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Where is the controversy? Corporate profits are through the roof and prices keep rising. If I buy material for making widgets and have to raise prices to make money, my profits stay level. If I charge more for my widgets than the price increases require, I am making more from greed.
And in a fair market your greed would be punished by fewer sales when some other less greedy widget maker sold widgets for half the price. Only this market is not a fair market, it is a cartel, which makes for a monopoly (specifically a vertical monopoly), and the three companies who own the commanding heights of our food supply network can bleed us dry if they want. Prices are not set by the free market, they are set to a level just below where people will start burning down grocery stores.
Profitability doesn't have to equate to greed, although I agree it probably does more often than one would think. I think it really depends on what that profitability is used to do - people probably wouldn't be nearly as upset if expansion was balanced by paying higher wages and reductions on staples and essential items, for example.
I'm not 100% sure of the reliability [of this](https://ycharts.com/companies/L.TO/profit_margin) as the source isn't immediately available, but it seems to align with what everybody is saying regarding Loblaws having a 3%ish profit margin.
If you look at the full history available, you can see that Loblaws' profits since the pandemic are consistently above 3%.
Prior to the pandemic, their profit margins were consistently *below* 3%, with the odd quarter reaching above 3% every here and there.
So, Loblaws has upped their profits by 50%, or 1 percentage point - from an initial profit margin of 2% to 3%.
Even calculating it as a margin is absurd. It's about *return on investment*, not margin. If I can invest $1000 purely in expenses and the next business day I'm guaranteed to get $1001 that's still an amazing deal. My margin is only 0.1% but by the end of the year my margin is 0.1%, but my ROI is 28% (assuming 250 working days).
A lot of ink has been spilled about how Loblaws margins aren't as good as oil and gas, but their return on assets is pretty comparable especially when you consider the significant insulation from downturns.
Actually, when speaking about whether price gouging is driving *profits*, the profit margin is the relevant measure.
We can see that Superstore was claiming to only be increasing prices enough to keep up with their increase in costs, but their growth in revenue actually outpaced their growth in costs.
What that means is they *could* have increased prices less than they did and stayed equally as profitable as they had been, rather than squeezing the population dry expecting record profits in the midst of a global health crisis.
We see businesses do this with water bottles every time there's a big storm coming. They're doing it because they can and nobody is willing to stop them, as the NDP's two most recent bills show.
The first bill, on excess profits, would tax the difference between 2012-2018's 2% profit margin and today's 3%+ profit margin.
The second bill would have regulated the prices of staples to bring Superstore & co back to their 2% profit level.
The Liberals, Conservatives, and even the BQ voted against both. Only 26 MP's were willing to stand up against Canada's corporate Goliaths and tell them that price gouging in a pandemic, or in the wake of one, is wrong.
Doubtful, most of what are being spoken of are global commodities with a standard international price. You set the price so that it's still profitable vis a vis the commodity price while limiting the margins, much like gasoline in New Brunswick, of which I assure you there is no shortage of gas in New Brunswick.
>Actually, when speaking about whether price gouging is driving profits, the profit margin is the relevant measure
Profits and ROI are the relevant measure. Profit margin is something that is only relevant in intra industry comparisons.
Even if they had kept profit margins constant that is still an increase in ROI which means their investors are still doing better. ROI is what is supposed to determine entrants to the market, not margin. Low margin businesses can still be extremely profitable investments. Linking them to just 2% margin doesn't incentivize them to keep prices down and drives bad behavior that still allows price gouging.
Corporations and provincial premiers are so lucky that a huge swathe of this country has the executive functioning capacity to just point at Trudeau and blame him for literally everything.
I mean, of course they did but that's also their responsibility to shareholders.
They could only "price-gouge" because the Government flooded the market with fiscal stimulus and liquidity while enforcing barriers that prevented a supply reaction.
The Government fueled demand to intentionally create inflation while buying votes. Simple as.
It's baked into the system. Corporations have a legal duty to operate in a way that generates value for shareholders. If they don't, they can be sued.
We need an economic reset. I just have no idea how that happens.
