Canadian Consumers Ultimately the Only Real Losers in This Food Fight
Coming at a time when product shortages and empty shelves were becoming an increasingly common sight at many grocery stores across Canada earlier this year, seeing two of the country’s iconic titans of the food industry embroiled in a public high-profile dispute over the price of potato chips was a jarring reminder of the CPG industry’s tendency to engage in developing solutions for a problem that did not exist—until its key actors created it.
While specific details of the dispute’s origins are fairly vague, the nasty food fight kicked off in early February when chips producer Frito-Lay, a PepsiCo subsidiary famed for its Cheetos, Doritos, Lays, Ruffles, and Sunchips brands, tried to raise the prices it charges leading supermarket chain operator Loblaws for some of its products, citing growing costs of ingredients, packaging and transportation.
While the requested price increase was not anything really out of the ordinary in a market besieged by relentless price inflation not seen in many years, Loblaws’ refusal to agree to the hike and simply pass it off to consumers by hiking up its retail pricing quickly brought the disagreement to a boil.
So much, that Frito-Lay actually pulled all its brands from the shelves at all grocery locations operated by Loblaws under its various banners—resulting in blocks of empty shelf-space at the grocer’s snack-food aisles for about a month.
Happily for all, the tense stand-off was amicably resolved in time for the Easter weekend, but one can safely say that the only real winners in the dispute were, predictably, lawyers.
It certainly was not the consumers, given the fact that the Frito-Lay branded chip have not showed any lower pricing since returning to the Loblaws shelves, but then again they have not sky-rocketed in price either.
So what was all the fuss about then? It’s really anyone’s guess, but maybe, just maybe, it was an ambitious attempt by a mainstream CPG company to regain some of the once-dominant influence the marketplace, whereby retailers were one merely their supply chain subordinates and order-takers.
Naturally, that balance of power has been altered drastically over the years with the arrival of private-label brands and a whole new breed of giant competitors like Walmart and Costco, whose sheer size and economies of scale enabled them to turn the tables on their vendors.
Suddenly it was retailers telling their vendors to keep their prices in line, to provide more locally-sourced products, to use more sustainable packaging, to ship their products in shelf-ready displays, and so on.
On the other hand, the spectacular growth in online e-commerce shopping has provided CPG brand-owners with a promising alternative to their traditional brick-and-mortar channels to the point where many new food industry start-ups are staking their future entirely on e-commerce sales.
And while none of that jockeying for power means much to ordinary consumers doing their daily grocery shopping, there are clearly some unresolved issues in the consumer marketplace insofar as who gets to call the shots.
And that is really too bad, because it is ultimately consumer confidence that is the glue holding the whole system together. Needless to say, soaring prices and empty shelves are not consumer confidence buiders by an stretch.
Coming out of a prolonged global COVID-19 pandemic that has severely damaged many vital pillars of the modern global consumer economy just to enter a new era of runaway consumer price inflation does not make a good backdrop for helping consumers to return to their pre-pandemic purchasing habits.
Neither does depriving them of their favorite brands and products for reasons over which they have no say whatsoever.
As always, having a chip on your shoulder is is a lousy blueprint for doing business in a way that rewards all its stakeholders and participants alike.