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Food inflation ‘still omnipresent,’ warns Agropur CEO

MONTREAL — Despite hopes of a lull, inflation remains "omnipresent" across the supply chain of the Agropur dairy co-operative, its CEO says.
The Agropur logo is seen on a carton of milk in Montreal on Tuesday, June 18, 2019. THE CANADIAN PRESS/Paul Chiasson

MONTREAL — Despite hopes of a lull, inflation remains "omnipresent" across the supply chain of the Agropur dairy co-operative, its CEO says.

Émile Cordeau has yet to see inflation level off on the ground, even amid data suggesting prices are coming back to earth.

“We hear a lot about slowing inflation. What I can tell you is that at Agropur currently, on the contrary, inflation is still omnipresent throughout our entire supply chain,” he said during an interview in French from the sidelines of the co-operative's annual general meeting Wednesday.

“Our inputs still have inflationary pressure. It hasn’t really changed on our side,” said the head of the outfit behind the Natrel and Québon dairy brands as well as Oka cheese.

Several factors are adding pressure to Agropur’s profit margins. Cordeau pointed to the price of ingredients, transportation costs, labour scarcity and high interest rates.

The chief executive believes inflationary pressures will persist well past 2024 in his industry, particularly due to labour scarcity.

“The labour shortage will not go away. So, there will continue to be significant pressure and competition to attract talent and attract labour. For us, it will be part of our daily life for several more years.”

Food inflation reached 9.8 per cent in 2022, its highest point since 1981. It slowed throughout 2023, but still persists at an above-target rate. Food inflation was 4.7 per cent in December, according to data from Statistics Canada.

As a result, households have changed their eating habits. Agropur said it had seen a decrease in cheese consumption in Canada and the United States. “We don’t see cheese as a category that will decline in the future," he added.

Cordeau said other shifts in consumption habits have been favourable to the co-operative's activities in the private label sector, which is experiencing renewed popularity in grocery stores, in particular.

Agropur executives hope to mitigate inflationary pressures through efficiency gains, he said.

Asked whether the co-operative is mulling artificial intelligence, Cordeau answered in the affirmative.

“I would tell you that the biggest gains we can find are in everything that is forecast: trends, consumption forecasts, demand forecasts, production forecasts — really in everything that is planning where we can really benefit from artificial intelligence.”

Meanwhile, Agropur has reduced its debt load to target levels after hitting a peak during the pandemic.

The Montreal-area-based dairy processor reported debt amounting to 2.4 times its earnings before interest taxes, depreciation and amortization for the fiscal year ended Oct. 28.

In 2019, Agropur appointed Cordeau to the top job to lower the tides of red ink that resulted from a series of acquisitions in the 2010s.

The debt ratio climbed to a high of 8.3 times in April 2020 before falling to its current level, the first time in years the target ratio of between two and three times was achieved.

Cordeau did not rule out deviating from that target again in the short term to finance a fresh acquisition, for example, but he said management does not intend to stray from it for too long.

“The goal, on the other hand, will always be to have discipline to bring yourself back into that range,” he said.

Agropur said net earnings rose five per cent to $133.9 million last year from $127.2 million in 2022, while revenue decreased three per cent to $8.21 billion from $8.48 billion.

The co-operative also said it will pay $50 million to its 3,000-plus members across Quebec, Ontario and Atlantic Canada in the form of rebates and the repurchase of shares and debt securities, a nearly 25 per cent increase from 2022.

This report by The Canadian Press was first published Feb. 7, 2024.

Stéphane Rolland, The Canadian Press

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