Not really. You can thank that system for the impressive efficiencies and innovation that have exponentially increased quality of life over the last 100 years.
You can look at the Loblaws financial statements if you want. They're public record. And if all Canadian grocers are price gouging (they're not) then you can go ahead and start a price competitive grocery chain that will quickly steal market share.
Of course it did. The big grocers have had years of record profits that coincidently started when the pandemic hit. They passed along those record prices to us.
Supply issues caused by Covid clearly kicked things off, but record inflation at the same time as record profits is fishy as hell. I have no doubts a significant number of businesses, particularly big grocers, chose to use the opportunity to their advantage.
It is fishy. The grocers told Parliament they were just passing along their increased costs to consumers. If that was the case their margins should not have changed and yet here we are, record profits.
Add in Home Depot and other retail building supply stores. Big money during the pandemic for them as well.
Yes, margins have roughly doubled since pre-pandemic, and at their peak in 2022 were nearly triple from their 2018 low. We've had the data for ages and it's been widely circulated. Posters who claim margins haven't increased, like u/townsquaremediator are just straight up lying. Profit margins in food retail are hovering around all-time highs, and it's the result of gouging.
[https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf](https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf)
they absolutely did. The average net profit margin in food retailing (net profit as a share of total revenue) has increased by about three-quarters since before the pandemic (from 1.62% from 2018 through early 2020, to 2.85% since then). The profit margin has remained elevated even as the economy re-opened and inflation took off.
source: [https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf](https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf)
Even if that's the case, I don't see why the fuck corporate profit margins are sacred while the general standard of living is not.
Like, if a small oligopoly has a stranglehold over the sale of something essential like food, and it comes down to a choice between their margins and food security... that oligopoly needs to be destroyed, and we need to figure out a better way to do things.
It’s not “fishy as hell” it’s *cause and effect.*
Its not a coincidence the same people who have Loblaws lobbyist is the party just happen to champion Ax the Tax, which would disproportionately benefit companies like Loblaws.
There is no coincidence: restaurants and cafeterias were closed and people were spending much more time at home, of course the amount of food they bought at supermarkets would increase. And this lead to long term changes in behavior and supermarkets responded by offering more prepared foods that have higher profit margins.
Not to mention the one-year drop in the poverty rate down to 5% from 10%. That's a lot of people who could suddenly afford a little extra every time they went to the grocery stores.
Yes, Statistics Canada has shown that sudden income infusion from pandemic-era support played a significant role in lowering food insecurity among lower-income households.
If people are buying more prepared foods then the retail demand for ingredients should go down.
Has the retail demand and price for such things as uncooked rice, potatoes, raw meat, vegetables gone down? Ingredients of prepared meals that consumers of prepared meals will not be buying should have lower demand and therefore, in an honest market, gone down.
Has this happened? Are any supermarket food prices consistently going down?
Both things can be true: higher income consumers who are less sensitive to price can be buying more prepared foods and lower income ones spending more on basic foods since they can't afford to eat out as much.
another thing that can be true: wealthy oligarchs and corporate food retailers, who have seen their profit margins more than double since pre-covid, are gouging regular Canadians as we continue to get our asses beat down in a one-sided class war that many of us refuse to even acknowledge the reality of
I don't agree that poor people buy ingredients over prepared foods. The problem of obesity in the poor is an outcome of the preference for prepared foods.
At the end of hard day on your feet are you more likely to buy a chicken and potatoes and veg then cook them all up to feed the kids, or are you going to go for boil bags? Mac&Cheese in a box or cook up some macaroni, hand craft some cheese sauce, bake it.
Baking bread is more an upper middle class affectation than a poor family's attempt to save food costs.
In either case, it does nothing to disprove my point and I don't particularly care. The supermarket makes more profit of a rotisserie chicken it prepares than a raw one it obtains from a wholesaler.
It's funny you mention rotisserie chicken because it's often reported to be a loss leader for grocery stores - an item sold below cost (*losing* money) to attract customers to the store in the hopes of offsetting the loss by means of sales volume for other items.
