Grocery Bills Are Set to Rise as Annual Price Freeze Ends. Here’s How It Works

This February, Canadians will notice some prices at the grocery store creep higher.

Around the end of January, an annual industry-wide freeze by grocers on prices from suppliers comes to an end.

“We do have a freeze where we don’t take any cost increases between November and early February. So in the next few weeks, there will be some price increases reflecting the increases in costs that we negotiated and accepted,” said Eric La Flèche, CEO of Metro, at a press conference last week.

Every holiday period, most Canadian grocers maintain a blackout on price increase requests from many suppliers. Industry insiders say it’s a long-standing practice that helps stabilize prices during a time of year when consumers are more price-sensitive.

“When a supplier makes the case to change a price, the retailer does a lot of work to try to understand … is it really a justified increase or not?” said Peter Chapman, founder of consulting firm SKUFood and a former Loblaw executive.

He said the freeze ensures companies can focus on other things during the busy holiday season, such as inventory.

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Independent stores also participate, said Gary Sands, vice-president of government relations for the Canadian Federation of Independent Grocers, adding it often excludes products subject to more price volatility such as meat and fresh vegetables.

Amid high food inflation and facing criticism from frustrated consumers, the grocers have repeatedly pointed to supplier price increase requests as they defend their profits. They’ve called some of the requests unreasonable, in particular those from large multinationals.

The Canadian Press asked the country’s five largest grocers about the annual blackout period.

Metro spokeswoman Marie-Claude Bacon confirmed the grocer has an annual blackout period “that has been in place for many years.” Sobeys parent Empire declined to comment, though it’s previously told media it freezes many prices around that time. Costco did not respond to the media request.

Walmart Canada does not have a blanket three-month price increase freeze on suppliers, said spokeswoman Stephanie Fusco in an email. She said the retailer focuses on “having conversations with our suppliers to push back on unjustified price increases year-round.”

In October 2022, when inflation was just starting to come down from its peak, Loblaw announced it was freezing retail prices on more than 1,500 No Name-branded items until the end of January 2023 “in an effort (to) provide grocery-bill predictability to Canadians facing the highest food inflation in decades.”

Some industry watchers decried the announcement as a publicity stunt, since the supplier-side freeze happens every year, with Metro chiming in to say it would be freezing prices as usual.

The following year, price freezes were back in the news, with the grocers under pressure from Ottawa to submit their plans to curb food inflation.

Public details were thin, but Industry Minister François-Philippe Champagne said the plans included discounts, freezes and price-matching.

At the time, Empire told media it was expanding an annual price freeze on packaged products.

SKUFood’s Chapman said he thinks the efforts by some grocers to advertise the price freezes illustrate the pressure the companies were under.

With the blackout coming to an end, “unfortunately, there will be some prices starting to go up,” he said, adding the number of price increase requests from suppliers was still elevated but on the decline.

One year later, he had a similar message—though this time, he said requests were nearing pre-pandemic levels.

He said the weaker loonie has made items from the U.S. more expensive, such as the fresh produce for which Canada relies more heavily on the U.S. during the winter. Other foods like coffee and cocoa have seen recent price spikes in part due to poor harvests.

“We’re managing it as best we can to mitigate those cost increases,” he told reporters.

Suppliers are generally used to working around the freeze, but it can pose challenges if circumstances change unexpectedly, said Henry Chambers, senior vice-president for Canada and the Americas at U.K.-based consulting firm Sentinel MC. The firm began working with Canadian food businesses several years ago.

Chambers said he can understand the retailers’ motives for the blackout: “The grocers know Christmas is such a critical moment.”

“If the price of fuel goes up and it’s not anticipated … then that’s something that businesses may not be able to absorb over that period of time,” he said.

Chapman said the annual freeze isn’t necessarily contentious among suppliers, but acknowledged the process of submitting price increase requests has become “more onerous than it ever was.”

“Retailers have been … blamed for price increases in the market, and they are much more focused on trying to understand if a price increase is justified,” he said.

The grocery industry has come under a lot of scrutiny in recent years amid allegations the companies have unduly profited from inflation and have been pressured to implement a code of conduct to make negotiations between retailers and suppliers fairer.

The price freeze wasn’t a priority in the government’s crackdown, nor the Competition Bureau’s most recent study on the grocery sector.

However, a 2021 report from the Federal-Provincial-Territorial group studying retailer fees noted these blackouts mean suppliers often eat additional costs from outside factors, sometimes for several months before they can get a price increase approved.

“In some instances, they have to provide the retailer twelve weeks’ advance notice,” the report said.