Many a disgruntled Canadian continue to shun bacon, turned off by shrinking packages and higher prices as producers like Maple Leaf Foods grapple with a record surge in hog costs this year by passing the increases on to supermarkets and shoppers.
But at last, wholesale hog prices are coming down from their summer peaks, holding out hope the double-digit spikes in bacon and other pork prices at the checkout are over, and we could see retail prices follow wholesale down.
Or not. “I wouldn’t bet on it,” Kevin Grier, a Canadian livestock analyst said Thursday. “There’s just no incentive yet.”
Indeed, producers like Maple Leaf Foods as well as food retailers have seen profit margins on red meat hammered this year as supply costs have risen sharply.
As supply costs fall, some lost ground can be recovered by maintaining current retail prices, Grier said.
Lower bacon sales
A 500-gram pack of bacon is now running more than 23 per cent higher in price at the grocery store, according to the latest inflation data from Statistics Canada released in mid-October.
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Prepared food producers like Maple Leaf have also scaled back package sizes to 375g to curb sticker shock. But it’s all taken a toll on shoppers’ heretofore voracious appetite for the crispy pork cut.
Michael McCain, the chief of Maple Leaf Foods, said Thursday sales are still depressed owing to price hikes in the early summer that led some shoppers to avoid a purchase. Sale are down by about 6 per cent compared to year-ago levels, he said.
“It’s probably steeper than what we’d like but certainly the price increases that we’ve experienced are bigger than we’ve ever executed in our history,” the Maple Leaf CEO said on a conference call.
“Increases in retail bacon prices hurt demand,” analysts at Scotiabank said in a Sept. 23 note to clients.
McCain didn’t say whether pricing will be looked now in order to stir lost demand. But he did suggest he expects some consumers to remain wary of buying bacon for the next several months.
X factor
The X factor is competition among grocery chains, who are engaged in a competitive scrap with new and growing threats like Target and Walmart.
If Canada’s grocery wars intensify, protein prices could be pressured to come down, Grier suggested, including on bacon.
“If these guys keep going at each other, we could see prices decline, even though logic would say you probably shouldn’t be reducing prices because you’re just starting to get back some margin.”
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