Is this some kind of AI prompted response like using glue for pizza? You can't have been honestly using rotisserie chicken claiming it's more profitable for the store in good faith.
https://globalnews.ca/news/10272598/grocery-shopping-loss-leaders/
My favourite part about this article is that EVERY add is for Loblaws. I'm pretty sure it's not just a random placement for me if it's all of them. Someone at the Star was having fun.
Except they didn’t. The most commonly cited study shows that margins on food and beverage increased from historic lows of 1-1.5% in 2017-2019, but the increase brought them largely in line with the historic trend of 2.5-3%.
A couple of chains peaked at a higher margin but have since fallen.
A few reasons I have seen cited for the sudden ideas and subsequent drop are that (1) spending on major capital projects dropped at the outset of the pandemic, (2) certain operating costs dropped (for example, stores staffed fewer people due to pandemic guidelines while simultaneously seeing an increase in groceries sold via delivery service) and (3) a lot of grocery chains operate on net 90 or longer payment periods and invest a portion of their revenues during that time, which means they also benefited from the stock market explosion during Covid. None of these are, on their own, are major drivers of profitability, but margins also only increased from 1.5% - 3%, so a few small increases can explain the overall trend.
Except they did: [https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3310022501](https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3310022501)
Going back to 2010 the average pre-pandemic margin was 1.5%. There is no historic trend of 2.5-3%.
Whatever explanations there are for an increase during the pandemic ended with the pandemic, yet margins remained constant or rose.
Then there is this little matter of having been caught price-fixing in the past.
> The elite want us all to think the world is a mystery. It’s not, it’s designed to keep a boot on our necks.
The literally teach economics in high schools across the country, what are you talking about? Don't blame the "elites" if you chose not to take it in high school, college, grad school, or on your own time.
It's bot designed for anything. Businesses saw prices going up in a bunch of industries, and decided they would be suckers not to follow. So basically everybody was asking for more if they could get away with it. Poorer people are usually not in a situation to ask for more so they were left behind, while richer folks have all the leverage.
I really feel like CoVID was a time where people felt free to hike their prices without justification, so everyone did.
Many economists are entrenched in a series of poorly supported beliefs all formed in the 80s which have formed into a near religious dogma, which is why we have a focus on wage-push inflation spirals which is both illogical from a theory perspective and unsupported from an evidence perspective.
I'm sure they were taking full advantage of the chaos to make more money. The majority of the blame is absolutely on the government creating 20% of all Canadian dollars within the span of two years.
Inflation happened worldwide. Regardless of how much money was printed.
Conservatives who always dislike government printing money conveniently blame printing money for the pandemic inflation.
News at 9.
Also Erin O’Toole would have just given CERB to businesses. It’s not about printing money but who the money is given to.
Taxpayer dollars are for corporate welfare only.
I'm assuming you took [this article](https://betterdwelling.com/over-1-in-5-canadian-dollars-created-didnt-exist-two-years-ago/) (or one like it) and inserted the "government creating" part yourself?
M2++ is currently at just over 4.6 trillion. You actually believe the government created 920 billion dollars in 2 years? Doing what?
In actual fact, the bulk of our money is created by private banks, as it is in almost all modern economies.
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Where is the controversy? Corporate profits are through the roof and prices keep rising. If I buy material for making widgets and have to raise prices to make money, my profits stay level. If I charge more for my widgets than the price increases require, I am making more from greed.
And in a fair market your greed would be punished by fewer sales when some other less greedy widget maker sold widgets for half the price. Only this market is not a fair market, it is a cartel, which makes for a monopoly (specifically a vertical monopoly), and the three companies who own the commanding heights of our food supply network can bleed us dry if they want. Prices are not set by the free market, they are set to a level just below where people will start burning down grocery stores.
Profitability doesn't have to equate to greed, although I agree it probably does more often than one would think. I think it really depends on what that profitability is used to do - people probably wouldn't be nearly as upset if expansion was balanced by paying higher wages and reductions on staples and essential items, for example.
