Shoppers exit a Sobeys grocery store in Toronto on March, 2021. Empire, the owner of Sobeys and other grocery brands, said sales of U.S. products are falling as consumers prioritize Canadian goods during a trade war with the U.S.Melissa Tait/The Globe and Mail
Sales of American products are “rapidly dropping” in grocery stores amid the trade war with the United States as shoppers keep a sharp eye on where their food is coming from, according to the chief executive officer of Sobeys Inc. parent Empire Company Ltd. EMP-A-T.
“We have heard loud and clear from our customers that they want Canadian products,” Empire CEO Michael Medline said Thursday during a conference call to discuss the company’s third-quarter results.
Last week, U.S. President Donald Trump applied punishing 25-per-cent tariffs on all Canadian imports except for energy and critical minerals, then walked that back for goods compliant with the United States–Mexico–Canada Agreement (USMCA) until April 2. Countertariffs on roughly $30-billion worth of U.S. imports into Canada remain in place.
And on Wednesday, U.S. tariffs on Canadian steel and aluminum took effect, resulting in further retaliatory tariffs on U.S. steel and other goods coming into Canada.
That means prices will begin to rise for products on Canadian shelves that come from the U.S., retailers have signalled. This week, grocer Loblaw Cos. Ltd. introduced a new “T” symbol on store signage to indicate products affected by tariffs.
Empire, which operates grocery banners including Sobeys, Safeway Inc., FreshCo and IGA Canada Inc., currently sources about 12 per cent of its products from the U.S., Mr. Medline said. The retailer has identified alternative sources in nearly every category, he said, and is also pushing back on suppliers to ensure that “reactionary or unnecessary costs are not passed on to customers.”
Suppliers who do not want their products to become less competitive are also looking at alternatives, Mr. Medline said. He cited Lindt & Sprüngli as one example: Roughly half the products the Swiss chocolatier sells in Canada come from its U.S. plants, but last week it decided to start supplying this country from Europe.
Meanwhile, sales of Canadian products have picked up, especially since stores began adding new signage to help shoppers identify those items more easily. Sales of U.S. products as a percentage of total sales “are rapidly dropping,” Mr. Medline said.
The biggest risk from the trade war, he added, is the impact it could have on the Canadian economy and consumer confidence. While the company has not yet seen warning signs of cautious behaviour among shoppers in its stores, the growing uncertainty is a problem.
“While we have a strong plan to deal with the direct impacts of retaliatory tariffs, we don’t want to downplay the risks that exist,” Mr. Medline said. “The uncalled-for tariffs and the retaliatory tariffs represent a real threat to the Canadian economy.”
On Thursday, Empire reported profit and sales growth during the third quarter. Net earnings rose to $146.1-million, or 62 cents per diluted share, in the 13 weeks ended Feb. 1, compared with $134.2-million, or 54 cents per share, year-over-year.
Same-store sales – an important metric that tracks sales growth not tied to new store openings – were up 2.6 per cent, excluding fuel sales. In total, sales grew 3.2 per cent to $7.7-billion in the quarter year-over-year.