News Briefs

Canada's big three grocers say rising food prices are shaping shopping habits, with Loblaw Companies Ltd. the latest to offer insight into how people are saving money on their grocery bill amid soaring inflation.

Consumers are shopping for groceries more often, buying less with each visit and shifting to value-oriented stores as pandemic restrictions loosen and the cost of food increases, Loblaw said Wednesday as it reported its first-quarter results.

The grocery and drugstore retailer said its discount division, which includes No Frills and Maxi, posted strong growth in the quarter while demand for its in-house products surged.

Sales of Loblaw's No Name private label brand, with its distinctive yellow and black packaging, reached an all-time high, Loblaw chairman and president Galen G. Weston said.

"This is an indication of the Canadian consumers' steadily increasing focus on value,'' he said during a conference call.

His comments came after Metro Inc. highlighted a similar shift in shopping patterns last month.

"The inflationary picture is accelerating and that's having an impact on consumers,'' Metro president and CEO Eric La Fleche said in April. "There's a search for value and a shift to discount happening.''

Empire Co. Ltd., the parent company of grocery chains Sobeys, Safeway, FreshCo, said in March customers were buying more of the retailer's house brands and opting for larger formats that offer better value.

Canada's food inflation rate hit 8.7% in March, Statistics Canada said last month.

Loblaw also grappled with its own internal cost pressures during the quarter ended March 26, with fuel, shipping, ingredients and packaging prices all rising, Weston said.

Loblaw chief financial officer Richard Dufresne said those costs "pale in comparison to the cost increases coming on goods for resale.''

Weston said the retailer now has a "central procurement team'' to consolidate its buying and negotiations with vendors.

The team "evaluates the impact of cost inflation on the cost of a good and it allows us to negotiate with our vendor base,'' he said, adding that the company is careful about only accepting "real, justifiable cost increases.''

Loblaw was embroiled in a high-profile pricing dispute with Frito-Lay Canada in the quarter, which saw the maker of brands like Cheetos, Doritos, Lays and Ruffles pull its products from Loblaw stores. Both companies said last month they had mutually resolved the matter.

Meanwhile, Loblaw's drug business stood out in the quarter, driving a significant portion of sales and gross margin growth, the company said.

Loblaw's drugstores, which include Shoppers Drug Mart and Pharmaprix, recorded strong front-store and prescription sales.

"As consumer behaviour normalized, customers returned to our Shoppers beauty counters, generating excellent results in our higher-margin categories like cosmetics,'' Weston said. "Cough and cold has strengthened significantly, prescription counts increased and pharmacy services continued their multi-year expansion.''

Same-store sales at the company's pharmacies grew 5.2%, including prescription sales up 6.8 per cent and front store sales up 3.6%.

Food retail same-store sales rose 2.1%, benefiting from higher than normal eat-at-home levels.

Revenue for the quarter totalled $12.26 billion, up from $11.87 billion in the same quarter last year.

Loblaw reported its profit available to common shareholders totalled $437 million or $1.30 per diluted share for the 12-week period compared with $313 million or 90 cents per diluted share a year earlier.

The company said it will pay a quarterly dividend of 40.5 cents per share, up from 36.5 cents per share.

On an adjusted basis, Loblaw said it earned $1.36 per diluted share, up from an adjusted profit of $1.13 per diluted share a year ago.

Irene Nattel, an analyst with RBC Dominion Securities Inc., said in a client note Loblaw posted another quarter of strong and better-than-expected results, underscoring the company's "favourable momentum shift.''

-The Canadian Press

Grocery delivery startup Instacart is adding more Canadian stores to its app as it expands despite mounting competition, rising inflation and easing demand.

The San Francisco-based company said Tuesday it has partnered with more than 10 new companies in Canada including grocery and drugstore retailer Metro Inc. and discount store Giant Tiger.

"We've seen a lot of success with adding discount retailers, especially at a time where people are looking for better deals given inflation,'' Instacart CEO Fidji Simo said in an interview.

The company is now offering budget friendly alternatives to same-day delivery, including next-day delivery and pickup options, she said.

"It's actually really important for us that grocery delivery isn't seen as a luxury.''

The California-based company became a major player in the grocery industry during the pandemic. Public health measures intended to curb the spread of COVID-19 accelerated the move to online grocery and powered Instacart's rapid growth.

While the meteoric growth of online grocery orders has slowed as restrictions ease, Simo said the market is still ripe for further expansion.

"Online penetration for every other category of retail is about 30%,'' she said. "Grocery is still at 10% ... the growth potential is staring us in the face.''

The grocery delivery app allows customers to order groceries and other items from retail stores through its app.

It then uses independent contractors, which it calls shoppers, to gather and deliver orders. The gig worker model has drawn criticism from labour advocates who have accused the company of inadequate pay rates and poor working conditions.

Instacart also has part-time hourly workers that shop in stores, but don't deliver orders.

The company, which makes money by charging fees to customers and grocers, is also expanding the services it offers directly to retailers to help them improve both their in-store and online technology.

The Instacart Platform offers the technology the company developed for its own marketplace, including its ad platform, personalization and merchandising, and offers it directly to grocers to apply to their own online grocery services.

"Our goal is to grow retailers' businesses,'' Simo said, adding that Instacart's technology can propel the "digital transformation'' of the legacy brick-and-mortar grocery stores.

One of the first transactions Simo announced after taking over as CEO of Instacart last summer was the acquisition of Caper AI, a smart cart and smart checkout technology company.

The artificial intelligence-powered shopping carts are already in use in some Sobeys grocery stores.

Meanwhile, Instacart is also growing into so-called grocery adjacent categories with the addition of a pet shop and sports nutrition store, as well as multiple smaller businesses.

"It really rounds out the selection,'' Simon said. "We want to have the largest selection possible available to Canadians.''

-The Canadian Press

OTTAWA - Retail sales edged higher in February as Canadians went shopping for new clothes and spent more filling up at the gas pumps.

Statistics Canada said Friday retail sales rose 0.1%t to $59.9 billion in February, while core retail sales - which exclude sales at gasoline stations and motor vehicle and parts dealers - added 1.4%.

However, in volume terms, retail sales fell 0.4% in February.

TD Bank economist Ksenia Bushmeneva said consumer spending is expected to remain robust in the near-term, supported by easing public health restrictions, significant pent-up demand and a healthy labour market.

"But higher prices and interest rates will begin to weigh on household budgets in the second half of the year, prompting consumers to tighten their purse strings,'' Bushmeneva wrote in a report.

"Retail sales may also see some weakening as consumption continues to shift away from goods and toward services, such as travel and hospitality.''

Sales in February were up in six of the 11 subsectors tracked.

Statistics Canada said sales at clothing and clothing accessories stores gained 15.1% for the month, while building material and garden equipment and supplies dealers rose 5.6%. Sales at gasoline stations added 6.2%.

Meanwhile, sales at motor vehicle and parts dealers fell 5.1%, the largest drop for the group since a 6.2% drop in December 2020. General merchandise stores saw sales drop 1.2%.

Looking ahead, Statistics Canada said its initial estimate for retail sales in March suggests a gain of 1.4% for the month, but cautioned the figure will be revised.

Nikita Perevalov, director of economic forecasting at Scotiabank, said a large part of the increase in March was likely due to high prices as the annual inflation rate for the month was 6.7%.

"High consumer prices point to a vulnerability at the heart of the Canadian economy - household budgets may not be able to withstand for long record increases in prices of food and energy, forcing weaker growth in spending on discretionary items,'' Perevalov wrote in a note to clients.

The Bank of Canada raised its key interest rate target by half a percentage point to 1% last week and warned more rate hikes are in the works as it looks to bring inflation under control.

The consumer price index in March posted its largest increase in more than 30 years as it rose 6.7% compared with a year earlier, a full percentage point higher than its year-over-year increase in February.

-The Canadian Press

Workers at a Metro distribution centre in Ontario have voted in favour of a new deal while workers at a Sobeys warehouse in Quebec have rejected the grocer's latest offer.

More than 900 workers at Metro Inc.'s Toronto-area distribution centre ratified a new four-and-a-half-year collective agreement Friday, ending a one-week strike.

Unifor said Metro warehouse workers in Etobicoke will receive an average wage increase of 15.8% over the lifetime of the new deal.

The union said the new collective agreement also includes higher shift premiums for freezer work, a shortened wage progression to reach the top rate, improvements to pensions and benefits and no concessions.

"This collective agreement achieves the best maximum pay rate and fastest progression in the industry,'' Unifor Ontario regional director Naureen Rizvi said in a statement. "There is no doubt that it will raise the bar for warehouse workers across Ontario.''

