Loblaw, Canada’s largest food and drug chain, only buys a small fraction of its goods from the U.S., CEO Per Bank said on Thursday, tamping down fears that the looming Trump tariff war could cause a spike in grocery bills.
In a quarterly update, Bank said the company has been lining up alternatives to American suppliers in case U.S. President Donald Trump follows through on his 25-per-cent tariff threat that would likely prompt retaliatory tariffs from Ottawa on U.S. goods entering Canada.
According to Bank, U.S. imports make up less than 10 per cent of Loblaw’s overall cost of goods.
“And it’s mostly in produce,” he said during a conference call with financial analysts Thursday morning.
After years of high inflation, Bank said he isn’t expecting consumers will fork over an extra 25 per cent for U.S. imports, prompting a major shift to Canadian-made products or imports from other countries.
He said Loblaw is already tracking a significant impact from the ‘Buy-Canadian’ movement among shoppers, with a roughly 10-per-cent sales lift in Canadian-produced goods during one week earlier this month.
In the household goods and cleaning aisle, for example, Loblaw sources products from about 30 vendors in the U.S., but also sells Canadian-made versions under its private label ‘control brands’ — President’s Choice and No Name.
If Ottawa decides to slap tariffs on U.S. cleaning products, those big brands “will not be competitive anymore,” Bank said, “and all the sales will go to our control brands.”
“That’s good for Canada, it’s good for customers and it’s good for us,” he added. “If you have a 25 per cent tariff on Kellogg’s, if that should come so far, then of course we’ll probably promote our control brands instead of Kellogg’s because nobody will buy it if it’s 25 per cent more expensive.”
Though it’s not fully clear which American goods would be subject to tariffs from Canada, Ottawa has already telegraphed what it would target in the first round of a trade war with the U.S.
Before Trump agreed earlier this month to delay tariffs for 30 days to allow for negotiations, the Trudeau government announced a list of 25-per-cent counter tariffs on $30 billion worth of American goods — the first phase of a broader, $155-billion tariff plan.
At the time, academics and food executives said the initial list appeared to have been designed to blunt the impact at grocery costs for Canadian shoppers.
Much of the U.S. food on the list, including poultry, eggs and dairy, have strong Canadian-made alternatives already on offer, making it easy to avoid more expensive U.S. goods — if they exist in stores at all. But those same executives warned that if the list gets longer, and starts to include harder-to-replace goods, there could be problems.
On Thursday, Bank said replacing produce from U.S. growing regions like California would be the main sore spot.
“If tariffs are applied on produce, that’s where we will be mostly impacted,” he said. “On produce, it’s probably the most difficult place. I think we can probably mitigate half of our suppliers.”
On top of the tariff threat, Loblaw also warned that global food companies have been pushing for higher-than-normal price increases.
“Many are requesting double digit price increases,” chief financial officer Richard Dufresne told analysts. “This is compounded by the fact that we are working with a Canadian dollar that trades at its lowest level in over 20 years.”
During the financial update on Thursday, Loblaw, a network of more than 2,800 stores that includes Shoppers Drug Mart, No Frills, Fortinos and Real Canadian Superstore, reported $14.6 billion in fourth-quarter retail sales, up three per cent compared to the previous year.
But profits at the chain dipped by 14.6 per cent to $462 million, which the company said was due to a re-evaluation of its liability for outstanding loyalty points, since more customers are participating in its PC Optimum program.
