To fight market failure in the food supply chain, support zero-profit grocery stores
By Marissa Alexander and Wade Thorhaug
(Originally published for the Hill Times, on September 16, 2024)
Canada is in the middle of a housing crisis. The private sector has failed to fix the steep cost of housing, and many now recognize it as a market failure. Accordingly, in last year’s budget, the federal government committed to funding non-profit solutions like housing co-operatives.
We are also dealing with a crisis in the food supply chain. According to Statistics Canada, prices have gone up by an astounding 20% from 2020 to 2023, and 23% of the population is food insecure. Food insecurity affects historically marginalized groups the most: 40% of Black and 37% of Indigenous people are food insecure.
Reports by the Competition Bureau and an all-party committee on agri-food found big grocers have been taking advantage of inflation and their dominant market share with predatory pricing, paying suppliers less and charging consumers more.
Put simply, this is another market failure.
In response to the crisis, the government recommended inviting more multinationals into Canada, adding to the likes of Walmart and Costco, in the hope that this will drive down prices. There has been no mention, however, of co-operatives and other homegrown, zero-profit grocery models.
Yet co-ops are popular across Canada: according to a 2019 Abacus Data poll, about one in three Canadians are members. Another one in three are not members but could be, given the appeal of the co-op model as a democratic, community-focused alternative. Interest in co-ops is shared across rural and urban residents, and among Liberal, Conservative, and NDP voters.
Co-ops are not just popular–they are also seen as more trustworthy, especially in times of inflation. In a recent Food Secure Canada webinar on greedflation, economist Nicholas Li compared North West Company, a food retailer supplying many Northern communities, to the Arctic Co-op, its main competitor. He found that the North West Company’s profits rose significantly from 2019-2023, similar to other private retailers. Meanwhile, net margins and patronage dividends for Arctic Co-op Ltd., which serves individual community-owned member co-ops, were stable or declining.
As detailed by Jon Steinman, author of Grocery Story: The Promise of Food Co-ops in the Age of Grocery Giants, co-ops have a different structure than profit-maximizing retailers. Some co-ops are technically for-profit, but that profit then gets re-invested into the co-ops or their membership. This makes price gouging difficult or even impossible.
Canada’s history shows that co-operatives keep people afloat in times of crisis. During World War I, rural co-ops met people’s needs for cheap food. During the great depression, those co-operatives who survived were funded by the federal government, and they, in turn, helped to organize new co-operatives. In the 1950s, Inuit co-ops greatly contributed to social development and food sovereignty in communities harmed by colonialism. However, the 1990s saw a steep reduction in support of co-ops as the government prioritized market solutions.
We can take inspiration from other models that aren’t co-ops. In Quebec, solidarity grocery stores sell food at different prices, depending on what you can afford. Chicago is considering opening a city-run grocery store to fill in the missing need in food deserts in racialized neighborhoods. Publicly-owned grocery stores already exist across the United States, especially in remote rural towns. As described by Susanna Redekop, co-founder of Freedom Dreams Co-operative Education, a co-operative development and education hub, Indigenous, Black and migrant communities have a long history of organizing co-operatives, loan programs, credit unions, and land trusts to support each other in the face of racism and economic exclusion in Canada.
To flourish, these models need government support. Rather than attracting multinationals, the government should be highlighting the impact of co-ops and supporting widespread roll-outs. They could support campaigns like those of Your Way Together, an educational initiative for co-operative development in Indigenous communities. Loans could be provided through a federal program modeled after Québec’s Cooperative Investment Plan, a province that has more co-ops than any other. Zero-profit grocery stores also need tailored support in areas where there is a “natural monopoly”, such as Northern towns where the North West Company is the only store. Finally, Black, Indigenous, and migrant communities—who face the highest levels of food insecurity in the country—are innovating co-operative models that should be learned from and supported.
The numbers on skyrocketing food prices and food insecurity are clear: we have a crisis on our hands. With climate change, Canada’s fragile food supply chain is only going to get worse.
We cannot rely on the private market to solve this problem. The government has recently acknowledged as much in the housing sector, allotting much-needed funding to non-profit and co-operative housing. It now needs to do the same in the food sector.