Business

Canadian snack maker Neal Brothers sees sales surge amid Loblaws fight with Frito-Lay

Canadian snack company Neal Brothers says orders have gone through the roof as a result of a fight over potato chip prices between Loblaws and Frito-Lay.

Canadian snack maker says orders have almost doubled, but costs are up, too

Ontario grocery chain Fortinos recently put in a massive order for Neal Brothers chips, due to the sudden lack of product from Frito-Lay. (Submitted by Peter Neal)

Canadian snack company Neal Brothers says orders have gone through the roof as a result of a fight over potato chip prices between Loblaws and Frito-Lay.

Frito-Lay, the maker of snack brands such as Cheetos, Doritos, Lays, Ruffles and Sunchips, set off an unexpected food fight last month when it abruptly cut off one of Canada's biggest grocery chains because of their refusal to raise prices.

Frito-Lay, which is owned by PepsiCo., said it took the extraordinary step because it is facing "unprecedented pressures from rising costs of items, including ingredients, packaging and transportation." It was pushing Loblaws to charge customers more for their products in order to recoup those higher costs, the company said.

But Loblaws refused to pass on those costs, with the grocery chain saying it is "laser focused" on keeping prices as low as possible.

The result has been some empty shelves for snackers but also an opportunity for alternatives such as Richmond Hill, Ont.- based Neal Brothers, which makes premium, natural and organic snacks.

"Two weeks ago today, I got an urgent call from a great partner of ours at Fortinos," company founder Peter Neal told CBC News in an interview.

Fortinos is a chain of 23 grocery stores in Ontario, owned by Loblaws, and the company was in desperate need of chips to replace the inventory lost to Frito-Lay's sudden decision.

WATCH |The food fight between Frito-Lay and Loblaws, explained:

Pricing dispute could lead to chip shortage at Loblaws stores

4 months ago
Duration 2:08
A pricing dispute between Loblaws and Frito-Lay Canada could result in a chip shortage on supermarket shelves.

Sales rise not sustainable

Shortly after that call, Neal got a similar one from parent company Loblaws, asking for what he describes as a "huge" request compared to their normal order.

"We were able to fulfil part of it, and the rest of it we'll hopefully be able to fulfil early next week," Neal said.

"We just had another order come in yesterday, and that will put us up to, by the end of next week, a good 100 per cent or more."

While Neal is enjoying the new business, he doubts the company can sustain at this level of production and hopes that once the current surge calms down, sales might level off at a plateau that's maybe 20 per cent higher than the previous baseline.

"We're hoping consumers will see our product for the first time, and once this is all over, and we're not in those main aisles, they will seek us out in the natural food section."

WATCH | Follow your food from farm to fork to see why prices are going up:

Following rising food costs from the farm to the store

4 months ago
Duration 2:38
Increasing expenses along the supply chain and even the weather are some factors behind rising food costs Canadians are seeing at the grocery store.

Sylvain Charlebois, director of the Agri-Food analytics lab at Dalhousie University in Halifax, says the fight between Frito-Lay and Loblaws may have come as a surprise to shoppers, but it is far from the only such fight behind the scenes.

"Make no mistake: many other manufacturers and grocers are involved in similar tug-of-war disputes," he said in an email. "It's happening in dairy and bakery, so many food categories are impacted by this."

Costs rising everywhere

Supply chain disruptions coupled with high inflation are pushing up the price of all sorts of food, and that trend is unlikely to dissipate any time soon

"For years, during supply-chain games, food manufacturers had to blink first," he said. "[Frito-Lay's] move signals that the sector is tired of and desperate to stop supply-chain bullying."

Neal Brothers, founded by brothers Peter and Chris Neal, shown here, have seen a surge in business. (Evan Mitsui/CBC)

While Neal's pleased with the new business, the surge is hardly a windfall. Because the company that bears his name is facing the same supply chain problems and higher costs that everyone else is. Trucking costs alone have tripled, and sometimes even quadrupled, Neal said.

"People say, 'You must have won the jackpot,' but no ... it's good for visibility, but we are making less money on every bag now."

"It's really, really challenging right now," he said. "This is worse than March and April of 2020 when the pandemic first started."

ABOUT THE AUTHOR

Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: pete.evans@cbc.ca

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