Carmen Fortino, executive vice-president and division head for Metro in Ontario, said in a statement the company and the union reached a "fair and reasonable'' deal that maintains competitive working conditions for employees.

Meanwhile, 190 workers at a Sobeys distribution centre in Terrebonne, Que., remain on strike after turning down the grocer's latest offer.

Kim Bergeron, a lawyer representing UFCW Canada's Local 501, said workers rejected a tentative agreement Friday with 69 per cent voting against a proposed new deal.

Pay and benefits remain the key sticking point, she said.

Sobeys spokeswoman Claudine Leblanc said the company was ``surprised and disappointed'' that workers rejected the tentative agreement recommended by the bargaining committee.

"Our teammates in Terrebonne have one of the most comprehensive and competitive agreements in Quebec,'' she said.

Workers are currently paid wages of up to $30 an hour, and the proposed deal included salary increases on top of the that, Leblanc said in an email.

"We will continue to negotiate with the union representatives so we can reach a deal very soon,'' she said.

Sobeys has contingency plans in place to ensure customers continue to receive the same service and products at IGA stores across the province, Leblanc added.

-The Canadian Press

MONTREAL - MTY Food Group Inc. reported its first-quarter profit rose compared with a year ago as its revenue also climbed higher.

The restaurant franchisor and operator says it earned $16.6 million or 68 cents per diluted share for the quarter ended Feb. 28, up from $13.4 million or 54 cents per diluted share a year earlier.

Revenue totalled $140.5 million for the quarter, up from $119 million.

MTY is the company behind more than 80 restaurant brands, including food court staples like Thai Express and Tiki-Ming, as well as many that are co-located with convenience and gas, such as Mr. Sub and Country Style. 

MTY CEO Eric Lefebvre says 75 new locations opened across MTY's network in the first quarter, making it the best first quarter in the company's history in terms of restaurant openings.

At the end of the quarter, MTY had 6,704 locations in operation, of which 89 were corporate and 6,615 were franchised.

-The Canadian Press

A recall of certain Kinder brand chocolate products linked to an outbreak of salmonella in Europe and the U.K. has been expanded to Canada.

The Canadian Food Inspection Agency says there have been no illnesses reported in Canada in association with the affected products distributed by Ferrero Canada Ltd.

The recalled chocolates include:

• Kinder Schoko-Bons
• Happy Moments - Kinder Confections Assortment
• Kinder Mini Eggs
• Kinder Egg Hunt Kits
• Kinder Mix 7 Easter Treats
• Kinder Surprise Miraculous
• Kinder Surprise Natoons
• Kinder Surprise

The products were sold nationally in a variety of sizes, with best before dates ranging from June 19, 2022 to Nov. 29, 2022.

The CFIA is conducting a food safety investigation, which may lead to the recall of other products.

Salmonella poisoning can result in a wide range of symptoms, from short-term fever, headache and nausea to more serious issues including severe arthritis and, in rare cases, even death.

The European Centre for Disease Prevention and Control said Wednesday the chocolate products were identified "as the likely route of infection'' in an outbreak involving 134 children mainly under 10 years of age, several of whom have been hospitalized.

The chocolates are also being recalled in Belgium, France, Germany, Ireland, Luxembourg, the U.K., Norway and Sweden.

UPDATE April 12: Additional products have been added to a Canadian recall of certain Kinder brand chocolates linked to an outbreak of salmonella in Europe and the U.K.

The Canadian Food Inspection Agency says there have been no illnesses reported in Canada in association with the affected products distributed by Ferrero Canada Ltd.

The new recalled items include:

• Kinder Advent Calendars
• Kinder Surprise Frozen
• Kinder Surprise Trolls
• Kinder Surprise The Smurfs

The agency had previously announced a recall for Kinder Schoko-Bons, Happy Moments - Kinder Confections Assortment, Kinder Mini Eggs, Kinder Egg Hunt Kits, Kinder Mix 7 Easter Treats, Kinder Surprise Miraculous, Kinder Surprise Natoons and Kinder Surprise.

The products were sold nationally in a variety of sizes, with best before dates ranging from March 2, 2022 to Nov. 29, 2022.

The CFIA is conducting a food safety investigation, which may lead to the recall of other products.

-The Canadian Press