Is artificial intelligence quietly deciding what you pay for groceries? In this episode, we sit down with Dr. Sylvain Charlebois — Professor and Director of the Agri-Food Analytics Lab at Dalhousie University, widely known as “The Food Professor” — to unpack the rise of surveillance pricing.
Transcript:
Jeffrey Snyder, Broadcast Retirement Network
Well, Dr. Charlebois, it’s great to see you. Thanks for joining us on the program this morning.
Well, thank you for having me. You know, this is such a, well, let me start by saying AI is so, it’s everywhere. I mean, it’s pervasive in American society, I presume in Canadian society, and now it has crept into grocery pricing.
You wrote a piece about this. I want to start by getting your perspective on how maybe grocers and supermarkets and producers of food are using this tool.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Well, I mean, AI has been around for a while. I mean, in November of 2022, that’s when OpenAI democratized AI and all of a sudden people started to focus more on AI, but when you look at the entire food supply chain, AI has been around for a while, especially at Farmgate and in retail. At Farmgate with precision agriculture, of course, farmers have actually been trying to optimize how they grow food, crops, livestock, anything really.
By predicting, forecasting, it’s much easier that way, especially when you’re a price-taking node like farming, for example. And in retail, of course, it’s all, again, it’s all about forecasting. If you can predict what people will buy ahead of time, you can actually reduce costs as much as possible.
But now what we’re seeing is consumers are starting to be more involved and more attuned into what’s happening with AI, what are the possibilities of seeing industry using AI against them, really. And so that’s why we’re hearing more from politicians looking into regulating AI and the use of AI in people’s lives, especially when they actually shop at the grocery store and that food security is actually at stake.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, and I’m assuming it’s very similar in Canada as it is in the States. Affordability of food, gasoline, every good is challenged. And certainly buying food is important for the family because you’ve got to be able to eat.
If you can’t sustain yourself, you’re not going to be able to work and do all the, not to be healthy. You’re not going to live long if you can’t eat and drink water. But it is, in my opinion, and I want to get your opinion on this, AI is a great tool to do all the things you were talking about for the grocers, to predict the weather, to incorporate different factors in terms of economic inputs.
But don’t you think it maybe crosses a little bit of a line? I’m not trying to lead the witness, but in terms of using our individual data in order to price a good, like for example, we’re seeing potentially with that McDonald’s lawsuit and some other organizations.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Yeah, absolutely. So I mean, with dynamic pricing, for example, the idea is to optimize this balance, this equilibrium between supply and demand. So if you have high inventories, you charge less.
If you have fewer products, you’ll charge more. You basically can influence demand. And depending on the time of day, of course, you can actually, again, reduce waste and make sure that your system operates at a high level.
But with surveillance pricing, and that’s the sensitive term here, it is really much about your digital profile, your algorithm basically, or algorithms basically dictating how much you should be charged for bananas and things like that. Of course, online, the physical face, the physical aspect of food purchasing is very difficult to actually apply surveillance pricing. Even dynamic pricing is somewhat difficult.
It could be seen as a threat. And we saw it with Wendy’s a few years ago when the CEO announced that it was going to lead a dynamic pricing pilot and 48 hours later, that got canceled because of the backlash. I think we’re in a different place now with dynamic pricing.
I think people are willing to explore, but with surveillance pricing, this is about individualizing pricing strategy based on how much you earn, where do you live, how many cars you own, all that stuff. And that makes people feel incredibly uncomfortable, especially when it comes to food. I think people have actually accepted the issue of dynamic pricing and even surveillance pricing for flights, insurance, and hotels.
But with food, again, it’s just different because it really boils down to accepting whether or not we’re willing to see some pricing discrimination basically based on who you are digitally.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. And that’s kind of where I was going. I mean, I don’t necessarily, I think that there’s a, to be able to use your data against you, it really removes the power of the consumer.
Like what do you do as a consumer? If they’re, if a organization, a grocer, a franchisee is using this surveillance pricing against you, the only option you have is not to buy, right? I mean, but if you want that burger or you need that grapefruit or whatever food you’re buying at the grocery store, you’re at a significant disadvantage.
So don’t you think maybe, and maybe this is more of an ethical question, does it cross that line and what can be done to kind of return the power back to the consumer, to you and I?
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Yeah, absolutely. I think it does cross the ethical line, certainly in food. And that’s why I’m not surprised to see states like Maryland, for example, looking into this, banning the practice and you’ll see Canadian provinces doing the same thing.
We just need to be extremely careful here. I think it’s important to recognize the power of AI and how it can actually help the industry becoming more efficient, more productive, especially in Canada. Unlike the US, productivity has been an issue and I do see AI as a solution, not a problem.
But when you start connecting with consumers, that’s when I believe we need to set barriers, clear barriers, moral barriers in terms of how AI is used. But also don’t forget, there’s going to be a cat and mouse game for a while. So on the one side, you’ll have industry trying to figure out ways to increase margins or defend margins.
But on the other hand, I do believe that more and more of us will actually have better tools, AI driven tools to actually get to the best deal possible. So it’s going to be interesting to see how one will influence the other over time.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I mean, I would imagine, you know, to your point, I think of the tool gas money. And that’s a tool here we have in the States, I presume it’s everywhere, where you can identify the cheapest gas at a different, you know, 87 octane, which is the lowest regular gas here in the United States. That’s a place where the consumer can go and choose.
