NWC boss says he can’t make food affordable for everyone in Nunavut

This chart shows some of the factors that go in to the North West Co.’s pricing decisions. (PHOTO BY PETER VARGA)

Edward Kennedy, president and CEO of the North West Co., during a visit to Iqaluit’s Northmart store Feb. 25. (PHOTO BY PETER VARGA)

As one of Nunavut’s two major food retailers, the North West Co. faces the greatest number of complaints about the lack of access to affordable, nutritious food for the poorest people in Nunavut.

The Nutrition North Canada air freight subsidy, in place since 2011, was supposed to help make healthy food more affordable for all Nunavummiut — and it has, says NWC.’s president and CEO, Edward Kennedy.

But any effort to make food completely affordable for all would call for actions that go far beyond freight subsidies, he said.

“There’s an income security issue in terms of social assistance payments,” Kennedy said in a recent interview with Nunatsiaq News. “Are they truly indexed to the cost of living in the North?

“The answer is no.

“So you’ve got, I think, a significant social and public policy issue,” he said.

NWC runs Northern and Northmart stores in 21 of Nunavut’s 25 communities.

The company was the target of a recent boycott by the Iqaluit-based Feeding My Family group, who don’t believe the Nutrition North program is working at all.

But the allegation that NWC is “gouging” Nunavummiut and that the company profits from NNC, as Feeding My family believes, is unfounded, Kennedy said.

The company’s profit margin is 4.8 per cent, he said.

“There’s a lot of retailers that make way more than that in urban areas,” where the cost of doing business is completely different, he said.

“The gouging perception just doesn’t hold up to scrutiny in terms of objective facts of the cost of business and our actual margins. Margins are high because costs are high.”

The company reports the price of produce and other eligible items actually dropped by almost 17 per cent in real terms — accounting for inflation — since the start of NNC.

This has led to a 25 per cent increase in the purchase of “nutritious” foods covered by the subsidy, Kennedy said.

NNC freight subsidies enabled the cost reduction that led to the increased sale of eligible foods – which include fresh produce, meat and dairy products.

But Kennedy is quick to add that fully half of the savings come from “private sector efficiencies” that NWC worked out on top of the federal freight subsidies.

That includes improved air freight rates negotiated with Calm Air in the Kivalliq region and First Air in the Baffin region, as well as efforts to increase warehouse storage capacity and reduce energy costs with equipment that consumes less energy.

“You’d say there’s something very good here that’s happened,” Kennedy said. “Then you have to take a step back and say how can we make it better.”

“The perception that [NNC] is a disaster is very wrong. The facts just don’t stand up to that,” he said.

“But if it’s a disaster to deal with poverty reduction and income security, and food security in a substantial, significant, sustainable way — there never was enough money to put into this program.”

NNC in itself is not enough to “really tilt the balance” against poverty reduction in Nunavut.

For that to happen, “you have to start talking about the social assistance payments in this territory, indexed against the high cost of living,” Kennedy said.

NWC, like its counterpart Arctic Cooperatives Ltd., stocks its grocery shelves with goods that make their way up to communities throughout Nunavut via long supply lines.

They are also subject to costs that are among the highest in the country: for electricity, fuel, construction and transport.

“We’re not going to turn an inherently high-cost environment into a low-cost environment,” Kennedy said.

“So we have to get around to looking at incomes as well, and equity of incomes within Nunavut, and within Canada.”

But even with these price reductions, the need for food banks continues in communities throughout Northern Canada.

A 2014 Hunger Count Survey by Food Banks Canada reported that food bank use in northern Canada’s three territories increased by 247 per cent between 2008 and 2014.

In the territorial capital of Iqaluit alone, the Niqinik Nuatsivik Nunavut Food Bank routinely serves about 500 individuals – or 120 households – every two weeks, according to chairman Stephen Wallick.

That’s up from the approximately 30 households who relied on it in 2001.

Kennedy said NWC is well aware of the need for food banks, and actually works with 45 “food redistributors” throughout Northern Canada who take on food items that are near their expiry date.

That includes the Iqaluit food bank.

“Our policy is, if the food is safe for consumption, before it’s thrown away it should go to any recipient organization in the community that’s open and available to receive it,” he said.

Even that policy is fraught with challenges in Nunavut, he said, because not all communities actually have the capacity to run food banks.

Such organizations have to deal with the same list of challenges that retailers face, including high power rates and high building maintenance costs, and the lack of full-time administrators.

The company has lined up plans to lighten many of its cost burdens over the next three years, with a $57 million investment in 13 Northern and Northmart stores throughout Nunavut.

The sum is part of a greater $150 investment that NWC is putting into its stores throughout Northern Canada.

A large part of that investment will go into added warehousing for storage, Kennedy said — the idea being to ship greater volumes of product at a lower per-unit cost.

The company will also replace refrigeration units and lighting “with more energy-efficient solutions,” the company reported in a Feb. 24 news release.

NWC also runs chains of stores under different names in Western Canada, Alaska and the Caribbean.

In comparison with these other retail businesses, Nunavut “is probably the most economically challenged right now, because of the lack of wage economy growth,” Kennedy said.

The territory’s main sources of economic growth — natural resource exploration and government investment in infrastructure — are now at a “lower ebb,” he said.

“On the resource side, we think we’re at a 15-year low in resource spending in the North,” he said – pointing to Nunavut and the Northwest Territories in particular.

Those factors add to the usual challenges of doing business in Nunavut.

“We’d like to see Nutrition North improved and sustained,” Kennedy said. “There’s a lot be do in the North that goes beyond Nutrition North,” he added, pointing to his company’s $150 million investment plan.

“We really need to pick up on these other areas, because we can’t depend on the rising tide of the general economy.”