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People shop at a Loblaws store in Toronto on May 3, 2018.Nathan Denette/The Canadian Press

Peter Chapman is a retail consultant, professional speaker and the author of À la Cart: A Supplier’s Guide to Retailers’ Priorities. He is based in Halifax, where he is the principal at SKUFood.

There has been a lot of conversation about rising prices at grocery stores. Industry Minister François-Philippe Champagne has said repeatedly that he believes luring a foreign grocery chain to the country would help solve the problem by creating competition for the handful of food retailers that dominate the domestic market. In reality, if our prices were really so inflated, we would have had new entries to the Canadian retail landscape by now.

Canada is a challenging market in which to operate. Our population is growing, but it’s still relatively small, and it’s spread across a vast geography. In food retail, this translates into lower sales per square foot at stores, and high costs to move product from the point of production through the supply chain to retail.

Although we are one country, there are 10 provinces with unique laws. Food tastes are regional, and one of those provinces, the second-largest market, conducts business in French. We also have a complicated regulatory environment where labelling, food safety and interprovincial trade restrictions add costs to any food business. Our food and beverage industry is being impacted by the federal carbon-pricing regime, and also by a federal mandate to shift to more sustainable packaging. The costs of these initiatives are still being debated.

Any successful entrant would need to carve out their segment of the market. Easier said than done. There is no doubt German discount stores Aldi and Lidl have gained market share in countries such as the U.S. and Britain. But in Canada, we already have a robust discount segment servicing more price-conscious consumers.

Loblaw’s No Frills and Maxi, Metro’s Food Basics and Sobeys’ FreshCo are all designed to deliver lower retail prices. Retailers are adding new stores or converting existing locations to these banners. This will result in more retail square footage and give consumers the option of “trading down” to reduce grocery expenditures.

We also have Walmart, Real Canadian Superstore and Giant Tiger, which have their own unique mix of discount prices on general merchandise and food. Costco warehouses offer a different concept with better value for their members. In recent years, dollar stores have had success with different consumer brands and a limited assortment of shelf-stable food. The discount segment is the most competitive sector of the retail food industry.

And price is only one part of the story. People want lower prices, but they also select stores for convenience. Consumers say they will make every effort to seek out good deals, but store location influences store choice. It would be very challenging for a new entrant to find enough quality locations in the right markets. There would be some, but perhaps not enough to create the critical mass needed. Existing retailers control a lot of real estate through ownership or restrictive covenants to limit other retailers selling food and beverage.

Then there is the issue of labour. Many businesses in Canada struggle to find qualified labour that will work for the wages that are supported by current profit margins. A foreign competitor would face similar challenges. Recently, labour contracts negotiated in the retail food sector have been paying employees more. Any new competitor would need to start at these levels or higher to attract the employees they would need, if they could find enough at all. If they were willing to pay more, they would need to charge higher retail prices to absorb the wages.

Anyone exploring an opportunity in Canada would also conclude the current competitors are not doing that bad a job of serving the domestic market. They could always be better, but that is also true of other sectors such as airlines, telecommunications and banking. We have ample supplies of most food and beverage products, seven days a week. Quality fresh food, national brands and private labels are available, and most retailers have expanded their offerings of good-for-you products and locally produced food. Consumers demand change and the better retailers respond.

There is no doubt competition forces everyone to get better. But the current grocery retail landscape is already about 30-per-cent foreign-owned. Walmart, Costco and Whole Foods Market are all U.S.-based retailers. Is there really room for more?

It is true that, in the current situation, five major retailers control the vast majority of the Canadian market. But the cause of that is not a lack of foreign competition. Weak laws to prevent consolidation, complicated interprovincial trade and a challenging high-cost environment, with onerous regulations, has left us with an oligopoly. We need to focus on the real issues affecting food prices.

A discounter from another country, enticed by subsidies, might create a few photo ops. But they are not going to bring prices down.

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