Frito-Lay stops shipping chips to Loblaws stores in pricing dispute

One of Canada's biggest food manufacturers has halted shipments to the country's largest grocer in an extreme example of how inflation is impacting the food industry and driving a wedge between some retailers and suppliers.

At issue is a dispute over pricing between Frito-Lay Canada and Loblaw Companies Ltd. Frito-Lay, the maker of brands like Cheetos, Doritos, Lays, Ruffles and Sunchips, says it's trying to recoup higher costs.

The situation has left the chip and snack food aisle of many Loblaw stores less full than usual, or stocked with house brands, such as President's Choice or No Name.

Frito-Lay spokesperson Sheri Morgan confirmed there is a "temporary disruption" with one customer.

"Our business has faced unprecedented pressures from rising costs of items including ingredients, packaging and transportation," she said in an email.

"To help offset these pressures on our Canadian operations … we have made adjustments to our prices that are consistent across the marketplace."

Loblaw spokesperson Catherine Thomas said the grocer is "laser focused" on minimizing retail price increases.

"When suppliers request higher costs, we do a detailed review to ensure they are appropriate," she said in an email. "This can lead to difficult conversations and, in extreme cases, suppliers don't ship us products."

The rift between Frito-Lay and Loblaw exposes deepening tensions in Canada's food industry that many experts say could worsen as supply chain challenges and inflation continue.

Some argue that grocery retailers are simply trying to keep sticker prices low for consumers and stop suppliers from using inflation to justify unreasonable price hikes.

Others suggest grocers are using their market strength to bully suppliers and pad their bottom lines.

"It's challenging that it has devolved into such a confrontational relationship," said Michael Graydon, CEO of Food, Health & Consumer Products of Canada, which represents Frito-Lay.

"The level of frustration is growing."

The increase in wholesale prices some suppliers are seeking from retailers will help mitigate ongoing inflation — but won't completely offset higher costs, Graydon said.