September 22, 2009 / 6:58 PM / 9 years ago

UPDATE 1-Loblaw sees tough year ahead for grocers

* Sees food price deflation, weak consumer confidence

* Expects volume and value to be key

TORONTO, Sept 22 (Reuters) - The next 12 months will be a difficult time for grocers as they cope with falling food prices and weak consumer confidence, a top executive at Loblaw Cos (L.TO) said on Tuesday.

Allan Leighton, the deputy chairman of the country’s biggest grocery chain, told a retail conference in Toronto, that prices will be affected over the next year as “food inflation turns into food deflation.”

Grocers have depended on rising food prices in past quarters as they passed on higher costs for commodities such as wheat, rice, vegetables and fruit to consumers.

But industry experts now see a slowdown in price increases in the next few months and this will translate into less spectacular earnings growth for Canada’s big supermarket chains.

To mitigate this shortfall, Leighton said retailers must focus on volume and value.

“Volume will rule, value will drive,” Leighton said.

Earlier on Tuesday, Statistics Canada said retail sales unexpectedly fell in July from June after two months of robust gains, pushed lower by a drop in gasoline prices and poor sales in supermarkets and home electronics stores.

$1=$1.07 Canadian Reporting by Scott Anderson; editing by Rob Wilson

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