Food producers say they're feeling the pinch of rising costs

Food producers say they're facing cost pressures that are contributing to the rising prices Canadians are seeing at the grocery store.

Industry representatives on Monday pleaded their case to the House agriculture committee that is currently examining food inflation.

Philip Vanderpol of the Dairy Processors Association of Canada said input costs producers face — such as labour, packaging and energy — have all shot up in the past year.

"With cost increases of this magnitude, it is obvious that costs have had to be passed on down the supply chain," Vanderpol told the committee.

James Donaldson, vice-chair of Food and Beverage Canada, echoed Vanderpol's point, but also noted that smaller producers aren't able to pass on costs to large grocery retailers.

"It's impossible to pass those costs on through pricing due to … flat-out rejections by some retailers," Donaldson said.

The latest inflation numbers from Statistics Canada show that while overall inflation fell to 5.9 per cent in January, food prices are up 10.4 per cent compared to last year. That number is up slightly from December's 10.1 per cent.

"Since the onset of the COVID-19 pandemic, many factors have impacted prices at the grocery store, such as supply chain disruptions, labour shortages, changes in consumer purchasing patterns, poor weather in some growing regions, tariffs, higher input costs and higher wages," Statistics Canada said in a November 2022 report about the rising cost of food.

The report adds that Russia's invasion of Ukraine has also played a part because of the importance of both countries in food production.

Maple Leaf Foods CEO Michael McCain said that these conditions have created the most turbulent market he's seen in 40 years.

"Spiraling inflation and market volatility have been a massive headwind," he told the committee.

Both McCain and Donaldson cited reforms to Canada's immigration system as a way to help alleviate labour shortages. Donaldson specifically called on the government to create a faster track for temporary foreign workers to gain permanent residency status.

McCain also said the government needs to apply a more competitive lens to regulations that govern food producers, comparing the current number of regulations to a tonne of feathers.

"You got a tonne of feathers — it's still a tonne," he said.

Grocery code of conduct

Ottawa has proposed a grocery code of conduct to govern the relationship between food producers and retailers. Industry negotiations on such a code are currently ongoing.

Donaldson said that the code would help address the imbalance between smaller producers and large retailers which dominate the grocery industry.

The five largest grocery chains — Loblaws, Empire, Metro, Walmart and Costco — make up a majority of the food retail market in Canada.

"When you don't have the leverage of a larger company, it's very hard to get their attention," Donaldson said.

But McCain argued that a code of conduct would have little impact on overall food prices.

"We're completely agnostic to [a code of conduct]," he said. "Truth be told, I think it will have absolutely no impact on our business, or anybody else's business, or the consumer outcome."

Donaldson agreed that a code wouldn't be a "magic bullet" for addressing food prices, but still argued in favour of one.

The committee is scheduled to hear from representatives of Loblaws, Empire and Metro on Wednesday.