Loblaw and PepsiCo end their standoff over snack prices

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Loblaw Companies Ltd. and PepsiCo Inc. resolved a dispute that has kept some of the most popular snacks off the shelves at Canada’s biggest grocer for nearly two months.

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PepsiCo stopped shipping its food brands, including Frito-Lay potato chips and Quaker products, on Feb. 12 after Loblaw refused to pay higher prices.

The standoff meant Loblaw’s more than 2,400 locations lost access to Lays, Doritos, Tostitos and a deep roster of other snack and breakfast brands. To cope, Loblaw stocked more of its store-brand chips, along with some smaller Canadian brands. One Ontario snack company, Neal Brothers Foods, said it was flooded with orders from Loblaw in the fallout of the PepsiCo dispute.

“We’re pleased to share that we have resolved the ongoing disruptions with Pepsi-Co Foods,” Loblaw wrote to stores on April 8, in an email obtained by the Financial Post. “We encourage stores to continue to support any brands they added to their assortment during the service disruption with Frito Lay.”

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In a statement, PepsiCo called the last two months a “challenging time.”

“We are committed to our Canadian manufacturing and operations and look forward to resuming distribution of our products from coast to coast in the coming days,” PepsiCo spokesperson Sheri Morgan said in an email.

Loblaw said PepsiCo will start shipping products on Monday, and expects to be fully stocked before the Easter weekend.

“All along, this was about providing value to our customers,” Loblaw spokesperson Catherine Thomas said in an email. “We’re happy to once again have a wide assortment in our chip aisle, with a mix of new Canadian flavours and classic favourites, at varying prices to suit our customers’ needs.”

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The standoff exposed tensions in the food business as grocers and their suppliers grapple with the worst inflation in a generation. Suppliers say they need grocers to pay more for products to help offset the soaring cost of ingredients, labour, and shipping. But grocers, including Loblaw, have pushed back, saying they’re analyzing each price request to determine whether it’s justified.

Because production costs have increased so much, manufacturing lobbyists say more suppliers are opting to stop shipments when price negotiations break down. But the move isn’t taken lightly, especially considering Loblaw controls roughly a third of Canadian grocery sales.

Late last year, another major consumer goods company, Mondelēz International Inc., stopped sending its products brands to Loblaw, due to a pricing dispute. The food manufacturer stop shipping Oreo and Ritz, along with some other biscuit brands for about a week and a half before negotiators came to an agreement.