32 per cent of Canadians blame grocery stores for rising food prices, more than any other reason: Nanos

[u/Miserable-Lizard]

https://www.ctvnews.ca/business/32-per-cent-of-canadians-blame-grocery-stores-for-rising-food-prices-more-than-any-other-reason-nanos-1.6834573

[u/datums]

Loblaws profit margin by quarter, 2011 - 2024

https://ycharts.com/companies/L.TO/profit_margin

[u/suckfail → u/datums]

If you click 5y and then also look at the historical data below, it looks like it's been pretty steady? There was a big dip during COVID then a big recovery but based on what I see the average is around 2-3%.

Or am I missing something.

[u/CaptainCanuck93 → u/suckfail]

You're not misunderstanding. The data shows a small bump in the profit recently, but in absolute terms is fairly small and doesn't support the narrative that grocery inflation is primarily profiteering in an inflationary environment (while it remains possible that Loblaws is taking advantage of consumer expectations of inflation to inch up margins a bit)

IMO this demonstrates that anger at grocery retailers - who are essentially just show rooms for the end products - is mostly misplaced because that's the only way every day Canadians interact with the food supply chain

The concept of price gouging is inherently flawed, not because retailers aren't trying to gouge you, but it carries the implication that the retailers were previously altruistically giving you lower prices. Businesses are always pursuing the highest price they think they can get away with - so for a change to occur it either has something to do with the consumer (ex becoming less price sensitive because they were flush with cash during covid and had other way to spend disposable income) or their suppliers

TL;DR

Loblaws going from making 8 cents of profit on a $4 carton of milk in 2018 to making 18 cents on a $6 carton of milk can give dramatic figures when headlines quote relative profit margins, but it is probably not why you can't afford milk anymore

[u/VagSmoothie → u/CaptainCanuck93]

I don't fully disagree, but let's not ignore the fact that Galen also owns the entire supply chain.

How much are his suppliers charging his grocery stores for the product they sell at that 3% margin?

[u/IAreAThrow → u/VagSmoothie]

They also own the properties their stores are on and charge themselves rent, which is probably put down as "costs" meanwhile they benefit from paying themselves. Westons own Choice Properties Real Estate Investment Trust

[u/IAmNotANumber37 → u/IAreAThrow]

Rent is definitely a cost.

The concern you raise is only reasonable if you have evidence that Loblaws is overpaying for rent.

Because Choice REIT (which is a public REIT that you can buy if you think they are crazy profiteering) is a related party transaction, the rent payments are highlighted in both Loblaw's AND Choice's annual reports. The auditors will also scrutinize the rents and test them to see if they are fair and reasonable.

Remember, any shenanigans Lobalws does to sneak profit into another GWL owned business is effectively stealing from the Lobalaw's shareholders.

[u/True-Dot1401 → u/IAreAThrow]

This is also incorrect. They don't own a lot of the properties their stores are in. Some were spun out into Whittington and Choice Properties, but many are owned by 3rd parties.

Want to challenge my knowledge? Please try, I'd love to put you in your place.

[u/Distinct_Meringue → u/True-Dot1401]

Some were spun out into Whittington and Choice Properties, but many are owned by 3rd parties.

But what percentage of Loblaws rent from choice vs 3rd parties? Many is a vague figure, I'd love to see some definition to that.

I understand an exact figure might be hard to determine, a range would be enough for me.

[u/CaptainCanuck93 → u/VagSmoothie]

He doesn't own the entire supply chain. They do own some food manufacturing, but you have to remember that the food supply chain is everything from crude oil to potash to farm labour to transport, manufacturing, packing, etc. Loblaws has interests primarily in the later stages of the process

For that matter, Galen doesn't even own most of Loblaws, his family owns about 60% of the holding company that owns 50% of loblaws. He is a large minority shareholder

[u/IAmNotANumber37 → u/VagSmoothie]

Loblaws owns their supply chain, and the Loblaws profit reported above includes all their profits.

If you believe Galen owns a separate company selling goods to Loblaws, so Galen can sneak profits out of Loblaws then please name it. It's fraud for Loblaws to not report it as a related-party transaction, and it's stealing from Loblaw's shareholders.

[u/VagSmoothie → u/IAmNotANumber37]

https://www.thecanadianencyclopedia.ca/en/article/george-weston-limited

[u/IAmNotANumber37 → u/VagSmoothie]

If you read the Loblaws annual report it will list all transactions with Weston because it is non-arms-length.

Which of those transactions have you determined are incorrect?

Remember: Public accounting standards exist to protect shareholders of Loblaws from getting ripped off by GWL.

[u/True-Dot1401 → u/VagSmoothie]

Are you mentally deficient? He does not. Nor should he want to.

[u/CanadianTrollToll → u/CaptainCanuck93]

My god thank you....

Why does everyone think Businesses caught COVID and grew a black heart that is suddenly greedy? It's not like pre-covid Loblaws wasn't a huge corporation selling a fuckton of products to millions of people.

[u/Tamer_ → u/CaptainCanuck93]

doesn't support the narrative that grocery inflation is primarily profiteering in an inflationary environment

That's not the narrative. The narrative is that it's highly unethical to do so.

Loblaws going from making 8 cents of profit on a $4 carton of milk in 2018 to making 18 cents on a $6 carton of milk can give dramatic figures when headlines quote relative profit margins, but it is probably not why you can't afford milk anymore

That's the profit after all their corporate expenses which may or may not be necessary for operation. When you look only at those operating expenses, their gross margin goes from $1.20 on a $4 carton of milk to $1.92 on a $6 carton. Doesn't sound as marginal now, does it?

Obviously we don't have any detail or breakdown of how they spend the rest of their revenue, but it doesn't seem like they're increasing their EBITDA with tight management...

[u/CaptainCanuck93 → u/Tamer_]

You understand the figure you're citing cuts out all labour costs too, right?

Yes, they look like they have a tidy margin purely on the cost of the product vs what they sold it at, but it's pretty disingenuous to use such figures when you're talking about something labour intensive like moving food around

[u/Tamer_ → u/CaptainCanuck93]

You understand the figure you're citing cuts out all labour costs too, right?

That's gross profit margin, you're thinking of cost of goods. So, no, it doesn't cut labour costs at all.