Some fear they’ll be stuck with the bill

Small grocers see risk in Ottawa’s push to rein in prices

Independent grocers are worried they’re being left behind by the federal government’s campaign to combat inflation, now that Ottawa has pushed Canada’s biggest supermarket chains into slashing prices.

This fall, Prime Minister Justin Trudeau threatened the top five grocery retailers with new taxes if they didn’t stabilize prices. In response, major chains including Loblaw Cos. Ltd. and Empire Co. Ltd. have announced discounts and price freezes on thousands of products. But lobbyists for small business say the government’s campaign could end up hurting familyrun grocery shops and neighbourhood stores, who don’t have the same leverage over their suppliers to be able to demand similar price cuts or freezes.

Rick Rabba, president of the Toronto-area grocer Rabba Fine Foods, said he’s concerned that as the big chains swat away price increases or press their suppliers for discounts, those same suppliers will turn to independents looking to raise prices and offset costs.

“We can’t have the same power relationship with the suppliers,” said Rabba, whose company has 36 stores in Greater Toronto. “At the end of the day, we are forced to take price increases.”

Rabba’s only real choice, he said, is to accept a smaller profit margin to stay competitive with the chains’ prices. “My only other option is to lose a customer,” he said. “You can’t be priced outside of the market.”

But taking less margin is a dangerous game that could end up sinking an independent, according to Brad Fletcher, president of the Village Grocer in Markham.

“We work on very thin margins as it is,” he said. “We literally can’t afford to be having price increases on us without taking price increases to the customers.”

Industry Minister François-Philippe Champagne, who has led the government’s work on food prices, met with the executives from top manufacturers and grocery chains this fall and pushed them to come up with plans to stabilize prices.

In those meetings, Champagne was “explicit that any actions taken by large retailers, producers and manufactures cannot, and should not, negatively affect independent players,” spokesperson Audrey Champoux said in an email.

Last week, Empire announced it is freezing prices on 20,000 packaged products in the centre aisles of its stores from November until early next year. The move is only an expansion of an existing tradition in the Canadian grocery business, where most chains decline price increases to simplify operations as sales surge over the holidays.

Empire — a network of more than 1,600 stores that includes Sobeys, Farm Boy, Longo’s, Safeway, FreshCo, Foodland and IGA — said its new price freeze is on 100 per cent of its packaged products, compared with roughly 90 per cent during traditional holiday price freeze. Empire’s move meant cancelling 1,700 price increases that had been scheduled to go into effect between now and January.

The announcement came shortly after Loblaw announced details of its own plans to cut prices in stores, including a series of discounts on 35 staples including eggs, milk, butter, produce, pasta and meat. In an earnings update earlier this month, Loblaw said discounts had contributed to slightly lower margins in the third quarter.

The company reported a roughly 12 per cent increase in profits during the quarter.

Michael Graydon, one of the main lobbyists for food manufacturers in Canada, said he expects suppliers will try to be fair to independents, but if small players aren’t in a strong negotiating position they could end up facing price increases in the new year.

Graydon said chains have been rejecting price increases from suppliers at a “much broader” level after the government’s meetings with food executives this fall.

“Whenever government gets involved in these sort of situations, I think you end up creating more problems then you fix,” said Graydon, CEO of Food, Health and Consumer Products of Canada. “They should have just left it alone and let the industry deal with it.”

Gary Sands, senior vice-president with the Canadian Federation of Independent Grocers, said his organization is monitoring the situation and will push the government to intervene if small players end up at a disadvantage.

“We don’t want to see price stability for some Canadians and not for others, depending on where they shop,” he said.