Metro faces supplier squeeze, expects higher prices

Customers of Metro Inc. should prepare themselves for higher prices as the Canadian grocery giant says it is facing pressure from suppliers to accept price hikes in light of the ongoing tariff dispute with the U.S., its CEO said Wednesday.

“We’re starting to get demands from some suppliers who are, whose products will be, affected by the new tariffs,” Eric La Fleche said during a conference call with analysts Wednesday after the release of its third-quarter earnings report.

The Canadian government implemented tariffs on Canada Day on a number of American-made goods, including yogurt, orange juice and maple syrup, in retaliation for U.S.-government imposed tariffs on Canadian steel and aluminum products, which are also putting pressure on some Canadian food manufacturers.

The company is reviewing suppliers’ demands and negotiating prices, La Fleche said. “If it’s legitimate and if it’s industry-wide, sometimes we won’t have a choice and we will have to accept,” he said, adding the company has already agreed to some minor cost increases.

Metro will continue to ensure its retail prices are competitive, he said, but expects the company, as well as the market as a whole, will have to accept some cost increases.

Ontario’s minimum wage, which rose to $14 at the start of the year, has also put pressure on prices.

“We expect that the cumulative effect of all these cost pressures should start to be reflected at retail,” La Fleche said. “We’re just starting to see some minor price increases — nothing major.”

Empire Co. Ltd., which operates subsidiary Sobeys Inc., predicted a similar outlook in late June, when the company reported its latest quarterly earnings. Sobeys CEO Michael Medline said at the time that the pending tariffs could result in higher grocery store prices, though he said the company would try to resist accepting suppliers’ cost increases.

A number of companies whose products use cans, including the Campbell Company of Canada and Molson Coors Brewing Company, have said that the 10-per-cent tariffs the U.S. has slapped on aluminum imports have forced them to consider price hikes.

The CEO also said Metro, which operates more than 650 drug stores and pharmacies under banners including Jean Coutu and Brunet, would be interested in selling medicinal cannabis.