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The rising price of groceries has been a source of outrage and controversy over the past few years, but the burden that is placing on consumers isn’t lost on food producers, says the head of Kraft Heinz Canada.
Simon Laroche, who recently completed his first year as president of the food conglomerate’s Canadian operations, said Kraft has absorbed about half of its input cost increases by being more productive and efficient, in an effort to avoid passing higher prices to shoppers.
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“During COVID-19, we learned to be more resilient, so we diversified our sources of where we procure our ingredients,” he said, noting the company has still grappled with supply chain problems over the past year, though these now seem to be stabilizing.
Laroche said another strategy the company has adopted is known in the industry as price-pack architecture, which involves offering different sizes of an item at various price points to appeal to different consumer groups. For example, Kraft Heinz has three different sizes of its peanut butter (500 grams, 1 kilogram and 2 kilograms).
“It’s kind of a new sexy name for something that we’ve been doing in marketing for a while — we’re just doing it with a greater sense of sophistication,” said Jordan LeBel, a marketing professor at Concordia University.
LeBel said price-pack architecture is similar to precision marketing, a technique in which companies target key customer segments with a set of benefits in a product at a price point that will most appeal to them. He said the strategy is designed to convert first-time buyers of the product into loyal customers.
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Some critics have suggested price-pack architecture bears a resemblance to shrinkflation, a practice in which manufacturers downsize the size or quantity of a product, while keeping prices the same. Kraft has faced criticism on the shrinkflation front: a report in December noted Kraft Dinner packages that used to be 225 grams had shrunk to 200 grams but remained at the same price, something the company acknowledged citing price pressures.
Laroche said his team remains focused on controlling prices, while maintaining quality and taste.
“That’s what what we’re all working towards every single day, together with quality, obviously, and great taste. Because in our industry, if it doesn’t taste good, you don’t sell anything.”
Laroche said he believes that Canada’s grocery code of conduct, which he was involved in as part of the Food, Health & Consumer Products of Canada (FHCP) group, will also help stabilize prices.
He worked five years in Australia, which already has an established grocery code of conduct. He believes the voluntary code in Canada, intended to improve dealings between big grocery stores and their suppliers, could help stabilize prices and benefit consumers in the long run as well.
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“I think creating a level playing field for everyone and a more stable and fair (trading) environment will benefit everyone in the long run,” he said.
• Email: slouis@postmedia.com
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