Why Grocery Prices Will Rise in February

This February, shoppers across Canada can expect to see some grocery prices rise. An industry-wide annual freeze that pauses most supplier-driven price changes from November through early February comes to an end at the close of January, and retailers say some costs will be passed through to consumers in the weeks that follow.

“We do have a freeze where we don’t accept cost increases between November and early February. In the next few weeks there will be some price increases reflecting the cost changes we negotiated and accepted,” said Eric La Flèche, CEO of Metro, during a recent press conference.

Annual price freezes are tied to the holiday season

Many Canadian grocers impose a temporary blackout on supplier price-increase requests over the holiday season. Industry participants describe this long-standing practice as a way to stabilize prices when consumers are most price-sensitive and stores are focused on high seasonal demand.

“When a supplier proposes a price change, retailers work to determine whether it is truly justified,” said Peter Chapman, founder of consulting firm SKUFood and a former Loblaw executive. The freeze allows grocers to prioritize inventory, staffing and promotions during the busiest weeks of the year.

Independent grocers also follow the pattern, though the blackout often excludes items that are subject to greater short-term volatility, such as meat and fresh vegetables, according to Gary Sands, vice-president of government relations for the Canadian Federation of Independent Grocers.

Against a backdrop of elevated food inflation and public frustration over grocery costs, retailers have pointed to supplier price requests as a driver of higher prices. They have sometimes described certain supplier demands—especially from large multinational manufacturers—as unreasonable.

Grocers take different approaches to price freezes

The country’s largest grocers handle the holiday blackout differently. Metro confirmed it maintains an annual blackout period “that has been in place for many years.” Sobeys’ parent company has said in past media statements that it freezes many prices at this time, while some retailers have chosen not to comment publicly.

Walmart Canada reports it does not have a blanket three-month freeze; instead it engages with suppliers year-round to challenge unjustified increases. Loblaw and the Retail Council of Canada have declined comment in some instances, reflecting the sensitivity around public messaging on price and inflation.

For many shoppers, the existence of an annual supplier freeze is not common knowledge. The mechanism returned to public view in recent years as grocers faced scrutiny and sought to explain the factors behind rising food costs. For example, some retailers announced temporary price freezes on private-label items to reassure consumers, though industry insiders noted that supplier blackouts are routine and often occur every year.

When retailers advertised such freezes, commentators sometimes dismissed the move as publicity rather than a substantive change in pricing behavior. Still, the announcements highlighted the pressure grocers felt from government and the public to address food affordability.

Weaker Canadian dollar also contributing to higher prices

As retailers end the blackout, they are also coping with other cost pressures. Metro’s CEO has pointed out the weaker Canadian dollar makes imports from the United States more expensive, affecting items like fresh produce that Canada imports more heavily during winter months. Commodities such as coffee and cocoa can also spike in price due to weather and harvest conditions, adding to supplier cost pressure.

“We’re managing it as best we can to mitigate those cost increases,” La Flèche said, noting that supplier requests for price increases remain elevated though they have been declining toward more normal levels in recent periods.

The blackout can create operational tensions for suppliers, who may have to absorb rising input costs until the freeze ends. Henry Chambers, senior vice-president for Canada and the Americas at consulting firm Sentinel MC, explained that while suppliers plan for the annual pause, unexpected cost shocks—such as sudden fuel hikes—can be difficult to manage within the fixed period.

Chapman added that the process for submitting and justifying price increases has become more demanding. Retailers face public scrutiny when prices rise and are therefore more diligent about evaluating whether supplier requests are warranted.

Grocery industry under scrutiny for high food prices and profits

The grocery sector has been the subject of intense public and regulatory attention amid claims that retailers have profited excessively during periods of inflation. Policymakers have pushed for fairer negotiations between suppliers and retailers, prompting discussions about codes of conduct and greater transparency in retailer-supplier relationships.

Although the supplier blackout itself was not a central element of recent government crackdowns or of the Competition Bureau’s studies, federal and provincial reviews have noted the blackout’s impact on smaller suppliers. A 2021 report from a Federal-Provincial-Territorial working group pointed out that supplier blackouts can force manufacturers to absorb outside cost increases for several months before they are allowed to seek a negotiated price adjustment. In some cases, suppliers must provide retailers with up to 12 weeks’ advance notice before a change can take effect.

Read more about grocery prices:

• Why food and other everyday items can feel expensive even when inflation is on target
• How rising food costs are changing our grocery shopping habits
• Ways credit card rewards can help manage food inflation and household budgets
• Factors driving higher costs across categories in Canada, from groceries to travel