Canada's warning of new taxes on top grocers may not lower food inflation - analysts

Metro

15/09/2023 15:22

By Granth Vanaik and Juveria Tabassum
       Sept 15 (Reuters) - The Canadian prime minister's
warning of new taxes that might be imposed on national grocery
chains is unlikely to solve the problem of food inflation and
could lead to price increases for other essentials, industry
experts said on Friday.
    Prime Minister Justin Trudeau said on Thursday he had
invited the heads of Canada's five largest grocery chains,
including Sobeys  EMPa.TO , Metro  MRU.TO  and Loblaw  L.TO , to
Ottawa next week to discuss how they planned to control
sky-rocketing food prices. He said the government would impose
new taxes if their plans did not provide real relief.
    Trudeau's move comes when governments across the globe,
especially in Europe, have expressed concern over soaring food
prices as they seek to address a cost-of-living crisis that has
intensified after the pandemic subsided and since the
Russia-Ukraine war began. 
     However, after a similar move from the French government in
June, analysts were skeptical about Trudeau's warning. They
argued it was a "political" tactic and might be ineffective in
lowering lingering food inflation.
    "Both PM Justin Trudeau and François-Philippe Champagne
(Canada's industry minister) spoke tough about this topic and it
is difficult to envision what teeth they have to hold grocers
accountable," said Ben Jang, portfolio manager at Nikola Wealth.
    Michael Ashley Schulman, chief investment officer at Running
Point Capital Advisors, said new taxes could have the adverse
effect of causing price increases for other personal and
household essentials like toiletries and cleaning products.
    "The government is just trying to alleviate some of that
frustration that people have, but I don't think there's much
they're going to be able to do," Allan Small, senior investment
advisor at iA Private Wealth, said. 
    On Thursday, French supermarket chain Carrefour  CARR.PA 
slapped price warnings on products ranging from Lindt chocolates
to Lipton Ice Tea, to pressure top consumer goods suppliers,
including Nestle  NESN.S , PepsiCo  PEP.O  and Unilever
 ULVR.L , to lower prices.

 (Reporting by Granth Vanaik and Juveria Tabassum in Bengaluru;
Editing by Pooja Desai)
 ((Granth.Vanaik@thomsonreuters.com; Twitter: https://twitter.com/Vanaik_Granth;))