Frito-Lay's standoff with Loblaw ends up flooding an Ontario chip company with new orders

The business of an Ontario potato-chip company has increased due to the feud between Frito-Lay and the largest grocery store chain in Canada.

Neal Brothers Foods said snack shipments to Loblaw increased by 50 per cent in February compared to the same time last year. The sudden increase in sales volumes would have been even higher, but the company wasn't able to fully meet the needs of Loblaw after its break with one of the biggest snack manufacturers in the world.

The Frito-Lay snack brands have been stopped from being shipped to Loblaw for more than two weeks after the grocery store refused to accept price increases.

Frito-Lay has demanded that Loblaw pay more to offset the rising cost of ingredients, labour and transport. In order to maintain value for consumers, Loblaw has had to push back on requests from suppliers for more money.

Neal said that after the Frito-Lay decision, the company scrambled to ramp up production and find more trucking capacity. He said that the chip company was only able to fill 40% of the initial order.

Neal said his team worked 60 hours last week to respond to a crisis in the snack section of a major grocery store.

It's a shot in the arm for a local chip brand that used to be in the organic aisle, but has now been promoted to the main snack section.

Neal said the showcase with a retail chain that controls about 35 per cent of all Canadian grocery sales is a chance to grow his company's market share. The company said that its shipments of salsa to Loblaw increased more than 50 per cent in February compared to the previous February.

When you wipe out the competition in a store, the hope is that consumers will pick up our bag and try it.

The Frito-Lay-Loblaw standoff is indicative of broader tensions in the Canadian food business, as grocers and suppliers grapple with rising inflation across the supply chain.

Suppliers have long complained that Canada's grocery industry is too consolidated, allowing a handful of dominant chains to make unfair demands in negotiations.

With production costs on the rise, manufacturers are more willing to stop shipping and retaliate against a big grocery store that won't accept a price increase.

Neal said that Frito-Lay is a massive, international company.

Neal's company is responding to the needs of its main retailers.

The hope is (consumers) will pick up our bag, try it, and if they like it, we’ve gained some new customers

Peter Neal

That is my bread and butter. He said that pays the bills for his business and ensures that he can pay his employees.

At a time when food price inflation is the highest in more than a decade, the Frito-Lay episode is being framed as a fight for value. The company uses a team of commodity experts to analyze input costs for a product and determine whether a supplier's price increase is justified.

In extreme cases, suppliers don't ship us products and this can lead to difficult conversations. The retailer didn't respond to the request for comment.

Frito-Lay has reported profit growth. Frito-Lay North America said fourth-quarter operating profit increased 10 per cent year over year despite higher commodity costs.

Last week, the company reported a 30.1-per-cent jump in profits for the fourth quarter, with adjusted net earnings of $515

Email: jedmiston@postmedia.com