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 grocers such as Loblaws, Zehrs, No Frills and Real Canadian Superstore, says it has locked in prices on its popular house brand, which includes more than 1,500 grocery items, until Jan. 31 of 2023.
In a letter shared Monday with some of his customers, Loblaw chairman and president Galen G. Weston says the price of an average basket of groceries has risen about 10 percent this year, with items like apples, soup and even more chips. .
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Much of this is out of the company’s control, Weston said, as food suppliers pass on higher costs to Loblaw.
The chain has declined some increases where it can, he said, but suppliers face the same cost increases that consumers face, with higher prices for everything from raw materials to energy and transportation.
“None of these explanations offer much comfort when you’re worried 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 members of the company’s loyalty program, PC Optimum.
Last year, a fight over higher prices led the company to briefly stop selling Frito-Lay products in its stores, before the two sides reached an agreement.
Grocery chains have come under fire for being seen as making excessive profits at a time when consumers are being stretched by rising inflation.
A few years ago, grocery chains like Loblaw, Sobeys, Metro and others took a reputational hit with shoppers when Canada’s competition watchdog found they had colluded to fix the price of bread and other baked goods for years.
Federal NDP Leader Jagmeet Singh has 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 dollars
This is how much grocery corporations have earned so far in 2022.
On Monday, I am forcing a vote in Parliament to investigate price gouging and reduce food prices.
Help us pressure Justin Trudeau and Pierre Poilievre to do the same.https://t.co/4n10mrhPkH
—@theJagmeetSingh
Loblaw’s profits have been on the rise lately, with the company reporting net earnings of $387 million in its most recently completed quarter. That’s up $12 million from this time last year and $121 million from the same period in 2019, before the COVID-19 pandemic.
At rival Metro Inc., net earnings rose to $275 million in the most recent quarter, up from $252 million a year ago and $222 million in the same period in 2019.
It’s a similar trend at Empire Co., the owner of Sobeys, which posted a net profit of $187 million in its most recently completed 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 corporations have tried to paint themselves as victims of inflation, their financial results show that they are in fact contributing to it.
“Corporate profits have soared alongside consumer prices, and it’s no coincidence,” he told CBC News in an interview on Monday. “The evidence is clear that corporations 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 per cent in the second quarter of this year. While other sectors, notably the energy sector, have seen profits rise at a faster rate, Stanford said, grocers are clearly ahead.
“We should see this as a PR gesture from a company that knows it’s in the spotlight right now,” he said of Loblaw’s decision to freeze No Name prices.
LOOK | Shoppers react to Loblaw’s decision to freeze some prices:
Shoppers react to Loblaw’s price freeze
Loblaw Companies Ltd. has announced it will 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 been ripping off consumers. Trevor Tombe, an economist at the University of Calgary, recently looked at corporate profit figures and said he didn’t find much evidence of misappropriation in this sector specifically.
“Profit levels are increasing because of volumes, not because of increased price margins,” he said in an interview.
“The higher profits that we’re seeing are largely driven by high commodity prices and high energy prices, oil and gas in particular. That drives up inflation and profits.”
Similar movements in other countries
Loblaw’s decision to freeze prices on the private label brand with its distinctive yellow and black packaging follows similar announcements by grocers in other countries.
In August, French supermarket chain Carrefour announced plans to freeze the prices of around 100 of its own-brand products until November 30.
In June, Lidl’s US arm introduced a summer campaign to cut prices to ease the inflationary burden on customers. The company said it lowered prices on more than 100 items at its stores in nine states on the East Coast through August.
“It’s been a while since we’ve seen grocers voluntarily freeze prices in the G7,” said Sylvain Charlebois, professor of food distribution and food policy at Dalhousie University in Halifax. “It should have happened a long time ago in Canada.”
Still, No Name’s price freeze will provide much-needed relief to Canadians, he said, adding that it will also help repair some of the image problems facing Canada’s big grocers. said Charlebois.
“This is also a PR strategy … Many 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 number of reasons beyond a grocer’s control.”
Mike von Massow, an associate professor in the University of Guelph’s department of food, agricultural and resource economics, said it’s no accident that Loblaw has decided to limit 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 much more of the margin on that product, and they may have locked in pricing 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 commitment? Probably not.”
While the company’s move has a lot to do with public relations, von Massow said, it’s likely to help people who need it most, because it targets basic items where there are very few ways to avoid price increases. “There is a real possibility that costs will continue to rise over the coming months, and this now gives people some security,” he said.