Frito-Lay Stops Shipping Chips To Loblaws Stores in Pricing Dispute - CBC News

2/22/22, 6:40 PM Frito-Lay stops shipping chips to Loblaws stores in pricing dispute | CBC News
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Frito-Lay stops shipping chips to Loblaws stores in

pricing dispute
Loblaw spokesperson says grocer is 'laser focused' on minimizing retail price

increases
Brett Bundale · The Canadian Press ·

Posted: Feb 22, 2022 1:41 PM ET | Last Updated: 2 hours ago
https://www.cbc.ca/news/business/frito-lay-chips-loblaw-1.6360274 1/12
Lays chips are seen on a grocery store shelf. Frito-Lay, the manufacturer of chip brands like Doritos, Cheetos and
Lays says it will temporarily stop shipping its products to Loblaw due to a dispute on pricing. (Joe Raedle/Getty
Images)
comments
One of Canada's biggest food manufacturers has halted shipments to the

country's largest grocer in an extreme example of how inflation is impacting the
food industry and driving a wedge between some retailers and suppliers.
At issue is a dispute over pricing between Frito-Lay Canada and Loblaw

Companies Ltd. Frito-Lay, the maker of brands like Cheetos, Doritos, Lays,
Ruffles and Sunchips, says it's trying to recoup higher costs.
The situation has left the chip and snack food aisle of many Loblaw stores less
full than usual, or stocked with house brands, such as President's Choice or No
Name.
Frito-Lay spokesperson Sheri Morgan confirmed there is a "temporary

disruption" with one customer.
"Our business has faced unprecedented pressures from rising costs of items
including ingredients, packaging and transportation," she said in an email.
WATCH | How high prices are changing grocery shopping habits in Canada:
Poll suggests Canadians changing shopping habits because of rising food

prices
9 hours ago | 6:06
A poll by Angus Reid suggests Canadians are eating out less and changing what they buy at the grocery store
in response to higher food prices. 6:06
"To help offset these pressures on our Canadian operations … we have made
adjustments to our prices that are consistent across the marketplace."
Loblaw spokesperson Catherine Thomas said the grocer is "laser focused" on

minimizing retail price increases.
"When suppliers request higher costs, we do a detailed review to ensure they

are appropriate," she said in an email. "This can lead to difficult conversations
and, in extreme cases, suppliers don't ship us products."
The rift between Frito-Lay and Loblaw exposes deepening tensions in Canada's
food industry that many experts say could worsen as supply chain challenges
and inflation continue.
We'll all be paying a lot more for food next year, says Canada's Food
Price Report
Some argue that grocery retailers are simply trying to keep sticker prices low for
consumers and stop suppliers from using inflation to justify unreasonable price
hikes.
Others suggest grocers are using their market strength to bully suppliers and
pad their bottom lines.
"It's challenging that it has devolved into such a confrontational relationship,"

said Michael Graydon, CEO of Food, Health & Consumer Products of Canada,
which represents Frito-Lay.
"The level of frustration is growing."
WATCH | What's behind rising food prices in Canada?:
Following rising food costs from the farm to the store
21 hours ago | 2:37
Increasing expenses along the supply chain and even the weather are some factors behind rising food costs
Canadians are seeing at the grocery store. 2:37
Retailers, manufacturers at odds over pricing

The increase in wholesale prices some suppliers are seeking from retailers will
help mitigate ongoing inflation — but won't completely offset higher costs,
Graydon said.
The final price consumers pay in stores is set by grocery retailers — not food
manufacturers, he said.
However, retail industry advocates say food manufacturers are, in some cases,
seeking price hikes that outpace inflation.
Retail Council of Canada spokesperson Michelle Wasylyshen said the industry

group, which represents Loblaw, has been contacted by both big and small
grocery retailers about a flood of new price increases in January from vendors.
"This follows an already alarming number of increases in the preceding quarter,"

