The potato chip giant Frito-Lay has decided to stop its deliveries to grocery stores under the Canadian banner Loblaws due to a disagreement over a price increase.
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This veritable arm wrestling would more precisely originate from an increase in the prices that retailers will have to pay to stock up on Frito-Lay products (Lay’s, Doritos, Ruffles, Miss Vickies and several other brands).
In response to Loblaws’ refusal to pay more to sell its chips, Frito-Lay simply halted shipments to the largest grocer in the country.
According to Sylvain Charlebois, specialist in the agri-food industry at Dalhousie University, this price adjustment on the part of Frito-Lay is justified by an increase in production costs, in particular caused by an increase of nearly 30% to 40% the cost of certain foodstuffs.
“Food inflation is hitting us hard as consumers, but it’s the same thing in processing, so it costs more to produce potato chips,” he explained in an interview with LCN.
Mr. Charlebois said he was surprised by Frito-Lay’s reaction to Lowblaws’ reluctance to renegotiate prices upwards.
“Normally processors will accept the terms suggested by the distributor, but this time it’s not that at all,” he says.
Who will come out the loser in this war?
Asked by Mario Dumont, who asks who is most likely to suffer from this “chip war”, Sylvain Charlebois answers first: “It does not change much for Loblaws.”
He believes the banner will be able to fill empty Frito-Lay chip shelves with similar products from its house brands, which are No Name and President’s Choice.
“As for Frito-Lay, we are losing sales, that’s clear,” he adds.
However, he believes that the biggest loser will undoubtedly be the consumer, since the reduction in supply often rhymes with an increase in selling prices.
“If we lose choices […]prices are rising,” he sums up.
