Grocery price freeze: marketing stunt or opportune gesture?

In interview at Noon infoon the airwaves of ICI Première – before Metro’s announcement, which occurred later in the afternoon –, Johanne Labrecque, specialist in food marketing and retail trade at HEC Montréal, believes that it is normal that Loblaw , Canada’s largest grocery retailer, is taking action with a price freeze on No Name branded products until the end of January 2023.

Grocers will always adapt to economic changes to ensure they remain competitiveshe mentions. In the inflationary environment, consumer price sensitivity remains prevalent.

Ms. Labrecque specifies, however, that the price freeze is more appropriate for No Name brand products, whose price is lower, than for those of the President’s Choice brand, which also belongs to Loblaw.

This is explained, according to her, by the fact that the clienteles targeted by the two brands are different, the consumers who choose the Sans nom brand generally having lower incomes.

So, by guaranteeing price stability, we try to create loyalty in relation to the brand.says the professor again.

This opinion is shared by Sylvain Charlebois, professor at the School of Public Administration at Dalhousie University, who certainly sees a marketing stunt for Loblaw in this announcement, but also the logical conclusion of the fact that the company has better control over the different stages of the supply chain [de la marque Sans nom]which is not necessarily the case for other brands.

An impact on competition

The two specialists also agree that the company’s gesture will put pressure on other grocers, in Quebec and Canada, to freeze certain food prices.

This will depend, says Ms. Labrecque, on the negotiating capacity of retailers, but also of distributors. As proof, she recalls, this recent showdown between Loblaw and Frito-Lay, which owns several well-known brands of potato chips and other snack foods.

As part of this war of nerves, the two parties were unable to agree on the price of certain products. As a consequence, the absence of said products on the shelves for several weeks.

The distributor must also negotiate with suppliers who face their own increases, recalls Ms. Labrecque.

Normal practice, argues Metro

Following Loblaw’s announcement, grocer Metro said via email that prices for all private label and national brand groceries (except conveniences like sugar and coffee) will be frozen between November 1 and February 5.

The company notes, however, that this isan industry practice. This claim was denied by Loblaw.

Metro also indicates that it is possible that certain price increases received before October 31 appear on the tabletbut that there will be no price increase thereafter.

A gesture that comes too late?

Where the two experts disagree is on the relevance of announcing the freeze now, when food inflation has exceeded general inflation for 13 monthsmentions Mr. Charlebois.

According to the latter, Loblaw should have acted at least a month ago.

On social networks, the banners are massacred, are accused of scamhe says, before recalling that food inflation flirts with 10%with the most significant increases recorded in several basic products, such as bakery, meat and vegetables.

Ms. Labrecque specifies that negotiations with distributors are generally carried out in the medium term and that grocers are constantly adapting to price changes, whether in energy costs, wages or the transport of goods. , among others.

More than 1500 items targeted

In its announcement, Loblaw acknowledges that food inflation is causing grocery bills to skyrocket.

The No Name private label includes over 1,500 grocery items.

In a letter shared with members of the company’s PC Optimum loyalty program, Loblaw President Galen G. Weston says the price of an average basket of groceries has risen about 10% this year and that the price of certain items, such as apples, soups and fries, rose even more.

Mr. Weston says much of the increases are beyond the company’s control.

Galen G. Weston adds that while the grocery chain opposes unfair price increases, most are reasonable and stem from rising cost base for suppliers.

That’s why Loblaw decided to focus on what it can control and lock in the prices of No Name products. In addition, she promises other offers, in the coming weeks, to alleviate escalating food costs.

Federal investigation requested

In Ottawa, all federal MPs voted in favor of holding an inquiry into the profits of grocery chains.

The motion, introduced by the New Democratic Party (NDP), also called for tougher penalties for price-fixing and tougher competition laws to prohibit companies from abusing their dominant position in a market to exploit buyers or agricultural producers.

Still under pressure from the NDP, the Standing Committee on Agriculture and Agri-Food decided two weeks ago that it would soon be looking at inflation in the food supply chain and the rising cost of groceries.

Other countries have already done it

In August, French supermarket chain Carrefour announced plans to freeze the prices of around 100 of its private label products until November 30.

In June, Lidl’s US arm launched a summer price-cutting campaign to ease the inflationary burden on customers.

The company said it had lowered prices on more than 100 items at its stores across nine East Coast states through August.

The European context is also very different from that which prevails in North America, according to Johanne Labrecque, with more marked inflation and an energy crisis fueled by the war in Ukraine.