But Canadians are feeling pinched by what's coming from the food industry, needing to pay more as they visit the grocery or buying a meal.

If you're feeling you're paying more for food, it's not an illusion. An average family of four in Canada is roughly paying about $1,000 more for its food since January 2020. Right now, not one sector is immune to systemic pressures affecting the industry.

For a government, it is practically impossible to control macro variables that indirectly affect food prices like interest rates, the effects of the pandemic on global logistics, climate change, currency wars and labour woes, especially during a four-year mandate. Openly stating to Canadians that food prices at retail should be lowered or at least controlled would simply be foolish.

Controlling food prices at retail is not something most Canadians should want. It rarely works.

Case in point: Quebec controls the price of fluid milk at retail, and it's been a disaster for consumers. Milk is very expensive in La Belle Province because regulatory mechanisms barely give an opportunity to consumers to advocate for themselves. Industry lawyers and lobby groups will always overpower the welfare of consumers, especially those with limited means.

Controlling prices or even nationalizing parts of our food distribution system would only lead to higher prices, discourage investments and innovation domestically and from abroad, and offer fewer choices to consumers. The quality of food products for Canadians would surely be compromised.

But that is not what the Conservatives are promising. Their plan is to tackle innate market conditions that could affect food prices at retail up the food chain. For one, they want to end criminal behaviour, or at least punish it accordingly. The bread price-fixing scandal revealed by Loblaw and Weston Bakeries in 2017 was troubling. For 14 years, bread prices were artificially inflated by collusion. Bread prices went up 116 per cent during that period, according to Statistics Canada. When the scheme ended, bread prices dropped by 17 per cent within two years.

The Competition Bureau has known about the situation since 2015, yet no one has paid a fine or gone to jail, and the investigation is ongoing after six years.

Collusion undermines consumer trust. Governments ought to play a more active role in making sure these schemes are severely condemned.

The other promise made by the Conservatives is related to supply chain bullying. For years, major food retailers have unilaterally imposed fees on suppliers, affecting the food processing sector's competitiveness. Smaller companies, which are often family operated, are severely penalized by these fees that make it impossible for them to compete.

A code of conduct with some government-led oversight would create predictable, workable market conditions for processors and grocers.

Processors don't mind paying fees, lowering list prices and offering discounts to grocers. But grocers have a lot of power and have gone too far in recent years with outrageous pricing tactics affecting food companies and farmers in Canada and elsewhere. The challenge is to protect our food processing sector while making sure grocers serve the public well with competitive prices. A few other countries have done this with encouraging results.

Of all parties, the Conservatives are the only ones daring to tackle the hidden side of food distribution. They want to give a chance to innovation, competitiveness and fair pricing without regulating retail prices per se. It's a clever plan.

Before the pandemic, hardly any Canadians cared about supply chain tactics and oligopolistic powers within the industry. But now, pointing out the hidden ills of our food system is politically encouraged. One can only hope other parties will follow suit.

REUTERS The Conservatives have made food inflation a federal election topic. The other parties should also tackle the issues within food distribution, writes Sylvain Charlebois.