Frito-Lay pauses shipments to Loblaw stores, cites rising costs of ingredients, packaging, transportation | CBC News

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.

“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.

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

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

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.”

Loblaw store banners include Zehrs, Provigo, Fortinos, Atlantic Superstore and Dominion. The company also has several discount grocery chains, including No Frills, Extra Foods and Real Canadian Superstore, and owns the Shoppers Drug Mart chain.

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, Graydon said.

“This is a cost increase from the manufacturer to the retailer,” he said. “The manufacturer does not set retail pricing. It is set exclusively by the retailer.”

‘Millions of dollars in fines’

Meanwhile, some supermarkets have fined food manufacturers when they have been unable to supply stores with as much product as usual.

Yet Graydon said inventory issues during the pandemic are due to factors beyond the control of manufacturers, such as having to shut down a plant for several days due to a lack of packaging from shipping delays.

“There’s millions of dollars in fines taking place,” he said. “It is just one constant battle in regards to pricing, fines and allocations.”