Sobeys Boss On Rising Profits: ‘I Refuse To Apologize For Our Success’

STELLARTON – The top boss at Sobeys says his company has done nothing wrong as it posts consistent profits in the face of spiking food costs.

Michael Medline is the president and CEO of Empire Company, one of Canada’s main grocery companies. The Stellarton-based firm owns and operates a selection of grocery chains across the country, anchored by Sobeys.

Empire held its annual general meeting on September 15. At it, Medline let loose against what he said were “armchair quarterbacks” unfairly criticizing the company for profiting off inflation and rising food costs.

Statistics Canada says food prices have gone up by an extraordinary 10 percent over the past year. Meanwhile, grocery companies like Empire have seen profits consistently rise. Many argue the company is using inflation to squeeze extra money out of consumers by setting prices higher than it must to cover inflationary pressures.

At Empire’s AGM, Medline said those concerns have been “stoked by a handful of politicians, media sources, and think tanks.”

“I guess it makes for easy headlines and ignores what is truly driving our success,” Medline said.

“Quite frankly I am tired of these armchair quarterbacks who make little effort to understand even the basics of our business but are comfortable sitting on the sidelines pontificating about how Canadian companies are reaping unreasonable profits off the backs of inflation,” he continued.

“These reckless and incendiary attacks are meant to divide us and sit in stark contrast to the collaboration and problem solving that we experienced in the darkest moments of the pandemic.”

Cutting ‘hero pay’

One of the first moves Empire and other grocery companies made during the “darkest moments” of the pandemic was to claw back their frontline employees’ so-called “hero pay” raises.

On March 8, 2020, in Covid-19’s early days, Empire bumped its frontline workers’ pay by about 15 percent to recognize their “heroic work.” About 12 weeks later, as the pandemic continued to rage, the company took away those pay increases.

In a Covid-19 update it released in April of 2020, Empire estimated its “hero pay” program would cost the company about $90 million. However, the same release noted that expense would only “partially offset” the profits the store was pulling in thanks to the pandemic.

Not long before it made the decision to eliminate hero pay, Empire announced its corporate earnings had jumped by more than 20 percent.

RELATED: Halifax Demonstrators Condemn Grocery Giants For Cutting ‘Hero Pay’

And Empire has continued to post profits throughout the pandemic.

On September 15, it released financial statements for the first quarter of this fiscal year. They show a  profit of $187.5 million and sales rising by 4.1 percent compared to last year.

Medline argued Empire’s success has been the “direct result of a great strategy, disciplined execution, and the hard work and dedication of our teammates across the country.”

“I refuse to apologize for our success. Such success is not because of inflation, but in spite of it,” Medline said.

What do economists say?

While most Canadians believe grocery chains have used inflation as an excuse to squeeze more money out of them, economists debate if that is actually happening.

In July, a comprehensive Toronto Star report concluded that grocery chains like Empire were hiking prices faster than necessary and profiting from inflation. Economists at the Canadian Centre For Policy Alternatives have also argued grocery stores are passing the cost of inflation down to consumers while posting big profits.

However, a recent study from Dalhousie University’s Agri-Food Analytics Lab argues the evidence for rampant grocery chain profiteering isn’t there.

“Finding actual evidence of profiteering is challenging, based on the available data,” the report reads. “Accusing the industry of colluding or profiteering is easy. The conversation on ‘greedflation’ becomes more interesting when we ask ourselves how much is too much where profits are concerned.”

Even if grocery chains like Empire aren’t using inflation as an excuse to squeeze more money out of consumers, some question how ethical it is for them to continue increasing profits while so many are struggling, instead of focusing more seriously on keeping prices down.

Trevor Nichols is the associate editor of Huddle, based in Halifax. Send him your feedback and story ideas: [email protected].