As food manufacturers grapple with rising costs and supply chain issues, two of Canada’s largest grocery stores are signaling the potential for higher prices and erratic availability of some products in the coming months. Loblaw Companies Ltd.
As food manufacturers grapple with rising costs and supply chain issues, two of Canada’s largest grocery stores are signaling the potential for higher prices and erratic availability of some products in the coming months.
Loblaw Companies Ltd. and Metro Inc. released their latest financial results on Wednesday, offering a look at inflationary pressures and job challenges affecting the grocery industry.
The situation is expected to lead to a surge in food prices and a brief shortage of some specialty products on store shelves, suggesting that the pandemic could have a lasting impact on the food industry.
“There is significant pressure on commodity prices … and then there is pressure from the labor supply,” Galen G. Weston, Loblaw president and CEO, told analysts during a conference call. “Those two things are creating substantial challenges for our manufacturing base.”
Weston said manufacturers are consolidating production into higher-volume products and allocating secondary sizes and flavors, managing limited supplies by limiting retailers to finite quantities of some products.
“What customers will be frustrated with seeing that there is something in stock for a week and then it is out of stock for four to five weeks,” Weston said, adding that he expects the instability to continue for a few more quarters.
The situation is affecting the entire grocery industry in Canada.
Metro CEO Eric La Flèche told financial analysts that some products “remain difficult to source and obtain the quantities we would like.”
“There are some key elements that we are in on assignments,” he said. “The entire industry is.”
It is not just grocery store shelves that are expected to be affected by the continued impact of the pandemic. The rising cost of labor, shipping, and commodities is driving up costs for food manufacturers, and many consumer packaged goods companies are seeking price increases.
“We are paying close attention to cost inflation,” Loblaw CFO Richard Dufresne told analysts. “The number and size of cost increases requested by vendors has risen since the summer.”
Loblaw’s internal measures of inflation were slightly higher than the national average quarterly food price inflation of 2.6 percent, the company said.
Metro said that food basket inflation was around two percent in its fourth quarter, double the one percent recorded in the previous quarter.
La Flèche said meat and dairy were the main drivers that led to higher costs at Metro grocery stores.
Statistics Canada said on Wednesday that the annual pace of inflation in October rose to 4.7 percent as the consumer price index posted its biggest year-on-year rise since February 2003. The increase followed a 4.4 percent year-on-year increase. percent in September.
Higher prices could benefit discount grocery chains, such as Food Basics for Metro or No Frills for Loblaw.
But Weston said “accelerating inflation rates and the lack of predictability about what inflation will look like in the coming months and quarters” make it difficult to predict sustained trends.
Loblaw beat expectations, as it reported that its third-quarter profit increased compared to the prior year, helped by strong demand in stores and online.
The nation’s largest supermarket and pharmacy chain said it made a profit attributable to common shareholders of $ 431 million or $ 1.27 per diluted share during the 16-week period ending October 9. The result compares with a profit of $ 342 million or 96 cents per diluted share. share in the same period last year.
Revenues for the quarter were $ 16.05 billion, compared to $ 15.67 billion a year earlier.
Meanwhile, Metro reported that its fourth-quarter profit increased compared to the previous year as its sales declined.
The Montreal-based grocery and pharmacy retailer said it earned $ 194 million or 79 cents per diluted share during the 12-week period ending Sept. 25, compared to a profit of $ 186.5 million or 74 cents a share in the same quarter of the previous year.
Sales in the quarter totaled $ 4.09 billion, down from $ 4.14 billion in the same quarter last year, when the company says it saw exceptionally strong sales due to the pandemic.
This Canadian Press report was first published on November 17, 2021.
Companies in this story: (TSX: L), (TSX: MRU)
Brett Bundale, Canadian Press