Northern stores 'absolutely not' hiking food costs when federal funding arrives, says CEO

The chief executive of the North West Co. Inc. is rejecting accusations that its stores in remote Indigenous communities hiked food prices as funding flowed in this year from federal programs aimed at making necessities more affordable.

Dan McConnell made the comments Tuesday during a call for shareholders discussing the company's third-quarter financial results, in which it reported consolidated sales of $637.5 million.

"Absolutely not," he said when asked if the company's stores in Northern Canada were raising prices when federal funding arrived in the region. "We're actually looking at lowering prices by bringing in other options and lower cost items under a private label program."

The North West Co. operates 118 Northern grocery stores in remote communities across Northern Canada, as well as a host of other businesses, including Quickstop convenience stores in Northern Canada and Alaska and a dozen Cost-U-Less stores in regions including St. Maarten, the Hawaiian Islands and the Caribbean. In some northern Labrador and Nunavut communities, the Northern store is the only place to buy groceries

Last month, Nunavut Tunngavik Inc., the land-claims body representing Nunavut Inuit, said it is planning to investigate whether retailers, including Northern stores, hiked food prices after communities began receiving money this year under the federal Jordan's Principle and Inuit Child First Initiative programs. The programs provide funding to ensure children get adequate food and education.

The consolidated sales figure reported for North West Co.'s third quarter, which ended Oct. 31, marks a 3.3-per cent increase over the same quarter last year, but McConnell said that didn't translate to the bottom line, as the company's net earnings were $36.4 million, down from $38 million in the third quarter of 2023.

The company also faced a seven per cent increase in selling, operating and administrative costs compared with the same quarter last year, partly driven by higher minimum wages and new hiring, McConnell said.

Sales in the company's Canadian operations were up by four per cent, thanks in part to increased demand in communities where people qualified for government funding and payouts from a 2021 settlement between Canada and certain First Nations over drinking water.

"In Canada, we expect consumer demand in the fourth quarter and into 2025 to continue to be positively impacted by the distribution of First Nations drinking water settlement payments and government spending on First Nations Child and Family Service programs, including Jordan's Principle and the Inuit Child First programs," McConnell told shareholders during the call.

Audits like a 'black box,' economist says

Nicholas Li, an economics professor at Toronto Metropolitan University who studies food security in Northern Canada, said there is some evidence that retail food prices go up when government funding is around. But it can be hard to know why this happens.

Li was part of a team that published a report last year about the Nutrition North Canada program, which offers federal subsidies aimed at lowering and levelling food prices across remote Indigenous communities. The study found retailers passed on to customers just 67 cents of every subsidy dollar they received.

McConnell said Tuesday that qualifying North West Co. stores pass on 100 per cent of the subsidies they received, noting that its use of the program has passed several federal audits.

But Li said the federal government runs the Nutrition North audits like a "black box," refusing to release any information on how the companies are scrutinized.

He said the North West Co. has tended to be more profitable than other Canadian grocery giants such as Loblaws, Metro and Empire, which owns Sobeys. The company's stock also soared to historic heights this year, hitting nearly $56 last month.

"I think it's easy to voice frustrations with the North West Company," Li said.

There are likely many things happening to increase prices that retailers shouldn't be blamed for, he said.

"But at the same time, based on my research, there's also truth to these views that retailers do take advantage of some of these programs to profit," he said. "Both things can be true."

"It can also be true that the current retail setup [in the North], while maybe not ideal, is the best thing that's possible under the current circumstances," he added.

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