Does Canada need more grocery competition?

As Canadians labour to keep up with ever increasing grocery costs, Ottawa seems keen to attract a foreign grocery chain to increase competition in the market.

Currently, most major grocers across the nation are concentrated in the hands of five companies – Loblaws, Empire, and Metro. And in 2022, they collectively reported more than $100 billion in sales, raking in over $3.6 billion in profit, according to a summer 2023 report from the Competition Bureau on the subject.

“Canada’s grocery industry is concentrated,” it found. “In recent years, industry concentration has increased, and it has become more difficult than ever for businesses to enter, expand, and compete effectively.”

The bureau’s report had a simple solution: “More competition is a key part of the answer.”

In speaking with the Toronto Star in mid-December, Canada’s minister of innovation, science and industry, François-Philippe Champagne, said he was in talks with grocery chains around the world. He said courting an international client would be a "net benefit" to Canadian consumers and help drive down prices.

The Competition Bureau said it spoke to international grocers about what may prevent them from entering the market. The organizations pointed to several barriers, including taking on the established competitors, the need for a vast selection of multicultural products, bilingual labelling laws, and had cold feet after the ‘Target experience.’

Target famously failed less than two years after trying to break into the Canadian market.

But high grocery prices aren’t just a Canadian issue. In the study, the Bureau talked with similar authorities in various countries, like Australia, New Zealand, the United Kingdom, Germany, Norway, Austria, and the European Union.

Those nations have turned to solutions like a grocery Code of Conduct, property controls, unit pricing, and bolstering discount grocers to push down costs.

In Australia, the Australia Competition and Consumer Commission’s found that when ALDI, an international discount grocer, set up shop, a significant reduction in prices took place at nearby grocers.

This so-called ALDI Effect is missing in Canada, the report said, since nearly all discount grocers are owned by the large chains.