Expect a squeeze on orange juice costs as supplier price freeze ends: Metro CEO

Click to play video: 'Food prices expected to rise in 2024 as grocers in Quebec looking to regain public trust'
Food prices expected to rise in 2024 as grocers in Quebec looking to regain public trust
Food prices are expected to rise in 2024 but experts say inflation is slowing down and many grocery stores will be looking to regain customer trust, which could mean better savings for the average Montrealer. Global's Elizabeth Zogalis reports – Dec 31, 2023

Canadians might be feeling the squeeze on items like orange juice at the grocery store starting next week, according to a warning from the CEO of one of Canada’s biggest grocers.

Eric La Flèche, chief executive at Montreal-based Metro, told analysts on the company’s first-quarter earnings call Tuesday that the company is expecting it will have to pass on some higher costs from suppliers as an industry-wide blackout period for price hikes comes to an end this week.

“The good news is the number of increases is going back to more normal levels compared to what we saw in the last few years,” he said.

Amid an overall cooling in food inflation over the past year, La Flèche said Metro is seeing a “substantial” decline in the number of cost increases it faces from suppliers, but the size of those requests varies.

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The average price hike request is in the “mid-single digits,” he said, with some increases below that and some “commodity-driven” products facing steeper pressures.

Speaking at a virtual press conference earlier in the day, La Flèche said the Metro team is negotiating hard with suppliers and delaying price increases as much as possible.

One product that Metro shoppers will notice go up in price is orange juice, he said, because of problems with orange crops.

Grocery inflation in Canada has been moderating in recent months, but is still elevated at 4.7 per cent in December. Metro said Tuesday that its food basket inflation rate was 4.0 per cent, down from 5.5 per cent in the previous quarter.

La Flèche told analysts that he was encouraged about the trends for food inflation, and while price pressures are still elevated, they’re “gradually” coming back down to more “normal” levels of two to three per cent annually.

Uber Eats, Instacart drive online sales

A surge in customers ordering groceries over Uber Eats and Instacart meanwhile helped push sales higher at Metro Inc. in the company’s first fiscal quarter of the year.

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The Montreal-based grocer said Tuesday that it saw 105 per cent year-over-year jump in online food sales for the three-months ending Dec. 23.

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A spokesperson for Metro told Global News in an emailed statement that its partnerships, specifically with the companies behind Uber Eats and Instacart, helped the grocer to “significantly increase our online sales in a rather stable market.”

Global News asked how much of its quarterly sales were tied to the online channels, but was told that the company does not disclose those breakdowns.

Metro’s sales for the 12-week period totalled $4.97 billion, up 6.5 per cent from $4.67 billion in the year-earlier quarter that ended on Dec. 17, 2022.

Food same-store sales were up 6.1 per cent, helped in part by the timing of the end of the quarter relative to Christmas. Adjusting for the Christmas week shift, Metro says food same-store sales were up 3.4 per cent. Pharmacy same-store sales were up 3.9 per cent.

Metro meanwhile reported a first-quarter profit of $228.5 million and said it will pay a quarterly dividend of 33.5 cents per share, up from 30.25 cents per share.

The increased payment to shareholders came as Metro says its profit amounted to 99 cents per diluted share for the quarter ended Dec. 23 compared with a profit of $231.1 million or 97 cents per diluted share a year earlier when the company had more shares outstanding.

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“We recorded solid results in the first quarter as our teams continued to deliver good value to customers in all our food and pharmacy banners,” La Flèche said in a statement.

“We are confident that our sustained investments in the modernization of our supply chain and our retail networks will continue to create long term value for our shareholders.”

On an adjusted basis, Metro says it earned $1.02 per diluted share, up from an adjusted profit of $1 per share a year earlier.

It is outlook, Metro continued to say it expected significant headwinds in 2024 with the launch of its automated distribution centre in Terrebonne, Que., and the launch of the final phase of its automated fresh produce plant in Toronto next spring.

It says it expects some temporary duplication of costs and learning curve inefficiencies, as well as higher depreciation and lower capitalized interest.

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The company maintained its guidance for operating income before depreciation and amortization to grow by less than two per cent and adjusted net earnings per share to be flat to down 10 cents in its 2024 financial year compared with 2023.

Champagne seeks more grocery competition

Industry Minister François-Philippe Champagne is once again insisting that he is reaching out to international grocers in the hopes they will open up shop in Canada.

The minister says he spoke to one foreign grocer Tuesday morning as part of his efforts to court new players to join the Canadian grocery sector  — but he’s not naming any names.

Champagne met with Canadian grocers in the fall about food inflation and demanded they create plans to stabilize grocery prices or face consequences including potential tax measures.

He recently expressed disappointment that the grocers have not been more transparent about their plans, but has stayed mum on whether the federal government plans to punish them for it.

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La Flèche has said Metro did not alter its prices in response to the meeting with Champagne.

Champagne’s letter to Boswell suggested a follow-up study on the grocery sector, now that the bureau has new powers to subpoena companies for information.

“I was disappointed to learn that the bureau’s study did not benefit from the full co-operation of large grocers,” the letter said.

“I also look forward to discussing your assessment on the potential scope and feasibility of a follow-up grocery market study.”

Metro fully co-operated with the previous study, La Flèche insisted Tuesday.

Champagne sent a letter to the commissioner of the Competition Bureau on Monday asking to discuss a follow-up study on the grocery sector, now that the bureau has new powers to subpoena companies for information.

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The Competition Bureau published the findings of its previous study in June, saying that grocers’ co-operation varied and was not fulsome.

— with files from The Canadian Press

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