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Grocery retailers supplying food to dozens of Canada's most food-insecure communities are pocketing up to over half of a federal subsidy to reduce hunger, researchers have found.

The $131-million annual Nutrition North subsidy is paid directly to most grocery retailers serving over 120 remote northern communities from Labrador to Yukon. Applicable only to certain foods and necessities like milk, eggs and diapers, the funds theoretically cover the region's high transportation costs and thus reduce food costs for consumers.

Grocery prices are routinely two to three times higher in the North than in southern Canada, fuelling widespread food insecurity in the region. In Nunavut alone, nearly half of households can't afford enough to eat.

Retailers eligible for the subsidy are paid a set amount by the federal government, which varies depending on the product and where it will be shipped, meant to help cover transportation and other costs. According to the program's website, the retailers "must pass on the full subsidy to consumers," thereby reducing the shelf price of products relative to what they would be without the subsidy. This amount is published on customers' receipts, ostensibly to prove the subsidy has been passed on.

But because retailers aren't forced to disclose their transportation costs or their wholesale purchase prices, it is impossible for consumers to know if the companies are actually following the rules. That gap allows grocers to pocket "a big chunk" of the subsidy, said University of Toronto professor Tracey Galloway.

The biggest retailer in northern Canada, the North West Company, is an international corporation that reported $125 million in net income last year. It receives over half of the Nutrition North subsidy.

In larger towns with more than one store, grocers pass only about 67 cents of every subsidy dollar on to consumers. In smaller towns with a single grocery store, that so-called "pass-through" falls even lower, with retailers keeping up to 67 per cent of each dollar they receive from the federal government.

The team reached these findings by comparing price increases in the cost of the so-called "revised northern food basket," a statistical tool the federal government uses to estimate the cost of food in the North before and after major subsidy increases in 2016 and 2019. The government reports the price of this basket — which includes subsidized items — quarterly as a measure of the cost of food in the North.

In theory, an increase in the subsidy should be fully reflected in the cost of the revised northern food basket, with the cost in the financial quarter following the subsidy increase falling by its new value, explained Toronto Metropolitan University professor Nicholas Li. Month-to-month inflation was stable in 2016 and 2019, meaning grocers weren't forced to significantly pay more for their goods between each quarter the team assessed.

The $131-million annual Nutrition North subsidy is paid directly to most grocery retailers serving over 120 remote northern communities from Labrador to Yukon.

In practice, however, only part of the subsidy increase was being reflected in the post-increase cost of the basket. This was particularly true in smaller communities with a single store where only about 33 per cent of the increase was passed on to consumers — a "smoking gun" grocers broke the program rules, he said.

The findings indicate that Nutrition North's accountability measures are "insufficient," Galloway and Li write in a blog summarizing their findings. This despite the government publishing data on the subsidy and a requirement for retailers to undergo regular audits, which are not complex enough to assess if grocers are fully passing the subsidy to consumers.

"The department is reviewing the study’s findings, and exploring more options to further improve supports for consumers in isolated communities so they may fully benefit from the subsidy program," a spokesperson for Crown-Indigenous Relations and Northern Affairs Canada said in a statement.

In northern communities where high food prices and low incomes combine to fuel widespread food insecurity, grocers' failure to pass on the subsidy — and the federal government's inability to hold them to account — is especially hard felt. Food security is "an ongoing crisis," with thousands of northerners struggling to afford food every day, Galloway said.

The Nutrition North program is not perfect, with food security advocates and researchers emphasizing it primarily benefits people with stable incomes and housing. It also is primarily directed at ensuring people can access southern foods, not traditional country foods from the region.

While the program is better than nothing, Galloway said the team's findings highlight it is failing Canadians.

"I'm not surprised, but I am disappointed," she said.

Updates and corrections

| Corrections policy
October 13, 2023, 06:20 am

Editor's note: This story was amended to clarify Toronto Metropolitan University professor Nicholas Li's name. It was also amended to clarify the North-West Company's annual income.

