According to the head of one of Canada's biggest grocery chains, the worst of food inflation may be over.
Michael Medline said in an interview that the waves of cost increases are slowing down. We hope that it will lead to lower rates of inflation for consumers.
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During the past year and a half of rising inflation, there have been many fights between food producers and big grocery stores over who should pay for higher costs.
Canadian consumers have had to pay with grocery bills rising at the fastest pace in four decades, but it may be a sign that food inflation is close to its peak.
Weston said in July that he was starting to see signs of "stabilization"
Weston said that supplier costs are still high and put pressure on retail prices.
If a supplier wants to charge a grocery store more to cover unforeseen costs, they need to ask them to pay more. If the supplier has private label brands that compete with the supplier's products, it can be difficult for the supplier to hand over internal data to the grocery store.
If the grocer accepts an increase, it has to decide whether to pass on the cost to the consumer in the form of higher prices in store or slimmer margins. A refusal of the increase can lead to ugly disputes. Frito-Lay and Quaker products were pulled from the shelves of the grocery store. A drastic move known in the industry as a "stop ship" has been made by the global confectionary giant Mondelz International, Inc.
Medline said that they get a lot of cost increase requests. We didn't take them if they were backed by facts.
Empire has been in the same situation according to Medline, whose chain includes Sobeys, Fresh Co, Safeway, IGA, Foodland, Longo's and Farm Boy.
When we get to those points, we work it out. It came very, very close to a point where we probably had some that stopped shipping but it wouldn't be noticeable in the store because it picked up very soon afterwards.
Costs are going up. In July, Statistics Canada reported that grocery bills were up 9.9% compared to the same month a year ago.
Consumer advocates have publicly criticized the grocery industry for increasing profits and rewarding shareholders with dividends when some consumers can't afford groceries.
Medline lashed out at the critics at Empire's annual general meeting, accusing them of being "reckless and incendiary." Empire's first quarter net income was little changed from a year ago.
"I am tired of these armchair quarterbacks who make little effort to understand the basics of our business but are comfortable sitting on the sidelines pontificating about how Canadian companies are reaping unreasonable profits on the backs of inflation." This is completely false.
Major players in the industry say that higher profits in the grocery industry are due to other factors, such as efficiency gains or the resurgence of drug store sales. The data available in public financial statements can be hard to confirm.
Statistics Canada reported a pre-tax profit of $1.6 billion for Canadian food and beverage stores in the second quarter of this year, compared to $797 million in the same period in the previous year.
The profits are higher and that isn't disputed. He said how they became higher could be in dispute. This industry is making a lot of money.
The email address is jedmiston@nationalpost.com.
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