Not all food retailers are equal in the face of inflation, which continued to rise in the sector in June. As big names increase their profits, independent neighborhood grocery stores are having to tighten their belts.
Over the past year, the general manager of Aliments Merci says he has been “glued increase after increase” from all his suppliers. “In addition, there are stockouts everywhere. It’s unheard of,” exclaims Mathieu Malouin.
These increases are on average 16% to 20% over one year, estimates Lorraine Ste-Marie, director of the supply chain of this retailer of natural products, notably present in Montreal’s public markets. In some cases, the increases exceeded 50%. All this at the same time as the fixed costs, such as electricity, climb – just like the wages of the employees, shortage of manpower obliges.
The story is similar at GH Dépanneur, in the Griffintown district. “I am constantly redoing the prices. There are bottles of orange juice that just went up a dollar in a few weeks. It’s terrible, ”reports Jérémy Dandeville, co-owner of this business located on the border between the convenience store and the delicatessen. “If you’re not careful, there are products that stay on the shelves because nobody wants them. And there’s also the issue of commercial rent.
Merchants must also be very vigilant. “Recently, I realized that I was selling chips at the same price as I bought them because I hadn’t noticed the increase when I received the goods,” says Stéphanie Besler, owner of Orléans Épicerie, in the Hochelaga district.
To survive, these retailers must therefore transfer part of the bill to consumers while trying to maintain the same profit margin. But these increases are pushing some of their customers to the Maxis, Dollaramas, Costcos and Walmarts of this world.
The food market is highly concentrated in Quebec. Loblaw, Metro and Empire are the leaders, with nearly 2,500 stores under 25 banners (IGA, Provigo, Rachelle Béry, L’intermarché, Adonis, Super C, etc.), according to The directory. Food consumption and distribution in figures published by the Government of Quebec in 2020. Along with Costco and big-box stores like Walmart, in 2019 they accounted for more than 80% of the province’s food sales.
Having greater purchasing power against suppliers, the big names manage to negotiate lower prices with which the small grocers cannot compete.
Mme Besler actually finds, with dismay, that it is neglected by part of its clientele, who are on low incomes. ” It’s disturbing. I fear for the health and the future of my grocery store,” she confides.
“Our attendance rate has dropped by 10% to 20% since last spring,” says Ms.me St. Mary. Customers tell us that it’s fine to encourage local businesses, but that their budget is also important. »
The profits of the giants
In this context, the profits of Aliments Merci are dwindling, laments Mr. Malouin. This is not the case with the big chains.
Profits for Loblaw, Metro and Empire have increased significantly, according to their most recent financial reports. Loblaw’s adjusted net income increased 17.1% in the most recent quarter of fiscal 2022, reaching C$459 million. At Metro, it’s 5.1%. Empire’s net income, meanwhile, rose 3.8%. The gross profit margin remained fairly stable at Metro and Empire, while it increased slightly at Loblaw.
The latter, however, clarified by email that it had “registered faster growth in the pharmacy sector than in the grocery sector”, adding that the increase in its profits “can be attributed in particular to higher-margin items, like cosmetics. Metro also highlighted strong growth in sales of its pharmacy products.
“The perception that food retailers are taking advantage of this period of inflation to make bigger profits is totally wrong,” added Loblaw. We are sensitive to the challenges consumers face and strive to offer them the best value and real deals in each of our stores, every day. »
Sacrifices
At Supermarché PA, which has five branches in the Montreal area, operations manager Patricia Chouinard believes she is still able to offer competitive prices. This is, however, at the cost of some painful choices, such as reducing profit margins on several products. It is about the reputation of the business and the loyalty of the customers, she considers.
“We are also in the process of restructuring certain things, we are cutting in certain places, explains Mme Chouinard. For example, at the start of the year, we decided to stop distributing our printed flyer. However, it is still available in-store and online. »
She hopes that consumers will understand that not all merchants are putting more and more of it in their pockets and that small grocery stores will continue to be there.