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Loblaw tries explaining rising cost of food, but consumers are not buying it

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Loblaw Cos. Ltd. has been active on Twitter this week, sending messages to its critics explaining that “food inflation is a global problem” and that the price increases are due to suppliers themselves. I answered.Christopher Kasaroff/Globe and Mail

Canada’s largest grocery store is stepping up its public relations strategy to convince people that the company is responsible for the high prices. He says he is not in the mood to hear the message.

The day an 11-week price freeze on No Name products ended Tuesday, Loblaw Cos. Ltd. LT was active on Twitter, responding to messages explaining to its critics that “food inflation is a global problem” and blaming suppliers themselves for raising prices. rice field. Another of his Loblaw tweets announced that he had frozen prices at a time when consumers “need it most.”

However, the defensive tone was not well received by many and epitomizes the greater communication challenges facing Canadian grocery retailers. sales and profits in the midst of inflation. Sprawling supply As the last point of contact in his chain, grocers have become targets of shoppers’ well-deserved wrath over the affordability of basic necessities.

In a statement Wednesday, Loblaw spokeswoman Catherine Thomas said customer reaction to No Name’s price freeze, loyalty points offer and the company’s efforts to keep gross margins consistent at grocery stores is down. wrote that it was “very positive”.

“It’s a different story on Twitter,” she wrote. It’s the easiest thing to do. If we don’t reveal the truth, no one will.”

Roblow sees this as an attempt to explain the basics of inflation and supply chains, but consumers may resent the lecture.

Ken Wong, a professor of marketing at Queen’s University, points to a variety of factors that influence rising food prices, including rising fuel costs, wages and geopolitical factors. It doesn’t matter, because the story is very complicated.” Increased costs from suppliers, including the war in Ukraine, are grappling with rising costs of their own. “I don’t know if consumers really want to hear that. What they want to see is lower prices.”

However, grocers and manufacturers alike warn that price cuts won’t come to fruition anytime soon.

At the World Economic Forum in Davos, Switzerland, last month, Alain Jope, chief executive of consumer goods giant Unilever PLC, said the industry had not yet reached “peak prices.” Last week, Metro Inc. CEO Eric LaFlèche said the company was facing thousands of cost-increasing requests and warned of further price increases in the coming weeks.

And on Wednesday, the Federation of Independent Grocers Canada announced that a PepsiCo-owned potato chip manufacturer Frito Lay has imposed price increases on many of its merchants this week. The snack food conglomerate, which owns brands such as Lay’s, Doritos, Miss Vickie’s and Tostitos, last year standoff With Loblaw Cos. Ltd., it appeared over a previous price increase request.

pepsico PEP-Q The company did not respond to a request for comment on the price increase. It did not answer questions about whether the price increases were imposed on its larger grocery partners in addition to independents.

“The timing of Pepsi Frito-Lay’s price hike is actually just one week before the House of Representatives resumes hearings on price inflation, in that it once again shows that retailers have a lot of price hikes coming their way. is good,” said Gary. Sands, Vice President of Government Relations, Canadian Federation of Independent Grocers, said: “For example, if you are an independent grocery store, [profit] With profit margins of around 2%, cost increases such as double-digit price increases from Frito-Lay simply have to be passed on to consumers. I have no other choice. ”

Canada’s grocery sector faces pressure from an extraordinary pace of rising food prices. inflation for several months. Food prices in December rose 11% year-on-year, slowing slightly from annual growth of 11.4% in November, according to Statistics Canada.

Emphasizing that they are not profiting from inflation, retailers are trying to send the message that they are just part of a complex global supply chain where costs are increasing at every step.

However, it can be difficult to unravel claims about benefits.

For Loblaw, overall profit margins in the retail sector have actually increased. Company executives attribute this to people buying high-margin items such as beauty products, especially at Shoppers Drug his mart stores. (Drugstore sales account for about 28% of Loblaw’s total retail revenue, with grocers making up the rest.) And grocery, they say, has much lower margins. said Jodat Hussain, his Loblaw senior vice president of retail finance. parliamentary committee Examine food price inflation in December.

However, understanding how much or if grocery store profit margins have risen is complicated. Because Loblaw and Metro Inc. do not report separately Profit numbers for grocery stores and pharmacies.

“There’s less transparency and people will think you might be hiding something,” said Ravi Dahl, a Yale School of Business professor who studies customer behavior. “Transparency is one way he changes that belief. ”

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