Get ready for a grocery price war

Loblaws, Sobeys and Walmart all plan to lower prices this summer

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War, huh. What is it good for? Cheaper groceries, sometimes.

Reports from both the Globe and Mail and the Financial Post this week suggest a price war is brewing among Canada’s biggest grocers. On Tuesday, the Post cited a report from Desjardins Securities that said Walmart has cut prices on a number of popular packaged goods to better compete with discount chains like No Frills:

The mass merchant, which operates 312 stores across the country and began expanding into the grocery business in 2006, is looking to bolster its everyday low pricing strategy in the centre-of-the-store grocery aisles by consistently having lower shelf prices on selected major branded goods, according to a new report from Keith Howlett of Desjardins Securities.

Meanwhile on Wednesday, the Globe likewise warned of “price skirmishes” after Loblaw’s announced during an analyst call that it would follow the lead of other chains, like Sobeys and Metro, and cut some prices this summer. In an analyst call, Loblaw’s president Galen G. Weston admitted the retailer had been slow to respond to lower prices and suffered softer sales as a result:

He said Loblaw is trying to find the right level of markdowns to entice more customers but at the same time not pinch the company’s bottom line. In its first quarter, Loblaw backed off too much from discounting “while our competitors ramped up significantly,” which “hit us harder than we anticipated,” he said.

The real enemy? Inflation. Food price increases are expected to outstrip the general inflation rate again in 2016. According to a forecast prepared by the University of Guelph’s Food Institute, the average household will spend $8,631 yearly on food, up $345 from 2015, which was up $325 from 2014. That means the average family is spending $700 more on food than it was two years ago. We know now that middle class Canadians are feeling this pinch. According to a recent survey by Vancouver-based Angus Reid Institute, more than half of households earning $100,000 or more (54%) say it’s getting harder to feed their families.

A price war might be a welcome boon to shoppers. Those willing to shop across brands can probably take advantage of deals and find noticeable savings. In the meantime, there are other ways households can cut their food costs—by 20% or more. In the June issue of MoneySense, we explored ways to reduce waste, shop smarter and run your kitchen like a restaurant. In which case, you can maybe afford to pick a side in the Great Grocery Skirmishes of 2016. You’ll be shopping smarter anyway.

 

 

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