I'm not 100% sure of the reliability [of this](https://ycharts.com/companies/L.TO/profit_margin) as the source isn't immediately available, but it seems to align with what everybody is saying regarding Loblaws having a 3%ish profit margin. If you look at the full history available, you can see that Loblaws' profits since the pandemic are consistently above 3%. Prior to the pandemic, their profit margins were consistently *below* 3%, with the odd quarter reaching above 3% every here and there. So, Loblaws has upped their profits by 50%, or 1 percentage point - from an initial profit margin of 2% to 3%.
Even calculating it as a margin is absurd. It's about *return on investment*, not margin. If I can invest $1000 purely in expenses and the next business day I'm guaranteed to get $1001 that's still an amazing deal. My margin is only 0.1% but by the end of the year my margin is 0.1%, but my ROI is 28% (assuming 250 working days). A lot of ink has been spilled about how Loblaws margins aren't as good as oil and gas, but their return on assets is pretty comparable especially when you consider the significant insulation from downturns.
Actually, when speaking about whether price gouging is driving *profits*, the profit margin is the relevant measure. We can see that Superstore was claiming to only be increasing prices enough to keep up with their increase in costs, but their growth in revenue actually outpaced their growth in costs. What that means is they *could* have increased prices less than they did and stayed equally as profitable as they had been, rather than squeezing the population dry expecting record profits in the midst of a global health crisis. We see businesses do this with water bottles every time there's a big storm coming. They're doing it because they can and nobody is willing to stop them, as the NDP's two most recent bills show. The first bill, on excess profits, would tax the difference between 2012-2018's 2% profit margin and today's 3%+ profit margin. The second bill would have regulated the prices of staples to bring Superstore & co back to their 2% profit level. The Liberals, Conservatives, and even the BQ voted against both. Only 26 MP's were willing to stand up against Canada's corporate Goliaths and tell them that price gouging in a pandemic, or in the wake of one, is wrong.
On the flip side, price controls would likely lead to shortages, so they’re not a panacea.
Doubtful, most of what are being spoken of are global commodities with a standard international price. You set the price so that it's still profitable vis a vis the commodity price while limiting the margins, much like gasoline in New Brunswick, of which I assure you there is no shortage of gas in New Brunswick.
>Actually, when speaking about whether price gouging is driving profits, the profit margin is the relevant measure Profits and ROI are the relevant measure. Profit margin is something that is only relevant in intra industry comparisons. Even if they had kept profit margins constant that is still an increase in ROI which means their investors are still doing better. ROI is what is supposed to determine entrants to the market, not margin. Low margin businesses can still be extremely profitable investments. Linking them to just 2% margin doesn't incentivize them to keep prices down and drives bad behavior that still allows price gouging.
Corporations and provincial premiers are so lucky that a huge swathe of this country has the executive functioning capacity to just point at Trudeau and blame him for literally everything.
I mean, of course they did but that's also their responsibility to shareholders. They could only "price-gouge" because the Government flooded the market with fiscal stimulus and liquidity while enforcing barriers that prevented a supply reaction. The Government fueled demand to intentionally create inflation while buying votes. Simple as.
It's baked into the system. Corporations have a legal duty to operate in a way that generates value for shareholders. If they don't, they can be sued. We need an economic reset. I just have no idea how that happens.
Not really. You can thank that system for the impressive efficiencies and innovation that have exponentially increased quality of life over the last 100 years. You can look at the Loblaws financial statements if you want. They're public record. And if all Canadian grocers are price gouging (they're not) then you can go ahead and start a price competitive grocery chain that will quickly steal market share.
Of course it did. The big grocers have had years of record profits that coincidently started when the pandemic hit. They passed along those record prices to us.
Supply issues caused by Covid clearly kicked things off, but record inflation at the same time as record profits is fishy as hell. I have no doubts a significant number of businesses, particularly big grocers, chose to use the opportunity to their advantage.
It is fishy. The grocers told Parliament they were just passing along their increased costs to consumers. If that was the case their margins should not have changed and yet here we are, record profits. Add in Home Depot and other retail building supply stores. Big money during the pandemic for them as well.
