Financial Post | Business

Friday, April 8th, 2016

Sobeys price cuts on 8,500 items in Quebec
Ajay Tiwary
could trigger grocery war with Loblaw, Metro
April 5th, 2016
The Current Economic Events E-Portfolio: Entry #2
Summary:
This article revolves around Sobeys decision to slash prices on 8500 items ranging from 5-7
percent in Quebec, with respect to its possible responses from competitors. The announced price
cuts may trigger a possible price war with retailers Loblaws and Metro. With this, Quebec
grocery stores are expected to lower everyday costs or promote discounts for consumers in the
future. Furthermore, certain economists predict Sobeys is moving towards a disequilibrium
whereby a few favorable discounts from suppliers are needed to balance price cuts.
Economic Concepts:
A critical concept that was mentioned in this article and exist in all markets is demand. As taught
in class, demand is the indirect relationship between price and the quantities of a product
consumers are willing to purchase. Moreover, upon the assumption of consumers engaging in
rational behavior, it can be predicted that average citizens observe store prices and lean towards
better quality and price. As a result of, Sobeys decreasing their prices the consumer demand for
their products will increase. For example, when an individual shops at Pizza Hut and realizes
Pizza Pizza lowers their prices, according to rational behavior and law of demand, consumers
will take their business to Pizza Pizza respectively.
Connections & Implications:
This news story covers multiple concepts and aspects in economics, but I began to think about
the Sobeys producers and how they are effected through this decision. With this, producers who
provide Sobeys with its products, will begin to decrease transaction sizes not eliminate them.
Ultimately, Sobeys will have producers whom are not keen on selling products for a lower price.
This is because, a decrease in price correlates directly with a decrease in profit for suppliers; thus
eliminating any incentive to increase quantities supplied. Primarily due to the law of supply,
which depicts a direct relationship between price and quantity supplied. However, a change in
price only affects quantity supplied, with the overall supply remaining the same.
My View:
Overall, I agree with the arguments and its reasoning that this article provided. When direct
competitor in a market see a price decrease, most if not all companies will respond with the same
action. Thus, maintaining their customers and or gaining more demand for their products. A
possible solution for Sobeys supplier issues, will be to offer fewer promotional discounts and
create discounts for its suppliers. With this, I predict that companies will retaliate in the same
method through decreasing the pricing and rather attempt to increase promotions for income.

Edited by:
Thushjan Balakumar

Financial Post | Business

Sobeys price cuts on 8,500 items in Quebec
could trigger grocery war with Loblaw, Metro
April 5th, 2016

Friday, April 8th, 2016

Ajay Tiwary

Sobeys price cuts on 8,500 items

in Quebec could trigger grocery
war with Loblaw, Metro
HOLLIE SHAW | April 5, 2016 5:07 PM ET
More from Hollie Shaw | @HollieKShaw

Brent Lewin/BloombergSobeys' decision to drop prices by five per cent to seven per cent at its IGA stores in the
province by Thursday will require a response from rivals Loblaw and Metro Inc., said analyst Keith Howlett at
Desjardins Securities.

http://business.financialpost.com/news/retail-marketing/sobeys-price-cuts-on8500-items-in-quebec-could-trigger-grocery-war

TORONTO Sobeys decision to slash prices on 8,500 grocery items this week in
Quebec stands to trigger a price war with other grocery retailers.
The retailers decision to drop prices by five per cent to seven per cent at its IGA stores
in the province by Thursday will require a response from rivals Loblaw and Metro Inc.,
said analyst Keith Howlett at Desjardins Securities.
Both will have to decide whether or not to alter their weighting of everyday regular
shelf prices versus promotional discounts in the province.
The news comes a month after Sobeys announced it was cutting prices on meat and
produce at its Safeway stores in Western Canada.
Edited by:
Thushjan Balakumar

Financial Post | Business

Friday, April 8th, 2016
Sobeys price cuts on 8,500 items in Quebec
Ajay Tiwary
could trigger grocery war with Loblaw, Metro
April 5th, 2016
Unlike its main rivals, Sobeys does not have a discount banner in Quebec and executives
likely do not want the market share of discounters in Quebec (38 per cent) to increase to
the level of success they have in Ontario, where they have a 51 per cent market share,
said Howlett.
He views Sobeys moves as a negative sign that industry pricing could be moving
toward a period of disequilibrium.
To balance out the price cuts, Sobeys will offer fewer promotional discounts and has
negotiated more favourable discounts from its suppliers.

Edited by:
Thushjan Balakumar