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I'm curious if these researchers, or others, have compared the costs of living -- and relative diets between north and south -- in Canada's far north to other arctic nations, specifically the Nordic countries. Distances are much shorter in Scandinavia but it might offer some clues.

Perhaps the operation of northern stores should function on a fixed-profit basis, much like the old Bell monopoly? Right now, it seems that northern operators function, more or less, like a company store extracting all they can from a captive clientele.

Further, I wonder what gov't policies ought to be, in practice, in relation to all aspects of living in the far north. How much of the support for northern living could be most equitably and effectively given directly by gov't vs private enterprise? And, what do the traditional peoples of the lands, caught between traditional ways of life and what the colonists have brought, actually want in terms of a lifestyle and support? Does it make sense to fly a lettuce from the south to Pangnirtung? Does stick-frame construction of permanent dwellings, using materials sea-lifted in from thousands of miles away during summer, even make sense?

Of course, how does the arctic marketplace differ from that in other. remote parts of the country lying south of the tree line? How much responsibility ought there be for governments to ensure the viability of every settlement that people choose to establish (of course, not the same thing as settlements created by gov't initiated, forced relocation)?

If someone has a reference to a book that captures these basic questions regarding the meaning of life in Canada's Arctic, I'm interested to know of it. Perhaps Sheila Watt-Cloutier's book "The Right to be Cold' covers some of this?

Good questions!
This article raises the same questions that Basic Income vs. Delivered Welfare Services raise in the 'South' - and uncovers the same paternalistic bias of government politicians and bureaucrats.
That is: Are we able to trust a target population in need to exercise suitable choices if we give them cash vs. policed and delivered services, or food stamps, or in this case - subsidized grocery companies?
I would bet that if we gave the residents cash, we would find out pretty quickly if THEY thought it was worth flying a southern diet e.g. lettuce priced at 100% cost, to a remote community in the Arctic. [But the communities might have to ban southern food marketing to make this a fair test.]

I've gone very socialist on housing, recently, a result of frustration. (The free market just ain't doing their job; prices should always moderate after rising.) I'm talking government just building homes themselves on government land, selling for zero profit.

Here, since this program has already conveniently divided food into essential and luxury items, let's just ration the essential items: punch your ration card for the basics. Just !@#$ing give them away, everybody gets 1500 calories a day for nothing.

I like all three comments, largely because Canada has systematically exploited its Arctic circle populations , first by ignoring them for generations while colonial powers hunting for the fabled northwest passage shipwrecked themselves on Inuit lands and treated the native "savages" as you would expect of these entitled nincompoops.

Adding insult to injury Canada, committed one of its more egregious sins by uprooting some Inuit Families and exiling them to far northern islands much removed from their traditional lands, and left them there to starve - literally, because the Inuit were un or improperly prepared for an alien environment of which they had no knowledge and from which they could not extract a living. This criminally inhumane "experiment", undertaken for the purpose of establishing Canadian sovereignty of the area, was eventually abandoned with little acknowledgment of the suffering caused or the lives lost. I am not at all sure the government ever properly compensated the remnants of these exiled people.

Quite apart from that lethal episode Canada still exploits the arctic settlements for the same reason, but has never put them on the Federal payroll. Doing so might be an innovative solution to the "support" problem, and might have the similar effect of the basic livable income, freeing the Inuit of the crippling fight for survival so that they could develop a sustainable 21st century culture and economy. As a side note European countries with an Arctic presence are presently reinforcing their Northern outposts in preparation for incursions the Russians are rumbling about in their quest for "reclaiming" former Russian imperial ambitions.

I am wondering why Canada does not treat our Arctic lands and people as a worthy research project to develop technologies suited to the Arctic or similar remote lands.

We are so cavalier and dismissive of our indigenous people, but they are proving us fools by undertaking their own survival initiatives. If any humans outwit our crumbling planet it is likely to be those who respect the land they inhabit. NOT please, those who treat the land only as a treasure chest to be plundered.