It appears there will be tense negotiations between Loblaws, the nation’s largest supermarket company, and Lactalis Canada Inc. which markets Beatrice milks, Astro yogourt and Black Diamond cheeses.
Lactalis announced it will be increasing dairy prices by up to 15 per cent, partly because of milk price increases that the farmers’ marketing boards will soon be implementing.
But Loblaws chief financial officer said it will be working hard to hold suppliers’ prices down.
Lactalis Canada Inc., which is owned by a multinational company based in France, said the price increases are necessary because labour, ingredients, packaging and transportation costs have all risen.
And Lactalis Canada’s chief executive Mark Taylor said the price increases are “non-negotiable”.
The Canadian Dairy Commission (CDC), which establishes the “farm-gate” price under the national supply management system, last month announced an historic 8.4 per cent increase for milk and 12.4 per cent for butter.
Mathieu Frigon, chief executive of the Dairy Processors Association of Canada, said inflation rates on dairy products have stayed substantially lower than overall food inflation over the past decade as dairy companies have worked to absorb rising input costs through efficiencies and narrowing margins. But all the cost increases can’t be absorbed.
Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers, said smaller retailers — which are also experiencing upticks in labour, energy and transport costs — won’t be able to absorb all the increases.
“Retail will have to pass this cost on. There’s just no doubt about that,” he said. “It’s the retailer who’s left holding the bag of milk explaining to the customer why prices went up 15 per cent.”
The Retail Council of Canada, a trade association representing the big grocers, said “price surges of such a large degree are particularly concerning given that dairy products are essential for Canadian families,” but it’s up to the grocers to decide how much of the increase to pass onto consumers.
Richard Dufresne, chief financial officer of Loblaw Cos. Ltd., said the supermarket chain has “a thorough process to vet pricing requests” from suppliers.
“We work hard to negotiate those increases down so that we offer our customers the best value,” he said on an earnings call Wednesday.
