Loblaw says it’s not to blame for higher food prices as grocer faces backlash online

Click to play video: 'Loblaw’s No Name price freeze ends'
Loblaw’s No Name price freeze ends
The three-month 'price freeze' on Loblaw's No Name products came to an end on Tuesday – Jan 31, 2023

One of Canada’s biggest grocers says it’s not to blame for food inflation after a series of social media posts drew the ire of some consumers.

Loblaw Companies Ltd.’s corporate Twitter account began replying to users earlier this week who tweeted about the end of the grocer’s price freeze on No Name products.

While the company claimed its price freeze, instituted last October, was meant to help Canadians deal with decades-high levels of inflation, some Twitter users accused the grocer of raising prices to push its profit margins higher.

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Among the replies, Loblaw acknowledged that it had become the “face of food inflation” and said that “while it’s easy to blame grocers for higher grocery prices,” it made $4 of profit per $100 spent in its stores.

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Few Twitter users seemed convinced of the grocer’s online messaging campaign, with many levelling further accusations of corporate greed in response to Loblaw’s tweets.

Global News asked Loblaw to break down its profit margins, and was told by a spokesperson that it derives this figure by dividing its net earnings by its total revenue in the same period.

For the third quarter of the year, when Loblaw earned a profit of $556 million on revenues of $17.4 billion, that worked out to margins of roughly 3.2 cents per dollar.

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Loblaw also directed Global News to comments made by chief financial officer Richard Dufresne during the company’s third-quarter earnings call in November, where he pointed to global factors raising the cost of food from suppliers as driving up prices.

“Suppliers determine the costs, and we determine the retail prices,” he said.

Dufresne said the company received “unprecedented cost increases” from suppliers this past year and continues to face pressures. He claimed the company has “vigorously” pushed back when supplier costs “do not make sense.”

He said flat gross margins on food sales for much of the past year show that Loblaw is not raising prices out of step with price pressures.

“This gives us the confidence to say categorically that retail prices are not growing faster than costs, and the company is not taking advantage of inflation to drive profit,” he said.

Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, spoke about the backlash Loblaw was facing Thursday morning on The Start 680 CJOB in Winnipeg.

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He questioned Loblaw’s PR tactics in disputing Canadians’ experiences at the grocery store directly on Twitter.

“Loblaw is its worst messenger. Going on the defensive while people are suffering might not be the best thing to do right now,” Charlebois said in the interview.

“I don’t think people actually care. They just see food prices going up and they’re wondering what’s going on.”

While he said he understands the frustration consumers have in paying higher grocery prices, he said Loblaw’s earnings reports show that while sales in food were 6.9 per cent in the third quarter, the company saw bigger growth from its pharmaceuticals and cosmetics segments.

Click to play video: 'High food prices causing rise in grocery store theft'
High food prices causing rise in grocery store theft

“What that says to me is, Loblaw’s not making more money selling food. They’re making money selling lipstick and drugs,” Charlebois said.

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Loblaw’s Q3 earnings report also pointed to more business among discount brands such as No Frills and Real Canadian Superstore and private labels including No Name as driving higher sales in the quarter.

A September report from the Agri-Food Analytics Lab found that across Canada’s big three grocers, there was little evidence of so-called “greedflation,” as profit margins held steady even as food inflation soared in the first half of 2022.

A follow-up report from the lab in November found that, in the first half of 2022, Loblaw, Metro and Empire Co. all exceeded their average profits from the previous five years. But the authors said then that a lack of transparency in grocers’ financial data makes it difficult to say where exactly higher profit margins are coming from.

Charlesbois also said Thursday that there’s reason for further investigation into the food supply chain, however, with plenty of unknowns on the processing side. Prices on eggs are down lately at the farm level, for example, but retail prices are rising, he noted.

“Just to point fingers at grocers, I think is just simplifying what seems to me to be a very complicated issue,” he said.

Click to play video: '2023 food price outlook'
2023 food price outlook

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