Fierce competition amongst Canada’s largest grocery retailers will likely keep Loblaw Co. from dramatically raising its prices, even though higher raw materials costs are squeezing its profits, the company’s president said yesterday.
“There’s got to be a pretty big justification for price increases in the condition that this market is in,” Allan Leighton said on a quarterly earnings conference call with analysts.
“Economic conditions are a headwind, inflation is unpredictable at worst ... The market is tough and promotionally intense and we still hover on the darker side of the moon.”
Retailers are feeling pressure from rising commodity prices on everything from wheat and flour to coffee and cotton. A UN report released yesterday found the prices of wheat and other staples have risen “alarmingly” over the past year, and it has reinforced the risks of rising food costs.
But there has been “very little” movement in grocery prices, Leighton said.
In fact, grocers have recently been lamenting a decline in prices on key items as they compete to lure in more recession-weary customers who are focused on value and cost, rather than brand loyalty.
“Consumer behaviour has changed, and it changed when the recession took place, and it’s going to be like that for a period of time,” Leighton said.