Loblaw announced Monday that it will freeze the prices of 1,500 products sold under its No Name house brand. But experts say the move is largely a public relations tactic as Canadians and politicians accuse the grocery giants of profiteering.
Retail expert Doug Stephens said he doubts the decision was made out of altruism and notes that profit margins on private label already tend to be “a bit higher” than national brands.
“It’s an interesting move by Loblaws to encourage consumers to embrace its house brand,” he told CTV’s Your Morning Tuesday. “So while you could say this is a goodwill gesture from the company to Canadian consumers…it’s also a brilliant marketing move to get consumers to move to private label where hopefully they will develop a new habit around these products and that bodes well for Loblaws in the long run.”
The Loblaw No Name price freeze will be in effect until January 31. Barry Millman, CEO of Denbar Food Group in Cobourg, Ont., notes that the price freeze coincides with the “blackout period” between October and January, when suppliers like his company are prohibited from raising prices qu she bills at grocery stores.
“It’s been practiced for about 25 or 30 years now. All retailers are trying to stabilize their busy season, which is fall, Christmas and the holiday season,” he told CTVNews.ca in a telephone interview on Tuesday.
“During this blackout period, there is no real reason for (Loblaw) to raise prices,” Millman added. “In my opinion, it’s a PR ploy and it’s good for them if they can pull it off.”
Even outside of the blackout period, grocery suppliers typically have to wait up to three months for price increases to be approved by retailers, he said, meaning any cost increases must be absorbed by suppliers in the meantime.
“A lot of times we sell at a loss during this period because our suppliers certainly don’t give us any lead time,” he said.
Loblaw’s price freeze announcement also follows similar moves by grocery store chains around the world. Carrefour, a French grocery chain with a presence in more than 30 countries, announced in August that it would freeze the prices of its private label products, as did British grocery giant Tesco in September.
“For several months, we have seen grocers around the world freeze prices, on many different continents. And I think it was really time for a Canadian grocer to move forward,” said Sylvain Charlebois, director of Agribusiness from Dalhousie University. Analytics Lab, CTV News told Monday.
Metro said in a statement Monday to CTV News that it’s “industry practice” to have a price freeze between November and February. However, Loblaw denied the practice is common and called it “unprecedented in Canada” in a statement to CTVNews.ca on Tuesday morning.
Loblaw is technically right, says Millman. Although there is a blackout period preventing suppliers from raising prices, he says there is nothing stopping grocery stores from raising prices for consumers during this time.
GROCERY STORES ACCUSED OF “GREEDFLATION”
Last month, Statistics Canada announced that the annual inflation rate had slowed to 7.0% in August. However, that was largely due to lower gas prices, and grocery prices have risen 10.8% since last year — the fastest pace in more than 40 years.
But as food prices have soared, profits for Loblaw and other grocery chains have also increased. In the second quarter of 2022, Loblaw reported earnings of $387 million and its first quarter earnings were 40% higher than a year earlier. Metro also saw its profits rise 8.7% in the second quarter of 2022 to $275 million.
Stephens also pointed to a report from Canadians for Tax Fairness released last spring, which found that corporate profit margins in Canada averaged 16% in 2021, compared to 9% from 2002 to 2019. The report concluded that rising prices were the “key contributor to rising corporate earnings.”
“Obviously, if costs go down, profits go up, we can only assume that prices are driving a large part of that,” he said.
Growing anger directed at grocery giants like Loblaw necessitated the decision to freeze prices, Charlebois believes.
“It’s an interesting call. I think it was necessary for Loblaws,” Charlebois told CTV News on Monday. “He was under constant criticism. Nearly four out of five Canadians believe grocers profit and so it was definitely a public relations issue.”
Parliamentarians also took note. On Monday, an NDP motion calling on the federal government to investigate grocery chain profits received unanimous support. NDP Leader Jagmeet Singh sought to take credit for Loblaw’s price freeze announcement.
“Because of public pressure and our push to force grocery stores to start serving people’s needs, we have seen a positive sign Loblaws has now announced that it will freeze prices on its line of products ‘Without name “.”, he told reporters on Monday.
But an analysis by Charlebois and his team last summer found that while the dollar value of grocery chain profits has increased, profit margins are still around 2-4%.
“In fact, over the summer our lab produced a ‘greed’ report looking at grocery chain financials, looking at profits and we found no evidence of abuse,” he said. -he declares.
With files from CTV News’ Rachel Aiello and Joyce Napier
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