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Grocery prices in the North

A short summary of the Northern Food Retail Analysis by Enrg Research Group, 2015

Transportation

  1. Stores are responsible for the transportation of the food to the store whereas in the south, the supplier pays for the transportation
  2. Trucking and sealift are the cheapest modes of transporting goods, and flying is most expensive, but many communities in the North can only be accessed by plane for much of the year
  3. Trucks, ships and planes all return empty unlike in the south when they’re constantly moving product back and forth
  4. All modes of transportation are more expensive going north than going east-west.
  5. A truck going from Winnipeg to Edmonton AB, costs approx $1,200 (1,350 km)
  6. A truck going from Winnipeg to Fort Severn, ON via ice road costs $16,000 (1,700 km)

Bricks and mortar

  1. Building must store food that it might not sell all year instead of southern “just in time” delivery - large building that has to be heated to keep things from freezing
  2. Northern communities are off the power grid - powered by diesel generators
  3. Have to pay to bring diesel fuel to the community, also much less efficient source of energy
  4. A 19,220 sq. ft. Southern Store in Rankin Inlet NU spent $384,334 on electricity costs in 2012 while a similar size NorthMart  in La Ronge SK  (16,800 sq. ft.) on the electricity grid spent only $58,500 - six times less
  5. Temperatures are very low for a lot of the year so need more electricity to keep things from freezing

Human resources

  1. Need more people, more “touches” to get food to northern stores
  2. South: supplier → unloaded at store → shelf  = 3 touches
  3. North: supplier → unloaded at warehouse → loaded to truck → unloaded at airport → loaded onto aircraft → unloaded at Iqaluit airport → loaded onto smaller aircraft bound for Igloolik → unloaded at Igloolik airport → loaded on truck → unloaded at store → shelf = 11 touches
  4. Grocery store employees are paid higher wages to live in the North

Spoilage

  1. Every time there are more “touches” there are opportunities for produce to freeze or thaw, especially when outside temperatures can go down to -30 or lower.
  2. Distance is long and delays in transport can lead to damage
  3. As items get close to their best before date, the price will drop significantly resulting in profit loss.

Higher inventory costs

  1. Southern retailers only stock enough product for about one month and they generally have 30 days to pay the supplier at which point the product will almost be entirely sold
  2. Stores in the North have to pay upfront to stock a building with product they may not sell for almost a year. Inventory costs can be as much as $6 million dollars for a single store for a single year

Profit Margins
Profit margins cannot be determined from private companies, however the largest retailer North West Company reported an annual profit margin of 4 per cent. According to the ENRG study, although the companies do make a profit so that is a factor contributing to the overall cost of groceries, “it does not appear that these profits are a significant contributor to overall costs.”