I would think that there’d be people that are the tech people who could build, pull the same data and say, okay, well, Wendy’s is charging, I’m just going to, they’re not a sponsor, but that, you know, they’re charging $5 for a meal. And McDonald’s is charging six. And they’re comparable, right?
I mean, there’s the opportunity to kind of balance things out. But we’ll answer that one first. And I have a follow up question to that.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Well, yeah, absolutely. So again, I think there’s this element of fear. I mean, right now you have data centers in Canada, and I suspect it’s the same thing in the US where you have protesters expressing concerns about AI.
And so you can feel that people are concerned. I teach graduate students here in Halifax, Canada. And we spoke about this a while back.
And you can feel that students are also concerned about the use of AI and how it could change the labor market. So there’s a lot of fear right now going on and let alone looking at food insecurity per se. So I do think that over time, we need to reflect on how that exchange, that very, very delicate exchange between industry and consumers in grocery stores and at restaurants, how that can be impacted by AI or the use of AI.
Jeffrey Snyder, Broadcast Retirement Network
What’s the role of government here? Because here in the United States, obviously, you’ve probably been reading about some of the conversations that have been happening at the federal government level, at the state level, I presume the same is happening in Ottawa and throughout Canada. So what’s the role here?
Because you don’t want the overreach. You don’t want to shut down government. You don’t want to shut down private industry.
At the same time, you have a responsibility to protect the citizen against bad use of their data. Do they own their data?
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Yeah, absolutely. So of course, with the summit that actually happened at the White House last week, you can see that the tone is slowly shifting a little bit or at least what I’m seeing is that there’s no consensus in terms of how to regulate this or not. Right now, I think a lot of people think that we should allow industry to self regulate.
On the other hand, people who do want more regulations are certainly aware that there’s a bit of a race to AI supremacy. And of course, we need to include China in this race, obviously. And so that’s certainly a concern.
So it’s going to be interesting to see. I do think that governments are expressing concerns because it’s politically acceptable to see a government being concerned about this without knowing really what to do. But in the meantime, I would say that for the food industry and for grocers in particular, they need to tread, they need to navigate this issue extremely carefully without being seen.
Because right now, it’s the same in the United States. Grocers are not seen as champions of consumer protection.
Jeffrey Snyder, Broadcast Retirement Network
I can tell you that. At the end of the day, you can worry about your profits. But if you don’t have your customer, your consumer, you’re not going to have very many profits.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
There’s already accusations of profiteering and things like that on both sides of the border. So you really want to be extremely careful in terms of how you’re handling this.
Jeffrey Snyder, Broadcast Retirement Network
Do you think, you mentioned China, many here would consider them an adversary. They’re a partner, kind of a quasi-adversary, different form of government, etc. I mean, there’s lots of reasons why or why not.
But could our adversaries use this data that is out there against the American consumer? I mean, I presume they’re all operating in their own self-interest, right? So China’s operating in its interest, Russia’s operating in its interest.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
I honestly, so I’m not an AI expert. And I’ve always seen, I’ve always recognized the power of markets in particular. And what I’m seeing right now is that there’s a tremendous amount of investment in infrastructure, in data management.
There’s tremendous interest coming from companies. Last week, I was in Montreal giving a talk about AI and the food industry. And I mean, the room was packed, very interested in looking into how to use AI.
So a lot of companies are just scratching the surface right now, exploring different ideas, which is great because you need to innovate. And one way to do it very quickly right now is by using AI. So I do think there’s some excitement out there still.
And I don’t think we should tame that excitement. I think it’s good energy for the food industry. Keep in mind that the food industry is a tight margin environment.
And so anything to actually increase margins can help companies, which is good. But again, at the same time, that social contract between industry and consumers is already incredibly fragile, let alone dealing with AI and the potential of actually harming people. And frankly, in terms of harming people, I still don’t understand exactly how AI can be used against a group of individuals or a country or anything like that, other than better understanding exactly what is to happen or to get better intelligence.
But other than that, from a food perspective, maybe food safety could be compromised in some way. I mean, but there’s been talks like that forever with anthrax and everything. So there’s been fears for a very long time.
And our traceability systems are pretty robust these days.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, look, I think it’s a TBD. I think people like you articulating the issues, oftentimes it takes time for the market, meaning the enterprises, to adapt. And I think it’ll refine itself over time.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
I’m just hearing the same rhetoric as I heard when the internet came along and when social media came along.
Jeffrey Snyder, Broadcast Retirement Network
I was going to ask you about that. Yeah.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Yeah. And so, of course, it really changes our lives. I mean, the internet did change our our lives.
And so did social media in terms of how we communicate with each other. But at the end of the day, we’re still seeing businesses being morally ethical and responsible over time, because if you don’t do that, especially in food, you’re going to close your doors very quickly.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, absolutely. Well, Dr. Sylvain Charlebois, thank you so much for joining us. Great conversation.
And we look forward to having you back on the program again very soon, sir.
Dr. Sylvain Charlebois ,Professor and Director of the Agri-Food Analytics Lab, Dalhousie University
Thank you.