Food inflation slowing, but price increases are inevitable: Metro CEO

As Metro Inc. nears the end of a three-month cost freeze, some retail prices will start going up next week, CEO Eric La Flèche said.

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Grocery inflation is slowing down to “more normal” levels, but consumers should still expect prices for such items as orange juice to keep climbing in 2024, Metro Inc.’s chief executive says.

Food basket inflation in the quarter ended Dec. 23 was about four per cent, down from 5.5 per cent in the previous period, Montreal-based Metro said Tuesday. The figure trails published increases in the consumer price index for Quebec and Ontario.

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“I think we’re going in the right direction” with respect to grocery prices, Metro CEO Eric La Flèche said during an online press conference. “The food inflation rate is nearing the general inflation rate.”

Prices for food purchased from stores jumped 7.8 per cent in Canada in 2023, down from 9.8 per cent a year earlier, Statistics Canada reported this month. Overall consumer inflation slowed to 3.9 per cent.

Many shoppers have turned to so-called private-label products to save money, La Flèche said. Private-label brands have reached record penetration levels and are growing twice as fast as overall food sales, he added.

“We’re very conscious of the fact that consumers are finding these cost-of-living increases difficult,” La Flèche said. “We understand very well the search for value. Inflation is still around, but it’s coming down.”

La Flèche spoke after Metro reported a 1.1 per cent drop in 2024 first-quarter net income to $228.5 million. Revenue rose 6.5 per cent to $4.97 billion. Sales in the company’s 2023 fiscal year, which ended Sept. 30, topped $20 billion for the first time as profit exceeded $1 billion.

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Metro is nearing the end of a three-month “blackout period” during which it granted no supplier requests for price increases. As a result, some retail prices will start going up next week, La Flèche said.

Quebec’s biggest supermarket and pharmacy chain operator has received about 60 per cent fewer price-hike requests than in the year-earlier period, the CEO said. A year ago, he put the number of supplier demands for price increases of 10 per cent or more at 27,000.

“Our teams are negotiating actively with our suppliers, and the number of requests is down pretty substantially from the highs of last year and the year before,” La Flèche said.

Requests for price adjustments of 10 per cent or more are less common these days, he added.

“The size of the demands is coming back to more normal levels,” he said. “We’re looking at mid-single-digit or thereabout increases for some products starting in February, over time. We’re negotiating as best we can and delaying as much as we can some of the increases requested by our suppliers. Unfortunately, there will be some prices starting to go up.”

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Because of bad crops, shoppers should expect orange juice prices to go up “substantially,” La Flèche said. “We’re clearly going to be selling a lot less orange juice with those prices, and we will wait for a price drop. At some point it’s going to come back.”

As customers increasingly hunt for savings, sales at the company’s Super C discount stores are outpacing those of traditional Metro supermarkets. Metro isn’t providing specifics on Super C’s growth rate, however.

The company operated 103 Super C stores in Quebec as of December, up from 99 a year earlier, and 206 Metro, Metro Plus and Adonis locations, down from 207. Three new Super C stores — in Buckingham, Coaticook and St-Apollinaire — opened in Quebec during the last quarter of 2023.

“We don’t have a massive conversion program from Metro to Super C, but there could be one, two or three conversions a year,” La Flèche said.

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With large U.S. retailers such as Amazon, Costco and Walmart all selling food in Canada, La Flèche dismissed recent criticism that competition in the supermarket industry is lagging. Federal Industry Minister François-Philippe Champagne, who has been pushing Canadian supermarket chains to lower prices, said Tuesday he’s continuing to court foreign grocers in the hope they’ll open stores here.

“I think we operate in a very competitive industry,” La Flèche told reporters. “When I hear about international competition, I try to remind everyone that there are three large, multinational, global, international players competing in this market.

“To me, any thought that our industry is not competitive is not reflective of the market that we’re in.”

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