North West Company defends use of Nutrition North funding

The head of the North West Company says the retailer is passing the full Nutrition North subsidy on to customers, despite high prices and research that suggest otherwise.

The North West Company operates NorthMart and Northern stores across northern Canada, including in many NWT communities.

Nutrition North is a federal subsidy that flows through grocers like the North West Company and is intended to reduce food costs in the North.

The company has been accused of failing to pass as much of the subsidy as it should to northern customers, while continuing to record significant profits.

Dan McConnell, the company’s chief executive officer, defended its use of the subsidy while addressing a committee of MPs on Wednesday.

McConnell told MPs the Canadian government needs to do more to address the factors contributing to high prices in the North.

“The Nutrition North program is an important lifeline for reducing grocery costs by providing a consumer subsidy through retailers like North West,” he said. “However, it does not fix the underlying infrastructure and supply chain issues that cause high costs in the first place. Nor does it address inflation.”

McConnell pointed to the North’s infrastructure deficit, climate change impacts and high energy costs among factors affecting the price of food in northern communities.

“The North requires significant attention and investment,” he said.

Nunavut’s NDP MP Lori Idlout had called for McConnell and chief executives of other companies to appear before the Standing Committee on Indigenous and Northern Affairs to answer questions about the Nutrition North subsidy.

Idlout, who wants to reform the program, said “companies are earning extremely high profits off northerners’ food insecurity.”

On Wednesday, Idlout highlighted that North West’s consolidated net earnings for 2023 were $134.3 million and McConnell earns an annual salary of $3.91 million, while rates of poverty and food insecurity remain high in Nunavut.

Idlout referenced a study published last year that found for every dollar paid to retailers through the subsidy, the average retail price fell just 67 cents. The study said the amount of the subsidy passed on to customers was 18 to 69 cents lower in communities with just one store. In many cases, the North West Company operated that one store.

The study’s authors said the findings suggested “substantial leakage” of funding intended for marginalized communities into retailer profits. They called for more accountability measures.

Idlout said when she visited Kimmirut last March, the price for a carton of a dozen eggs was $3.99 at the Kimik Co-operative and $6.49 at the Northern store. She said she had seen a similar pattern in other northern communities.

McConnell, however, asserted that’s not the case.

“The subsidies are actually 100-percent passed through to the customer,” he said.

“We do pride ourselves on trying to continue to bring the costs of products down in stores every day. Everybody within our organization, they come to work every day to bring down the costs in order to pass that value on to the customers.”

McConnell said North West also faces competition from local co-ops and online suppliers.

Through Nutrition North, which was launched in 2011, the federal government pays millions of dollars in subsidies to retailers every year for select foods and other essential items, which stores are required to fully pass on to customers through price reductions.

The program had a budget of $131.3 million in 2022-23 and aims to make nutritious food more accessible in the North.

But the program faces continued criticism as food insecurity rates and the cost of goods in the North continue to rise.

According to data from Statistics Canada, 46.1 percent of households in Nunavut, 23.1 percent in the Northwest Territories and 15.3 percent in the Yukon faced food insecurity in 2019, compared to a national average of 10.6 percent.

‘Something just isn’t right’

Other retail and airline leaders appearing before the committee on Wednesday said more needs to be done to reduce the high cost of food in the North.

Jean-Pierre Goulet, general manager of Kimik Co-operative in Kimmirut, spoke about the high cost for electricity, water and insurance. He said keeping food refrigerated on its way to northern stores is difficult, resulting in a lot of fresh produce going to the dump.

“The NNC program has to take these realities into account and maybe bring changes to the program in terms of the amounts made available to merchants in the North,” he said, using an abbreviation for Nutrition North.

Idlout said when she visited the store, she was shocked to learn that 9,000 kg of goods was stuck in storage in Iqaluit as it could not land in Kimmirut. Goulet said as of Wednesday morning, around 3.500 kg of goods still had not made it to the community.

“The slate is never clean.” he said, adding that puts pressure on prices.

Gary Bell is the president and chief executive officer of Calm Air International, which offers cargo services in Manitoba and Nunavut’s Kivalliq region.

He said the costs of operating aircraft have risen due to inflation and policy decisions “made without proper consideration for the reality of life in the North.” He took issue with Transport Canada’s user-pay principle, which he said disadvantages residents in isolated communities, as well as changes to fatigue regulations that he said have reduced the amount of time pilots can fly in a day.

Shelly De Caria, president and chief executive officer of airline Canadian North, said challenges keeping staff, inadequate infrastructure, unpredictable weather and high fuel and maintenance costs affect cargo delivery across the Arctic.

“The subsidy is intended to benefit Inuit and the communities we serve directly, and yet we have seen mounting concerns in … offsetting the skyrocketing cost of food and food transportation. Something just isn’t right,” she said of Nutrition North.

Minister promises external audit

Northern affairs minister Dan Vandal said the federal government is working to ensure Nutrition North is efficient. He highlighted enhancements in recent years like the addition of grants for harvesters and food security research.

But the minister said a wider strategy and more initiatives are needed to address food insecurity in the North, involving territorial, Indigenous and community governments.

Vandal said that should include investment in transportation infrastructure, such as the proposed Mackenzie Valley Highway.

“Food insecurity, food inflation in the North is a huge issue. We have to do a better job,” Vandal said.

“To think that one program in one department of the government will solve poverty in Canada or in the North is unrealistic. It’s got to be a whole-of-government approach.”

Vandal said Nutrition North is being reviewed internally. The minister promised a subsequent external review once that is complete.

He committed to ensuring that 100 percent of the subsidy is passed on to consumers.