Food prices set to increase -- again -- as blackout on price hikes ends at some stores

TORONTO -

Higher grocery prices are expected to hit stores across Canada as a blackout on price increases over the holiday season comes to an end.

Last fall, Loblaw Cos. Ltd. said it would lock-in prices on all its in-house No Name products until Jan. 31, while Metro Inc. said it would hold prices of most private-label and national brand products steady until Feb. 5.

The lifting of price freezes comes amid growing consumer outrage over soaring grocery prices and increasing scrutiny of grocers' record profits.

But grocery chains have argued their food margins have remained flat and they are simply passing along higher supplier prices.

“Food inflation has continued and the cost to stock our shelves has gone up, month after month,” Loblaw spokeswoman Catherine Thomas said in an email.

The company, which operates multiple banners including Zehrs, Provigo and No Frills, will “continue to hold most of those prices flat” and switching to No Name will still save the average family thousands this year, she said.

The head of Metro said recently the Montreal-based grocery chain received more than 27,000 price increases from suppliers in 2022 averaging more than 10 per cent for dry groceries alone - triple the annual rate.

“We can't predict future inflation as many vendor requests for price increases continue to come in, and the root causes outside of our control are still present,” Metro CEO Eric La Fleche said during a call with analysts.

Still, at least one grocer in another country has opted to extend a moratorium on price increases.

In Australia, supermarket giant Coles extended its so-called “dropped and locked” price freeze on some products slated to end Jan. 31.

“They said it's to help Australians get through this food price inflation,” said Michael von Massow, a food economy professor at the University of Guelph in Ontario.

“They've picked some basic items, not unlike the No Name price freeze, but maybe a step further and extended it.”

It's unclear just how much food prices in Canada could rise in the coming months as inflation continues.

Factors such as the war in Ukraine, flooding in California and the strength of the Canadian dollar could all play a role, Massow said.

“There are a lot of unpredictable factors but there is some room for optimism,” he said.

While grocery prices rose 11 per cent year over year in December, Massow pointed out that the month-over-month increase was 0.3 per cent - roughly 3.5 per cent on an annualized basis.

“It's still high but there are some early signs that relief could be coming,” he said.

Also, as spring approaches and Canada's reliance on imported fruits and vegetables wanes, costs in the produce aisle should ease, Massow said.

As for the growing consumer backlash against grocers, he said it's not surprising - even if the frustration is misplaced.

“The grocers are making record profits and yet some people are struggling to eat ... I can understand people's anger,” Massow said.

But higher grocer profits are due to a host of factors, including Canadians cooking more at home to save money and higher sales of non-food items with stronger margins, he said.

“Everyone's looking for a simple answer to this problem and unfortunately, there isn't one,” Massow said. “Could the grocery stores be doing a better job of managing these perceptions? Yes. Are those perceptions fair? Probably not.”

This report by The Canadian Press was first published Feb. 1, 2023.