CEO of grocery chain Metro Inc. Eric La Flèche has noticed a rising trend of consumers substituting fresh produce for frozen equivalents, in light of rising food price inflation, he said in a conference call Tuesday 26 January. The costs of mostly foreign-bought fruits and vegetables, in particular, have been rising thanks to the falling Canadian dollar. Montreal-based Metro, the country’s third-largest grocery chain, said inflation pushed the cost of groceries up 2.8 per cent in the first quarter ended Dec. 19.
Profit at the grocery chain rose 24.3 per cent in the period to $139.8 million, or 56 cents per share, up from $112.5 million (43 cents) in the same period a year ago. Same-store sales, or volume at store locations open for at least a year, rose 2.8 per cent, and overall sales were up 4.3 per cent to $2.96 billion.
Food prices are expected to move even higher in 2016, according to a report from the University of Guelph’s Food Institute, which estimates the average Canadian household will spend as much as $345 more on food this year compared to last. The institute is forecasting food inflation rates across the country of two per cent to four per cent. Big price increases are expected for vegetables and fruit, by as much as 4.5 per cent this year.
In addition to fresh food price hikes, La Flèche said Metro has noticed some recent price increases from consumer packaged goods companies, though not major ones, and expects to see more inflation in centre aisles of the supermarket in the year ahead.
“You have to focus on value when certain items become out of whack,” La Flèche said, noting growing house-branded private label goods is a good value-oriented strategy. Private label goods account for more than 20 per cent of sales, and are “trending up,” he said.
The company is also exploring digital commerce strategies, and will conduct an e-commerce test later this year, but La Flèche did not elaborate on the plans. Loblaw has been testing a “click and collect” e-commerce model at a handful of its Toronto-area stores, where groceries are ordered online and picked up in designated areas outside the stores.
Also on Tuesday, Metro increased its dividend to 14 cents per common share, an increase of 20 per cent from the same quarter last year.
