New tariffs could lead to price increases, Metro CEO says

Eric La Flèche tells analysts the company will ensure its prices remain competitive

Though it's still early days and negotiations with suppliers continue, Metro's CEO says grocery prices may increase slightly in the coming months as the industry grapples with the fallout from the Canada-U.S. trade war.

On Canada Day the government implemented tariffs 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 has led food and beverage companies such as Campbell Company of Canada to consider raising prices.

In a call with analysts Wednesday morning to discuss quarterly financial results, Eric La Flèche said the Montreal grocery company was already feeling pressure from certain suppliers. "We're starting to get demands from some suppliers who are, whose products will be, affected by the new tariffs," he said.

READ: Tougher decisions to come as trade war drags on

The company examines requests around price hikes, takes into account any mitigating factors and negotiates from there, he said. But, if it's "legitimate and industry wide we have to accept it."

"Negotiations are ongoing so we will make sure our costs of goods are competitive," he said. "It’s out of the control of our suppliers and we expect there will be some price increase we and the market will have to take." La Flèche said the company would continue to monitor the situation closely and deal with the situation on a supplier by supplier basis.

READ: Canned food companies increasing prices to offset aluminum tariffs

Executives from Empire and Loblaw also touched on tariffs during their quarterly earnings calls in July, saying price hikes were likely. Loblaw chief financial officer Darren Myers said the company was waiting to see how suppliers would respond, but ultimately, “it’s going to be up to the customers on what they choose to do and there will be alternatives for them.” Meanwhile, Empire CEO Michael Medline said some of its supply partners had already tried to raise prices because of the tariffs, but the company refused contending it was too early for that.

Metro reported lower-than-expected earnings in its third quarter, as it completed its $4.5-billion takeover of the Jean Coutu Group. Revenue for the quarter was $4.64 billion, up from $4.07 billion a year ago. Excluding Jean Coutu, Metro said sales would have been up 2.4% for the quarter.

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