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    • Canadian food suppliers signal more price hikes coming to grocery stores this fall

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    Canadian food suppliers are once again issuing notices to grocery retailers informing them of upcoming price hikes.

    The letters signal more price increases will hit grocery stores this fall in a year that has already seen nearly double digit increases in food costs.

    In some cases, the higher prices are due to the Canadian Dairy Commission's approval of a second milk price increase this year. Farm gate milk prices are set to go up about two cents per litre, or 2.5 per cent, on Sept. 1.

    Lactalis Canada, for example, said in a letter to customers it must implement an average national market increase of five per cent this September, a rate it said that takes into account the CDC pricing increase as well as 鈥渟ignificant inflationary costs鈥 the company is facing.

    Arla Foods Canada issued a similar notice, saying price increases on its products coming this September reflect higher milk ingredient costs and the 鈥渋nflationary impacts across freight and packaging.鈥

    Saputo Dairy Products Canada also said it would implement price increases in the five per cent range, depending on the category.

    鈥淧roducers have faced increased production costs as well as rising feed, energy and fertilizer costs, which have had a significant impact on this year's farm gate milk price adjustment,鈥 Saputo said in a letter to its retail customers.

    鈥淚n addition to these regulated increases, there have been unprecedented and sustained inflationary pressures affecting manufacturing, energy, labour and distribution costs throughout the entirety of the supply chain.鈥

    The price increases shared with grocers underscore how regulated dairy price hikes are compounded by additional price increases throughout the supply chain, said Gary Sands, senior vice-president of public policy with the Canadian Federation of Independent Grocers.

    鈥淭he timing of the increases almost seems like they are piggybacking on top of the regulated increases,鈥 he said. 鈥淭he net effect is to further exacerbate the issue and concerns around affordability.鈥

    Those concerns are especially acute in rural and remote communities where transportation and fuel surcharges are higher, Sands said.

    鈥淭he increase in price for these essential products is of particular concern in those communities,鈥 he added.

    The price of food purchased at stores rose 9.7 per cent in May compared with a year ago as the cost of nearly everything in the grocery cart climbed higher, Statistics Canada said last month.

    Sylvain Charlebois, Dalhousie University professor of food distribution and policy, said the pace of food price increases could rise to 10 per cent before starting to slow.

    鈥淲e're expecting food inflation to peak between now and the end of September,鈥 he said. 鈥淚t may actually go north of 10 per cent before things start to calm down.鈥

    The U.S. Bureau of Labor Statistics said Wednesday the inflation rate for food consumed at home in that country hit 10.4 per cent in June, the largest 12-month increase since 1981.

    Charlebois said Statistics Canada is expected to post similar food inflation figures when it reports the consumer price index for June next week.

    Surging prices will put pressure on grocers to promote their private label options, also referred to as a retailer's house brand, he said.

    鈥淐onsumers are trading sideways or trading down on anything and everything right now and switching to discount stores,鈥 Charlebois said. 鈥淭hey're really more sensitive about the cost of living.鈥

    Meanwhile, the letters sent by suppliers to retailers outlining the reasoning behind the cost increases is part of an effort to not be accused of 鈥済reedflation,鈥 he said.

    鈥淭he last thing processors want is to become a scapegoat and to be blamed for higher food inflation,鈥 Charlebois said.

    鈥淚nflation is impacting every single Canadian out there but it's also impacting the political economy of food and how the food industry is being perceived.鈥

    Lactalis said in its letter to customers that it is 鈥渧ery cognizant of the impact of inflation on consumers.鈥

    鈥淎s we are all aware, this cycle of inflation is in large part being driven by the latest phase in the evolution of the pandemic and by the global geopolitical situation sparked by Russia's invasion of Ukraine and the ongoing conflict,鈥 the company said.

    A spokesman for an industry group representing food manufacturers said the vast majority are experiencing higher to significantly higher cost increases and all are projecting costs to continue rising throughout 2022.

    鈥淏usiness is not back to normal and suppliers are being pressured to seek cost recovery due to a perfect storm of external factors,鈥 said Anthony Fuchs, vice-president of communications for Food, Health and Consumer Products of Canada.

    Extreme weather disasters, the impact of Omicron variants, blockades, and significant labour shortages have all put pressure on costs, he said.

    In addition, the cost of commonly used raw materials such as wheat, grains and oilseeds has increased up to 80 per cent over the past year, Fuchs said.

    The cost for plastic packaging components has increased by more than 40 per cent and paper pulp, a key ingredient in cardboard packaging and boxes, has increased 15 to 50 per cent, he said.

    This report by The Canadian Press was first published July 13, 2022

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