Sometimes I am truly amazed at the the comments some people make to the press. As I have said in this Blog many times the Canadian consumer is impacted the most at the cash register, importers, wholesalers and retailers pass on all of their cost increases, not only on the cost of goods but the increased cost in shipping, currency conversion, bank fees etc. on to the consumer. They can not and will not subsidize the consumer. A second “trend” thats little talked about is the price creep of competitive goods. For example lets take a look at two of the same item. Item #1 is Canadian made and Item #2 is imported in U.S. dollars. When the loonie was equal to the U.S. dollar the retailer was able to price the Canadian made goods 5% higher than the imported goods because his customers would pay this to “support” the Canadian manufacturer. So now the imported Item is 25% more expensive as it is priced in U.S, dollars through the supply chain. If my past sales supported the 5% price difference then I should now be able to increase the price of my Canadian made goods the same 25% to “maintain” the spread. Simple math.
Now let me get back to my original reason for this Blog post. Loblaw, Canada’s biggest food and pharmacy retailer is keeping a watchful eye on potential consumer pushback from rising food costs, the downside of a weakening loonie.”Inflation is generally a positive for the industry, (and) that has contributed to a reasonable amount of robust sales growth for all of us over the course of 2014,” chief executive Galen Weston told analysts on a conference call. “With the decline in the Canadian dollar we expect that to continue into 2015. I think that is a positive. However, the changes have been pretty significant (and) we are watching this very carefully to see the extent to which the consumer begins to resist (inflation) passthrough. At this stage, we don’t see anything that is causing us concern, but it is something we are thinking carefully about.”
In another article on Maple Leaf Foods Kevin Grier, an independent livestock market analyst, said the amount of meat Canadians are buying has dropped by 5% to 10% year over year. However, the amount of money they’re spending on meat has actually increased because of the higher prices. Sam La Bell, an analyst with Veritas Investment Research Corp., said if consumers are expecting the price of a package of bacon to fall soon, they may be disappointed. “There’s an incentive to keep prices higher than you otherwise would, because you already lost the volumes,”
Food prices were up 4.6 per cent last month, according to StatsCan. Consumers may be sheltered from food price increases thanks to the plunge in gasoline prices.
So fellow Canadians. Net is that Loblaw and other retailers will continue to raise prices on products until you say “Enough is enough”. I’ll be looking for the two moons in the sky when that happens!