Walmart and Costco Agree to ‘Aggressive’ Price Cuts on Food After Canada Turns Up the Heat

Canada's federal government received initial commitments from the country's five largest grocery chains to stabilize food prices, it announced Thursday.

The government said that the grocers will support its efforts to stabilize rising food prices, and that the grocery chains will propose “concrete actions” to keep prices down by Thanksgiving, which falls on Oct. 9.

Each grocer has already identified initial actions that they will implement in the coming days and weeks, including “aggressive” discounts across key food products, price freezes and price-matching campaigns, according to the statement.

The government also said it will establish a Grocery Task Force, which will monitor the grocers’ commitments and investigate practices that hurt consumers, like "shrinkflation." On Sept. 21, the government introduced legislative amendments to increase competition in the grocery sector in an attempt to drive down prices.

“If we don't see results, we will take additional action to restore the food price stability that Canadians expect,” the government said in its release.

The announcement follows from a meeting held last month by François-Philippe Champagne, the country’s Minister of Innovation, Science and Industry, with executives from five chains — Metro, Loblaws, Empire, Walmart and Costco — that make up about 80% of the Canadian market to discuss food prices.

Prime Minister Justin Trudeau said last month that his government was considering imposing taxes on the grocery chains if they did not develop measures to grapple with rising food prices.

Prices for food purchased in stores slowed to a still-high yearly rate of 6.9% in August, down from 8.5% in July. Cole Burston/Getty Images

Annual inflation came in at 4% in August, an unwelcome acceleration from the 3.3% rate in July, Statistics Canada reported last month. Prices for food purchased in stores slowed to a still-high yearly rate of 6.9% in August, down from 8.5% in July.

Much like the U.S. Federal Reserve, the Bank of Canada has been raising its interest rates to wrangle inflation down to its 2% target. The Canadian central bank held its rates at 5%, its highest level since 2001.

Bank of Canada official Nicolas Vincent warned that the practice of changing prices more often, which has become easier in places like grocery stores given electronic price tags, could make it more difficult for the government to tame inflation.

“In other words, if recent pricing behavior settles into a new normal, it could complicate our return to low, stable and predictable inflation,” Vincent said in a speech Tuesday.

Canada is not the only country struggling with rising grocery prices. Last month, French supermarket chain Carrefour began placing “shrinkflation” labels on products that have gotten smaller but cost the same to pressure major suppliers, including Nestlé, PepsiCo and Unilever, to slash prices.

Retailers in the country are currently negotiating with major brands to usher in price cuts as shoppers turn to retailers’ private label items for some pricing relief.