Canada’s largest grocery chain is freezing prices on all of its no-name products for the next three months.
Loblaw Companies Ltd. – which operates grocery stores such as Loblaws, Zehrs, No Frills and Real Canadian Superstore – says it has frozen prices for the popular private label, which includes more than 1,500 grocery items, through Jan. 31, 2023.
In a letter shared with some of his customers on Monday, Loblaw Chairman and President Galen G. Weston says the price of an average basket of groceries has risen about 10% this year, with items like apples, soup and even more fries. .
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Weston said much of that is “maddening” outside of the company’s control, as food suppliers pass the higher costs onto Loblaw.
The chain has pushed back some increases where it could, he said, but suppliers face the same cost increases faced by consumers – with higher prices for everything from raw materials to energy and transportation.
“None of these explanations offer much comfort when you worry about your family’s budget and don’t know how much you’ll need each month to pay for food,” Weston said in a letter to loyalty program members. company, PC Optimum.
A fight for higher prices last year saw the company briefly suspend the sale of Frito-Lay products in its stores, before the two sides reached an agreement.
Grocery chains have been criticized for being seen as making excessive profits at a time when consumers are running out of steam due to rising inflation.
A few years ago, grocery store chains such as Loblaw, Sobeys, Metro and others took a reputational hit with shoppers when they were caught by Canada’s competition watchdog for having colluded to fix the price of bread and other baked goods for years.
Federal NDP Leader Jagmeet Singh made grocery store profits a rallying cry, noting that major Canadian chains have made $2.3 billion in profits so far this year.
$2.3 billion
That’s what grocery companies have won so far in 2022.
On Monday, I am forcing a vote in Parliament to investigate price gouging and lower the prices of your food.
Help us pressure Justin Trudeau and Pierre Poilievre to do the same.https://t.co/4n10mrhPkH
Loblaw’s earnings have indeed increased of late, with the company reporting net income of $387 million in its most recent quarter. That’s an increase of $12 million from the same period last year and $121 million from the same period in 2019, before the COVID-19 pandemic.
At rival Metro Inc., net profit was $275 million in the latest quarter, down from $252 million a year ago and $222 million in the same period of 2019.
It’s a similar trend at Empire Co., the owner of Sobeys, which posted net income of $187 million in its most recent quarter. That was down slightly from $188 million in the same period a year earlier, but up from $120 million in the same period before the pandemic.
Jim Stanford, economist and director of the Center for Future Work research institute, said that while many Canadian companies have tried to portray themselves as the victims of inflation, their financial results show that they are in fact contributing to it.
“Corporate profits have soared along with consumer prices, and that’s no coincidence,” he told CBC News in an interview on Monday. “It’s clear that companies are doing much more than passing on higher costs.”
As a percentage of Canada’s total GDP, he noted that corporate profits hit an all-time high of nearly 20% in the second quarter of this year. While other sectors — notably the energy sector — have seen profits grow at a faster rate, Stanford said, grocers are clearly coming out on top.
“We should see this as a public relations move from a company that knows it’s in the eye right now,” he said of Loblaw’s decision to freeze No Name’s pricing.
Loblaw Companies Ltd. announced it would freeze the price of all no-name items for the next three months, a move that drew mixed reactions from shoppers on the streets of Toronto on Monday.
Others say it’s unfair to suggest that grocery chains in particular have defrauded consumers. Trevor Tombe, an economist at the University of Calgary, recently analyzed corporate earnings figures and said he didn’t find much evidence of improper profits in this particular sector.
“Profit levels are up because of volumes, not because of rising prices,” he said in an interview.
“The higher profits we are seeing are largely due to high commodity prices and high energy prices, oil and gas in particular. increased profits.”
Marion Chan, director of consultancy firm TrendSpotter, says the move makes sense for Loblaw because it’s an opportunity to win customers on items where price tends to matter more than price. brand image.
“They are very willing to compromise and go with a name brand product or a private label product or product because it may be to save money,” she said in an interview. “There are a wide range of reasons why people are loyal to a brand, but [they] hits a ceiling at a certain point where they say, no, I just can’t spend.”
Similar movements in other countries
Loblaw’s decision to freeze prices for the house brand with its distinctive yellow and black packaging follows similar announcements made by grocers in other countries.
In August, French supermarket chain Carrefour announced plans to freeze the prices of around 100 of its private label products until November 30.
In June, Lidl’s US branch launched a summer price-cutting campaign to ease the inflationary burden on customers. The company said it had lowered prices on more than 100 items at its stores in nine East Coast states through August.
“We’ve seen grocers voluntarily freeze prices across the G7 for some time now,” said Sylvain Charlebois, professor of food distribution and food policy at Dalhousie University in Halifax. “This should have happened a long time ago in Canada.”
Still, the no-name price freeze will provide much-needed relief to Canadians, he said, adding that it will also help fix some of the image problems faced by major Canadian grocers, Charlebois said.
“It’s also a public relations strategy… A lot of Canadians blame grocers for what’s happening with food inflation,” he said. “Some of it is deserved … but much of this criticism is unfair because food prices can rise for a variety of reasons beyond a grocer’s control.
Mike von Massow, an associate professor in the department of food, agricultural and resource economics at the University of Guelph, said it’s no coincidence that Loblaw decided to cap price increases on the brand it owns because it has the power to control all parts of the supply chain.
“They control the brand, they can control the margin of this product a lot more – and they may well have locked in the prices and mitigated a lot of their risk going forward,” he said in an interview. . “Are they going to lose substantial amounts of money on this, on this engagement? Probably not.”
While the company’s decision has a lot to do with public relations, von Massow said, it will likely help the people who need it most because it targets basic items for which there are very few resources available. to avoid price increases. “There’s a good chance that costs will continue to rise over the next few months, and that gives people some certainty now,” he said.
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