‘Death by a thousand cuts’: Grocers warn of rising prices tied to Iran conflict

A Vancouver grocer says he’s doing everything he can to hold the line on prices, but warns it may not last much longer, as rising fuel costs ripple through the supply chain.

Running East West Market is a family affair for David Lee Kwen. He works alongside his daughter stocking shelves and helping customers. He fears there are tough decisions ahead.

“I worry that if this continues, I can’t take care of my family,” he said.

Lee Kwen points to the war in Iran and the resulting surge in fuel prices as a major concern. He estimates his own costs have already increased by about five per cent. For now, he’s choosing not to pass those increases on to customers.

“We want the customers to still shop here. Because if you put up your prices all the time, that’s not good,” he said. “They got to eat and they only have so much disposable income.”

Lee Kwen says independent grocers can only absorb so much though. “If you can’t cover your overhead, you got to increase prices.” He acknowledged that this is something he could be forced to do in the near future.

Industry warns increases are coming

The Canadian Federation of Independent Grocers says stores like Lee Kwen’s are especially vulnerable.

“They operate on an overall margin of about two per cent. That’s very tight,” said Gary Sands, the organization’s senior vice-president. “If you don’t pass those increases on to consumers, you’re going to be an out-of-business grocer, not an independent grocer.”

Sands said suppliers are already signalling price hikes.

“Some of the distributors of products are tapping on fuel surcharges to their deliveries.”

He warns price increases will be unavoidable for Canadians living outside of urban areas, especially on fresh fruits and vegetables.

“All of these pressures that we’re talking about, they’re going to have a much more significant impact on rural and remote areas of Canada,” Sands said.

Trucking costs surge

A significant portion of that pressure is coming from the transportation sector, where diesel prices have risen sharply in recent weeks.

“The price I saw on the way in (Wednesday) morning was 269.9/litre for diesel, right by my office in Langley, B.C.,” said Dave Earle, the B.C. Trucking Association’s president and CEO.

Earle says it’s a frustrating time in the trucking industry, as companies are forced to increase shipping rates to compensate for rising costs. But how much of that increase is passed on to shoppers, depends on what big rigs are hauling.

“Moving from California to Vancouver, if it’s a load of electronics, that’s worth $2 or $3 million, the extra $500 to $700 in fuel, it doesn’t make much of a difference to the end cost to the product. If it’s a load of lettuce, that’s very different,” Earle said.

Earle said a head of lettuce may end up costing only a few cents more, but applied to every product in a cartload of groceries, the difference can add up quickly.

“Death by a thousand cuts. By the time you walk out of the grocery store you look at your receipt, you wonder what’s happening,” Earle said.

He expects even if the conflict in Iran were to end relatively soon, consumers will still end up paying more.

“When you think about fresh produce crops that are being planted today, well the fertilizer that’s produced, the transportation of that to the field, all of that is affected. These input cost changes are going to follow us for months.”

Grocers hoping for relief

Back at East West Market, Lee Kwen says he’s hoping for a resolution overseas and a shift at home to reduce reliance on global supply chains.

“We have to wake up and build industry here,” he said. “You know, we are resource rich, our country.”