Loblaw’s decision to freeze prices on all No Name items until January labelled a ‘PR strategy’

Canada’s greatest grocery chain is freezing prices on all its No Name merchandise for the following three months.

Loblaw Companies Ltd. — which operates such grocery shops as Loblaws, Zehrs, No Frills and Real Canadian Superstore — says it has locked in prices of the favored home model, which incorporates greater than 1,500 grocery items, until Jan. 31, 2023.

In a letter shared with a few of its clients on Monday, Loblaw chairman and president Galen G. Weston says the worth of a median basket of groceries is up about 10 per cent this yr, with such items as apples, soup and chips up much more.

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Weston stated a lot of that is “maddeningly” out of the corporate’s management as meals suppliers move on larger prices to Loblaw.

The chain has pushed again in opposition to some will increase the place it may possibly, he stated, however suppliers are contending with the identical value will increase confronted by customers — with larger prices for every part from raw supplies to power and transportation.

“None of those explanations supply a lot consolation once you’re apprehensive about your loved ones’s funds and unsure about how a lot you may want every month to pay for meals,” Weston stated in a letter to members of the corporate’s loyalty program, PC Optimum.

Last yr, a battle over larger prices briefly noticed the corporate droop the sale of Frito-Lay merchandise at its shops, earlier than the 2 sides got here to an settlement.

Grocery chains have come below hearth for being seen to be making extreme income at a time when customers are stretched skinny due to rising inflation.

Just a few years in the past, grocery chains together with Loblaw, Sobeys, Metro and others took a reputational hit with customers when they had been discovered by Canada’s competitors watchdog to have been colluding to repair the worth of bread and different baked items for years.

Federal NDP Leader Jagmeet Singh has made grocery retailer income a rallying name, noting that the most important Canadian chains have taken in $2.3 billion in revenue to date this yr.

Loblaw’s income have certainly risen of late, with the corporate revealing internet earnings of $387 million in its most not too long ago accomplished quarter. That’s up by $12 million from this time final yr and by $121 million from the identical interval in 2019, earlier than the COVID-19 pandemic.

At rival Metro Inc., internet earnings got here in at $275 million in the latest quarter, up from $252 million a yr in the past and $222 million in the identical interval in 2019.

It’s a related development at Empire Co., the proprietor of Sobeys, which posted internet earnings of $187 million in its most not too long ago accomplished quarter. That was down barely from $188 million in the identical interval a yr earlier however up from $120 million in the identical interval pre-pandemic.

Jim Stanford, an economist and director of the analysis institute Centre for Future Work, stated whereas many Canadian companies have tried to paint themselves because the victims of inflation, their monetary outcomes present that they’re in actual fact contributing to it.

“Corporate income have soared proper alongside shopper prices, and it is not a coincidence,”he advised CBC News in an interview on Monday. “The proof is evident that companies are doing rather more than passing on larger prices.”

As a share of Canada’s complete GDP, he famous that company income hit an all-time excessive of virtually 20 per cent within the second quarter of this yr. While different sectors — notably the power sector — have seen income improve at a quicker charge, Stanford stated, grocers are clearly popping out forward.

“We ought to see this as a PR gesture from a firm that is aware of it is within the eye proper now,” he stated of Loblaw’s decision to freeze No Name prices.

Others say it is unfair to counsel that grocery chains particularly have been gouging customers. Trevor Tombe, an economist on the University of Calgary, not too long ago crunched the numbers on company income and stated he did not discover a lot proof of undue profiteering in that sector particularly.

“The revenue ranges are up due to volumes, not due to worth markup will increase,” he stated in an interview.

“The larger income that we’re seeing are largely pushed by excessive commodity prices and excessive power, oil and fuel prices particularly. So that is inflicting each inflation to improve and income to improve.”

Similar strikes in different nations

The decision by Loblaw to freeze prices of the personal label model with its distinctive yellow-and-black packaging follows related bulletins by grocers in different nations.

In August, French grocery store chain Carrefour introduced plans to freeze prices on about 100 of its house-brand merchandise until Nov. 30.

In June, Lidl’s U.S. arm launched a summer time price-cutting marketing campaign to ease the inflationary burden on clients. The firm stated it dropped prices on greater than 100 items in its shops throughout 9 East Coast states until August.

“We’ve seen grocers voluntarily freezing prices throughout the G7 for a whereas now,” stated Sylvain Charlebois, professor of meals distribution and meals coverage at Dalhousie University in Halifax. “It ought to have occurred a very long time in the past in Canada.”

Still, freezing No Name prices will supply much-needed reduction to Canadians, he stated, including it would additionally assist to restore a few of the picture points going through Canada’s huge grocers, Charlebois stated.

“This can also be a PR technique…. A lot of Canadians are blaming grocers for what is going on on with meals inflation,” he stated. “Some of it’s deserved … however a lot of that criticism is unfair as a result of meals prices can rise for a number of causes past a grocer’s management.”

Mike von Massow, an affiliate professor within the meals, agricultural and useful resource economics division on the University of Guelph, stated it is no accident that Loblaw has determined to cap worth hikes on the model that it owns, as a result of it has the ability to management all elements of the provision chain.

“They management the model, they’ll management rather more of the margin of that product — and they could nicely have locked within the prices and mitigated a good little bit of their danger going ahead,” he stated in an interview. “Are they going to lose substantial quantities of cash on this, on this dedication? Probably not.”

While the corporate’s transfer has a lot to do with public relations, von Massow stated, it’s probably going to assist individuals who want it most, as a result of it is focusing on staple items the place there are only a few methods of avoiding worth will increase. “There is a actual likelihood that prices will proceed to go up over the approaching months, and this offers individuals some certainty now,” he stated.