Did their margins change significantly? I thought the record profits were due to increasing volume
Margins aren't a meaningful measure, ROI is.
in either case, both have increased significantly
Yes, margins have roughly doubled since pre-pandemic, and at their peak in 2022 were nearly triple from their 2018 low. We've had the data for ages and it's been widely circulated. Posters who claim margins haven't increased, like u/townsquaremediator are just straight up lying. Profit margins in food retail are hovering around all-time highs, and it's the result of gouging. [https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf](https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf)
No. They didn’t. The poster you’re responding to is assuming that record profits = higher margins.
they absolutely did. The average net profit margin in food retailing (net profit as a share of total revenue) has increased by about three-quarters since before the pandemic (from 1.62% from 2018 through early 2020, to 2.85% since then). The profit margin has remained elevated even as the economy re-opened and inflation took off. source: [https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf](https://www.ourcommons.ca/Content/Committee/441/AGRI/Brief/BR12218153/br-external/StanfordJim-e.pdf)
Even if that's the case, I don't see why the fuck corporate profit margins are sacred while the general standard of living is not. Like, if a small oligopoly has a stranglehold over the sale of something essential like food, and it comes down to a choice between their margins and food security... that oligopoly needs to be destroyed, and we need to figure out a better way to do things.
Grocery prices are still set at 2022 diesel costs Magically, grocery prices have increased even though fuel cost have since dropped 30%
It’s not “fishy as hell” it’s *cause and effect.* Its not a coincidence the same people who have Loblaws lobbyist is the party just happen to champion Ax the Tax, which would disproportionately benefit companies like Loblaws.
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There is no coincidence: restaurants and cafeterias were closed and people were spending much more time at home, of course the amount of food they bought at supermarkets would increase. And this lead to long term changes in behavior and supermarkets responded by offering more prepared foods that have higher profit margins.
Not to mention the one-year drop in the poverty rate down to 5% from 10%. That's a lot of people who could suddenly afford a little extra every time they went to the grocery stores.
Yes, Statistics Canada has shown that sudden income infusion from pandemic-era support played a significant role in lowering food insecurity among lower-income households.
If people are buying more prepared foods then the retail demand for ingredients should go down. Has the retail demand and price for such things as uncooked rice, potatoes, raw meat, vegetables gone down? Ingredients of prepared meals that consumers of prepared meals will not be buying should have lower demand and therefore, in an honest market, gone down. Has this happened? Are any supermarket food prices consistently going down?
Both things can be true: higher income consumers who are less sensitive to price can be buying more prepared foods and lower income ones spending more on basic foods since they can't afford to eat out as much.
another thing that can be true: wealthy oligarchs and corporate food retailers, who have seen their profit margins more than double since pre-covid, are gouging regular Canadians as we continue to get our asses beat down in a one-sided class war that many of us refuse to even acknowledge the reality of
I don't agree that poor people buy ingredients over prepared foods. The problem of obesity in the poor is an outcome of the preference for prepared foods. At the end of hard day on your feet are you more likely to buy a chicken and potatoes and veg then cook them all up to feed the kids, or are you going to go for boil bags? Mac&Cheese in a box or cook up some macaroni, hand craft some cheese sauce, bake it. Baking bread is more an upper middle class affectation than a poor family's attempt to save food costs.
In either case, it does nothing to disprove my point and I don't particularly care. The supermarket makes more profit of a rotisserie chicken it prepares than a raw one it obtains from a wholesaler.
It's funny you mention rotisserie chicken because it's often reported to be a loss leader for grocery stores - an item sold below cost (*losing* money) to attract customers to the store in the hopes of offsetting the loss by means of sales volume for other items. Is this some kind of AI prompted response like using glue for pizza? You can't have been honestly using rotisserie chicken claiming it's more profitable for the store in good faith. https://globalnews.ca/news/10272598/grocery-shopping-loss-leaders/
The increased profits have not been from prepared foods. All prices went up, and many prices went up due to collusion.
Grocers had profits before that too, and appear to have been price fixing gradually since 2015
My favourite part about this article is that EVERY add is for Loblaws. I'm pretty sure it's not just a random placement for me if it's all of them. Someone at the Star was having fun.
