The price freeze runs from Oct. 17 until the end of January
By Jake Edmiston
Loblaw Companies Ltd., Canada’s largest food and drug retailer, will freeze prices on all No Name products for more than three months as a way of blunting the impact of inflation, the chain announced on Monday.
In a note to shoppers, Loblaw president Galen Weston said freezing prices on No Name — the company’s in-store discount brand with more than 1,500 products — was one of the few moves the chain could make to combat inflation, since it wouldn’t involve negotiating with suppliers.
“Your grocery bill is higher today because the suppliers who make the products we sell are raising their prices for us. And, while we’ve challenged (and will continue to challenge) any unfair price increases, the truth is most are reasonable,” he said. “That’s why, to help Canadians hit the brakes on food inflation, we are focusing on what is in our control.”
The price freeze, which runs from Oct. 17 until the end of January, is the first such pledge from a Canadian grocer during the inflation crisis, though other chains around the world have been using similar models for months. French retailer Carrefour, for example, opted to hold prices steady on 100 items from August until Nov. 30, according to Reuters.
The Loblaw freeze comes as inflationary pressure appears to be subsiding and Canada’s largest grocers have already endured months of public relations headaches around accusations of price gouging.
It’s a month too late, because, really, the cynicism out there is incredibleSYLVAIN CHARLEBOIS, DIRECTOR OF DALHOUSIE UNIVERSITY’S AGRI-FOOD ANALYTICS LAB
“It’s a month too late, because, really, the cynicism out there is incredible,” said Sylvain Charlebois, director of Dalhousie University’s Agri-Food Analytics Lab who has been publicly pressuring the grocers to freeze prices. “I mean, the grocers are being destroyed on social media.”
The top three grocers — Loblaw, Sobeys’ parent Empire Co. Ltd., and Quebec-based Metro Inc. — have dismissed the scrutiny as unfounded, and auditing experts haven’t found clear evidence of profiteering in public financial documents.
The House of Commons, however, is set to look at the question in detail in the coming weeks, summoning executives from the grocery chains before a parliamentary inquiry to explain how they managed to grow their profits during the worst inflation crisis in four decades.
Alistair MacGregor, the New Democratic Party member of Parliament who championed the inquiry earlier this month, said Loblaw’s price freeze has “very interesting timing.”
“Political and public pressure is starting to yield a response from the grocery sector,” he wrote on Twitter. “Let’s keep it up.”
Grocery bills rose by 10.8 per cent year over year in August, the highest inflation rate since 1981, according to the latest Statistics Canada consumer price index (CPI).
But Charlebois said he expects the next CPI report, to be released later this week, to show signs that food inflation is cooling. Grocery executives have been making similar predictions for months, assuring shoppers that inflation may be nearing its peak.
“We are seeing some signs of stabilization,” Weston told financial analysts during the company’s last quarterly update on July 27. “Having said that, supplier costs are still high, putting sustained pressure on retail prices.”
By September, however, Empire CEO Michael Medline said he was starting to see supplier requests for price increases start to slow down as well.
“The waves of cost increases are slowing down appreciably,” Medline said in an interview on Sept. 15. “And, I’m not a sooth sayer, but we’re hoping that it’s going to lead to lower rates of inflation for consumers.”
While there are signs inflation is slowing, it’s not clear when that’s actually going to happen, Loblaw spokesperson Catherine Thomas said. So the price freeze will give shoppers “predictability” at the grocery store over the coming months. But it won’t lock prices in place. No Name products will still go on sale for lower prices. The freeze just sets a “ceiling,” she said.
“Today, there is no clear consensus on when inflation rates will begin to decline, as we continue to see volatility in key ingredients like wheat and in U.S. currency, which both affect large parts of our business,” she said in an email. “Add to that the fact that we still have record costs increase requests from our suppliers, and this is clearly a dynamic situation.”
Even when food inflation softens, that won’t mean grocery prices will drop — they just won’t rise as steeply, Charlebois said. He also noted that the Loblaw price freeze will also stretch across the winter holidays, which is typically a “lucrative” time of year for the grocery industry.
“It is obviously a PR move,” he said, “but I actually do believe that it’s going to help consumers.”
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Source: Financial Post