Wednesday, December 7

Sobeys CEO fires back at NDP amid pressure for parliamentary inquiry on grocery profits


Michael Medline said the push is based on a faulty political narrative meant to ‘score some points’ in Ottawa

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Michael Medline, who leads Canada’s second biggest supermarket chain, said the push for a parliamentary inquiry into whether grocers are exploiting inflation to boost profits is based on a faulty political narrative meant to “score some points” in Ottawa.

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In an interview, Medline, chief executive of Empire Co. Ltd., the Stellarton, NS-based company that oversees 1,600 stores under the Sobeys, Safeway, FreshCo, IGA, Foodland and Farm Boy banners, doubled down on his defence of the Canadian grocery business against a growing backlash over the cost of food, and suspicions that corporate greed is contributing to higher grocery bills.

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“When something is completely unfair, it gnaws at me and then I say something,” Medline said on Oct. 4 at Empire’s office in Mississauga, Ont. “I’m not going to sit here and take it all the time when I don ‘t think it’s fair.”

The comments came a day before the House of Commons agriculture committee was scheduled to vote on a motion to investigate “profit-driven inflation” in the sector. If the motion passes as written, the committee would soon summon top grocery executives to explain why “ large chains are making record profits,” despite a surge in input costs.

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“If that’s the motion that goes through, it’s disappointing because it already has reached a conclusion without any work being done or any inquiry being held,” Medline said. “If people want to have inquiries that really can help Canadians, I’m all for it. I think a little good work beforehand, some reports and some facts, might be helpful instead of just, you know, trying to score some points by getting some grocery companies or retailers in front of Parliament.”

Still, Medline said he would participate in any investigation — even though his previous appearance at a parliamentary inquiry, in the summer of 2020, devolved into a sparring match with members of Parliament over the top grocers’ simultaneous cancellation of their so-called Hero Pay bonuses.

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“I don’t think it’s any secret that I found the last parliamentary inquiry disappointing,” Medline said. “Some of it, if you read the transcript — which I’m not going to read again — it was a PR exercise.”

Medline has stood out in recent weeks as a rare food CEO willing to publicly challenge economists and consumer advocates who have asked why the three dominant grocery chains in Canada — Loblaw Cos. Ltd. and Metro Inc. are the other two — managed to fatten profit margins while their shoppers face the worst food inflation in four decades. In a controversial speech to shareholders at the company’s annual meeting last month, Medline called the critiques “reckless and incendiary,” spurred on by lazy “armchair quarterbacks” in government and media.

“From business leaders and from friends, I’ve never had a better reception to anything I’ve ever said,” Medline said of the speech. “I felt that something had to be said, and I said it. It got more attention than maybe I thought, which I’m glad of.”

One of the people who noticed was NDP Leader Jagmeet Singh, who observed on Twitter that Medline’s $8.65-million total compensation in 2022 represented a 15 per cent raise over 2021. “Did workers at his stores get a 15 per cent raise? No. Instead, he took away their hero pay during the pandemic,” Singh said, referencing the scandal of June 2020 that pushed Ottawa to change federal protections for workers.

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“Look, I guess he has a job to do and a narrative to present,” Medline said in response.

However, Medline acknowledged that his industry’s reputation has taken a beating through several rounds of controversy, including Hero Pay and the protracted government campaign to stop grocers from using their market power to squeeze suppliers — a process that Medline has publicly supported. He said it’s understandable that, in periods of high inflation and economic uncertainty, that retailers that consumers visit most often end up the most questions about the cost of goods.

“I get it. Obviously I don’t think it’s fair in most cases. But I respect it and people can have their opinions and if it makes us a little sharper, and we can do even better, that’s great,” he said. “I would ask, probably, if I had the ask, that people not just read little tweets or social media posts, but look behind it to see what’s actually going on.”

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Canada’s top three grocers have said their higher profits and wider profit margins are coming from other factors and have nothing to do with the broader inflation story. For example, one common explanation is that pharmacy departments are benefiting from increased demand for high-margin health and beauty products, now that pandemic restrictions have been lifted and people are going back to offices and parties.

But accounting experts say it’s difficult to figure out whether those explanations are true using just the data included in public financial statements, leading to calls for a public inquiry into the source of the profits.

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“If we really want to get to the bottom of it, there needs to be some objective, third-party analysis,” Robin Shaban, a former officer at the Competition Bureau and co-founder of a think-tank called the Canadian Anti-Monopoly Projectsaid last week.

But Medline said the public financial statements of Empire and its main competitors are enough to prove there isn’t any profiteering going on. He also added that, in its most recent quarterly reportEmpire’s profit dipped by $1 million to $187.5 million.

“You can look at our numbers, and they tell the whole story,” he said. “We would be doing better, if not much better, without inflation.”

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financialpost.com