No chips for you: Frito-Lay in food fight with Loblaws

Got a craving for Doritos, Ruffles or Miss Vickie's?

You'll have to satisfy it somewhere other than Loblaws. Or Shoppers. Or Zehrs. Or Fortinos. Or any of the other chains owned by Loblaw Cos., after Frito-Lay Canada stopped shipping its snack-food brands to the country's biggest grocery retailer this week amidst a pricing dispute.

Frito-Lay, owned by Pepsi-Co, said it was trying to pass on some of the increased costs from supply chain woes companies have faced during COVID-19.

Our business has faced unprecedented pressures from rising costs of items including ingredients, packaging and transportation. To help offset these pressures on our Canadian operations and to ensure that we maintain the high quality our consumers expect, we have made adjustments to our prices that are consistent across the marketplace," said Pepsi-Co spokesperson Sheri Morgan in an emailed statement.

We are committed to our Canadian manufacturing and operations and our products remain widely available from coast to coast. As this is a confidential matter with a valued customer, I'm unable to comment further on this matter," Morgan added.

Loblaw Cos. spokesperson Catherine Thomas says the retailer is focused on trying to keep prices down as much as possible for consumers, something she stressed is difficult to do when the entire food industry is struggling with cost increases.

When suppliers request higher costs, we do a detailed review to ensure they are appropriate. This can lead to difficult conversations and, in extreme cases, suppliers don't ship us products. We don't comment on specific negotiations," Thomas said.

The decision to withhold shipments from the country's biggest grocery company is surprising, but could be the prelude to more battles between retailers and suppliers, said retail analyst Lisa Hutcheson.

That's a very bold move by Frito-Lay. It's making a big statement about how seriously they're taking this," said Hutcheson.

With producers reeling from supply chain woes and retailers facing resistance to price increases by consumers, some kind of battle was bound to happen eventually, Hutcheson said.

We could be seeing more of this down the road," said Hutcheson, who said both sides have something to lose, but suspects Frito-Lay ultimately has the upper hand.

They both need each other. But I think Loblaws needs Frito-Lay a little bit more, because of how much shelf space they take up. If I had to guess, I'd say Loblaws blinks first, because they're the ones who are going to be dealing with disappointed customers," said Hutcheson, who added that the decision to stop shipments wasn't risk-free for Frito-Lay, either.

There's a risk for Frito-Lay that some other snack company comes in and takes that shelf space. This is an opportunity for another supplier," said Hutcheson.

Sylvain Charlebois, a professor and head of Dalhousie University's Agri-Food Analytics Lab, said there's no question we're going to see more disputes in the weeks and months ahead, as suppliers figure out how to pass along at least some of their costs.

This is a symptom of a much larger issue. Every consumer packaged goods company and every grocery chain is having discussions like this right now," said Charlebois, who called it a major change in the supplier-retailer relationship.

For years, the grocery stores set all the rules. Now, this is the CPG companies saying enough is enough,' " said Charlebois.

A spokesperson for Metro said the Quebec-based grocery chain is still stocking Frito-Lay products.

We are selling Frito Lay's products and we have a good business relationship with them," said Marie-Claude Bacon, who had no further comment.

A spokesperson for Sobeys declined to comment.

There are already some bare shelves where the salty snacks should be; according to industry sources, big grocery stores typically get new shipments from Frito-Lay every two or three days.

In addition to Doritos, Ruffles and Miss Vickie's, Frito-Lay also produces Lays chips, Tostitos, Cheetos, Rold Gold pretzels, and SmartFood popcorn.

-with files from Rosa Saba

Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer