Food price hikes coming in February as cost blackout ends: Metro CEO | Financial Post

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Food price hikes coming in February as cost blackout ends, Metro CEO says

Another round of price hikes will start hitting grocery stores in the coming weeks

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Another round of price hikes will start hitting grocery stores in the coming weeks, mostly due to the end of a little-known holiday tradition in the grocery business, the head of Quebec supermarket giant Metro Inc. says.

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Metro chief executive Eric La Flèche said his chain, like most of its rivals, runs an annual blackout on all cost increases from mid-November until February as a way of making things as simple as possible during the all-important holiday rush. That meant food suppliers couldn’t ask grocers for more money even as inflation tore through the supply chain, making fuel and freight and packaging more expensive. So the requests piled up.

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Metro now has a backlog of “thousands” of those requests, La Flèche said, and they will start working their way through the system and showing up on shelves in February when the blackout ends.

“There are cost increases coming,” he told a news conference on Jan. 24 after the Montreal-based retailer’s annual general meeting.

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The industry-wide cost blackout came to light late last year when Metro and other industry insiders raised their eyebrows at a so-called “price freeze” at the country’s biggest grocer, Loblaw Cos. Ltd.

In mid-October, Loblaw announced it was freezing prices on its in-store discount brand, No Name, until the end of January. President Galen Weston told customers he was trying to make a “meaningful difference to your grocery budget” and provide some relief from inflation.

But sources in food manufacturing dismissed the move as a meaningless marketing ploy, since the annual blackout meant suppliers couldn’t raise their prices at retail anyway. Metro told CBC News that it was “industry practice” to freeze prices — a statement that backfired when some food scholars, including Dalhousie University professor Sylvain Charlebois, questioned whether such a practice would run afoul of federal competition law.

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“That’s a long-time practice at our company, and as far as we know, at most retailers. But again, we don’t speak for others,” La Flèche clarified during the news conference. “We had a blackout period and we didn’t accept cost increases.

Loblaw argued the price freeze was unlike anything done before in the industry. It focused on holding prices steady in stores, rather than swatting away cost increase requests at the wholesale level, spokesperson Catherine Thomas said at the time.

If we don’t accept cost increases, there’s no increase at retail

Eric La Flèche

But La Flèche suggested the two are the same thing.

“If we don’t accept cost increases, there’s no increase at retail. So, essentially, prices are pretty frozen for us during that period,” he said.

Metro and its competitors have faced accusations of price-gouging in the last year, after a handful of progressive think thanks questioned how the big grocery chains were managing to boost profits while shoppers faced the worst food inflation since the early 1980s.

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“Everyone knows retail prices move all the time and food inflation has continued,” Loblaw’s Thomas said. “What we did wasn’t the norm. It was the biggest act of inflation-fighting in Canadian grocery, and it saved customers a huge amount of money at a time when they needed it most.”

In a quarterly update on Jan. 24, Metro said it grew profits by about 11 per cent and announced a 10-per-cent hike to its dividend for shareholders. But La Flèche said the extra profits came because his company managed costs well, not due to inflation.

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The company reported that food inflation helped drive better-than-expected sales of $4.7 billion in the first quarter. But the deluge of cost increases from suppliers forced Metro to take slightly less margin on those sales. La Flèche said Metro received 27,000 requests for cost increases on dry goods alone in 2022 — about three times the normal rate.

He said he can’t pass all those costs onto the consumer and still stay competitive in a market where more cash-strapped consumers are constantly looking for deals.

“We’re selling more and more product on feature at a lower margin,” La Flèche said.

The company ranks as the third-largest grocery chain in Canada, including Food Basics and the Quebec pharmacy chain Jean Coutu. But La Flèche said he’s often at a disadvantage in negotiations with multinational food brands.

“If we want access to their merchandise,” he said, “we don’t necessarily have the big end of the stick all the time.”

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