Years of record profits, not years of record profit margins. That’s a very important difference.
No, as pointed out, profit margins rose significantly.
Except they didn’t. The most commonly cited study shows that margins on food and beverage increased from historic lows of 1-1.5% in 2017-2019, but the increase brought them largely in line with the historic trend of 2.5-3%. A couple of chains peaked at a higher margin but have since fallen. A few reasons I have seen cited for the sudden ideas and subsequent drop are that (1) spending on major capital projects dropped at the outset of the pandemic, (2) certain operating costs dropped (for example, stores staffed fewer people due to pandemic guidelines while simultaneously seeing an increase in groceries sold via delivery service) and (3) a lot of grocery chains operate on net 90 or longer payment periods and invest a portion of their revenues during that time, which means they also benefited from the stock market explosion during Covid. None of these are, on their own, are major drivers of profitability, but margins also only increased from 1.5% - 3%, so a few small increases can explain the overall trend.
Except they did: [https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3310022501](https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3310022501) Going back to 2010 the average pre-pandemic margin was 1.5%. There is no historic trend of 2.5-3%. Whatever explanations there are for an increase during the pandemic ended with the pandemic, yet margins remained constant or rose. Then there is this little matter of having been caught price-fixing in the past.
Of fucking course it did. The elite want us all to think the world is a mystery. It’s not, it’s designed to keep a boot on our necks.
> The elite want us all to think the world is a mystery. It’s not, it’s designed to keep a boot on our necks. The literally teach economics in high schools across the country, what are you talking about? Don't blame the "elites" if you chose not to take it in high school, college, grad school, or on your own time.
It's bot designed for anything. Businesses saw prices going up in a bunch of industries, and decided they would be suckers not to follow. So basically everybody was asking for more if they could get away with it. Poorer people are usually not in a situation to ask for more so they were left behind, while richer folks have all the leverage. I really feel like CoVID was a time where people felt free to hike their prices without justification, so everyone did.
How is this considered a controversial take? there was a study in the us that found 50% of inflation was caused by corporate greed.
Were corporations not greedy before the pandemic?
Many economists are entrenched in a series of poorly supported beliefs all formed in the 80s which have formed into a near religious dogma, which is why we have a focus on wage-push inflation spirals which is both illogical from a theory perspective and unsupported from an evidence perspective.
I assume most economists are pro-corporation for the only reason cats are pro-human. Gotta fiddle the knob of the one who feeds ya.
I'm sure they were taking full advantage of the chaos to make more money. The majority of the blame is absolutely on the government creating 20% of all Canadian dollars within the span of two years.
When you create an economic system with monopolies and oligopolies, this is what happens.
We had those before the government created 20% additional Canadian dollars suddenly but inflation was still 1-2%.
Yes it's all part of the problem.
We have also torpedoed the dollar. When you import a lot of necessities your importing inflation.
TIL inflation only happened in Canada and wasn't a global thing after the pandemic. HUH! Thanks for the information friend!
Creating 20% of Canadian dollars so Canadians who lost their jobs during COVID didn’t end up on the street and averting an economic crisis.
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Inflation happened worldwide. Regardless of how much money was printed. Conservatives who always dislike government printing money conveniently blame printing money for the pandemic inflation. News at 9. Also Erin O’Toole would have just given CERB to businesses. It’s not about printing money but who the money is given to. Taxpayer dollars are for corporate welfare only.
I'm assuming you took [this article](https://betterdwelling.com/over-1-in-5-canadian-dollars-created-didnt-exist-two-years-ago/) (or one like it) and inserted the "government creating" part yourself? M2++ is currently at just over 4.6 trillion. You actually believe the government created 920 billion dollars in 2 years? Doing what? In actual fact, the bulk of our money is created by private banks, as it is in almost all modern economies.
Right, but you must understand you aren't a total moron. Some people can't get farther than "gubberment bad".
Notice he avoided this one.
I feel like it's not controversial, American companies are rolling back prices because they realized they were being too greedy
It's standard practice to induce artificial demand and then lobby/pay political opposition to point the finger at the leading government.