she said. "In many cases the increases are unprecedented and far exceed typical
food inflation levels."
ANALYSIS Inflation biting into your grocery bill? Follow the food from
farm to fork to see why
Statistics Canada said last week that food prices increased 6.5 per cent in
January, the biggest year-over-year jump in grocery bills in more than a decade
and higher than the overall annual inflation rate of 5.1 per cent.
It's unclear how the loss of sales at Loblaw, which includes conventional chains
such as Zehrs, Atlantic Superstore and Provigo and discount stores No Frills and
Maxi, could impact Frito-Lay.
The company's products are made in Canada, largely using Canadian potatoes

grown by local farmers. Experts say a long-term drop in sales could ultimately
hurt local producers.
WATCH | Inflation hits highest level in Canada since 1991:
Canada's inflation rate hits 5.1% — highest since 1991
6 days ago | 2:44
Canada's inflation rate has surpassed five per cent, year over year, for the first time since September 1991.
The 5.1 per cent figure for January is even higher than the 4.8 per cent that economists were expecting. 2:44
Brand loyalty a factor
But experts say brand loyalty will work in the chipmaker's favour.
"Frito-Lay is betting that the loyalty consumers have for their brands gives them
leverage to make this move," said Joel Gregoire, associate director of Canada
Food and Drink with market research company Mintel.
Yet pulling supply from Loblaw — which holds the largest share of grocery sales
in Canada — is also risky for the food manufacturer, he said.
"Not filling orders to Canada's largest grocer will no doubt have a substantial

impact on Frito-Lay's near-term sales," Gregoire said. More broadly, he said the
dispute appears emblematic of a broader battle for pricing leverage
between grocers and manufacturers.
"This tension is not new, but this move by Frito-Lay has high stakes," he said.
"This is a battle to maintain margins as costs rise."
Sylvain Charlebois, a professor at Dalhousie University and lead author of the Canada Food Price Report, says
hostility between manufacturers and retailers could escalate in the coming months. (Radio-Canada file photo)
Indeed, food expert Sylvain Charlebois said the friction between Frito-Lay and
Loblaw is the "tip of the iceberg."
The hostility between retailers and manufacturers could worsen in the coming
months, he said.
"This is not just about chips," said Charlebois, Dalhousie University professor of

food distribution and policy.
"We're going to be seeing this in other food categories like bakery and dairy
as well."
Your weekly look at what’s happening in the worlds of economics, business and finance.
Senior business correspondent Peter Armstrong untangles what it means for you, in your
inbox Monday mornings.
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2/22/22, 6:40 PM Frito-Lay stops shipping chips to Loblaws stores in pricing dispute | CBC News

Frito-Lay stops shipping chips to Loblaws stores in

Loblaw spokesperson says grocer is 'laser focused' on minimizing retail price

Brett Bundale · The Canadian Press ·

One of Canada's biggest food manufacturers has halted shipments to the

At issue is a dispute over pricing between Frito-Lay Canada and Loblaw

Frito-Lay spokesperson Sheri Morgan confirmed there is a "temporary

Poll suggests Canadians changing shopping habits because of rising food

9 hours ago | 6:06

Loblaw spokesperson Catherine Thomas said the grocer is "laser focused" on

"When suppliers request higher costs, we do a detailed review to ensure they

"It's challenging that it has devolved into such a confrontational relationship,"

"The level of frustration is growing."

WATCH | What's behind rising food prices in Canada?:

Following rising food costs from the farm to the store

21 hours ago | 2:37

Retailers, manufacturers at odds over pricing

Retail Council of Canada spokesperson Michelle Wasylyshen said the industry

"This follows an already alarming number of increases in the preceding quarter,"

The company's products are made in Canada, largely using Canadian potatoes

WATCH | Inflation hits highest level in Canada since 1991:

Canada's inflation rate hits 5.1% — highest since 1991

6 days ago | 2:44

Brand loyalty a factor

But experts say brand loyalty will work in the chipmaker's favour.

"Not filling orders to Canada's largest grocer will no doubt have a substantial

"This is not just about chips," said Charlebois, Dalhousie University professor of

Enter your email address Subscribe

Popular Now in News

2 Frito-Lay stops shipping chips to Loblaws stores in pricing dispute

Trudeau announces sanctions on Russia as Moscow ramps up pressure on Ukraine

5 Ottawa convoy protest organizer Tamara Lich denied bail

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©2022 CBC/Radio-Canada. All rights reserved.

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