The escalating trade dispute between Canada and the United States is having a significant impact on consumer purchasing habits, as sales of American products in Canadian grocery stores continue to decline. The shift comes as shoppers grow increasingly mindful of the origins of their food, according to Empire Company Ltd., the parent company of Sobeys.
“We have heard loud and clear from our customers that they want Canadian products,” said Empire CEO Michael Medline during a conference call discussing the company’s third-quarter earnings. “Sales of U.S. products as a percentage of total sales are rapidly dropping.”
The decline in American product sales comes in response to ongoing tariff disputes between the two countries. Last week, U.S. President Donald Trump imposed a 25% tariff on all Canadian imports, excluding energy and critical minerals. However, this was later revised to exempt goods that comply with the United States-Mexico-Canada Agreement (USMCA) until April 2. In retaliation, Canada has maintained countertariffs on approximately $30 billion worth of U.S. imports.
Further exacerbating the situation, U.S. tariffs on Canadian steel and aluminum took effect this week, prompting Canada to implement additional retaliatory tariffs on American steel and other goods. These measures are expected to drive up prices for U.S.-sourced products on Canadian shelves, forcing retailers and suppliers to reevaluate their sourcing strategies.
Retailers and Suppliers Adapt to Avoid Price Increases
Empire, which operates grocery chains such as Sobeys, Safeway, FreshCo, and IGA, currently sources about 12% of its products from the U.S. Medline emphasized that the company has already identified alternative suppliers in nearly every product category. Additionally, Empire is pressuring suppliers to ensure that unnecessary price increases do not burden consumers.
Some suppliers are also taking steps to maintain their competitiveness in the Canadian market. Swiss chocolatier Lindt & Sprüngli, for example, has historically imported about half of its Canadian inventory from U.S. plants. In response to the tariffs, the company has decided to shift its Canadian supply chain to source products directly from Europe, bypassing American production facilities altogether.
Canadian-Made Products See Boost in Sales
Retailers have been proactive in guiding consumer behaviour by introducing store signage that highlights Canadian-made products. Grocery giant Loblaw Cos. Ltd., for instance, has rolled out a new “T” symbol on store signage to indicate which products have been affected by tariffs. This approach has contributed to the increasing preference for domestic goods, leading to a decline in sales of U.S. imports.
Empire has also reported a noticeable uptick in demand for Canadian-made products, a trend that Medline attributes to both the trade conflict and the company’s efforts to showcase local brands. “Customers are making a conscious effort to support Canadian businesses,” he said.
Potential Risks to Consumer Confidence
While the immediate effects of the trade war appear to be benefiting Canadian producers, Medline cautioned that the larger concern lies in the potential economic impact and consumer confidence. “The uncalled-for tariffs and retaliatory measures pose a real threat to the Canadian economy,” he warned. “While we have a strong plan to deal with the direct impacts, we can’t ignore the broader risks.”
At present, Empire has not observed a significant shift in consumer spending behaviour beyond product sourcing preferences. However, continued economic uncertainty could lead to cautious consumer spending, which may affect overall retail performance in the long run.
Strong Financial Performance Despite Market Uncertainty
Despite the challenges posed by the trade war, Empire has reported strong financial results for the third quarter. The company posted a net profit of $146.1 million, or 62 cents per diluted share, in the 13 weeks ending February 1, compared to $134.2 million, or 54 cents per share, in the previous year.
Same-store sales, which track revenue growth excluding new store openings, rose by 2.6% (excluding fuel sales), while total revenue increased by 3.2% to reach $7.7 billion for the quarter.
Adapting to a Changing Trade Environment
As the trade dispute continues to unfold, Canadian grocery retailers and suppliers are positioning themselves to mitigate its effects. With a growing preference for local products, retailers are working to solidify their supply chains and support Canadian businesses. However, the uncertainty surrounding future trade negotiations means that businesses must remain agile and prepared for potential market disruptions.
“We are adapting quickly and working to ensure that reactionary or unnecessary costs do not reach our customers,” Medline concluded. “Our focus remains on delivering quality products at fair prices, regardless of the challenges we face.”
Sobeys needs to promote its house brands (e.g. Compliments) more heavily, most of which are produced here. For example, most national brand dish soap is made in the U.S. but Compliments is made in Canada.