Canada's big grocery chains face pressure to cut prices as food costs rise

Food prices rose by 5.8 per cent in September, prompting the federal government to ask Canada’s five largest grocery chains to provide a plan for how they will stabilize prices, with staple products a likely focus. “High transportation costs, inventory issues and other pressures driving up costs are subsiding,” says Professor Saibal Ray, who specializes in Operations Management. Ray, commenting to Financial Post and Toronto Star, suspects the grocers’ promises to Ottawa will involve price cuts. “The price reduction or stabilization will be in staples, and grocers could try to compensate for slimmer margins in staple products by expanding their margins in luxury goods.” But the true test will come in the next round of quarterly earnings. “If the margins remain the same,” Ray asks, “then what are they doing?”