Canadian snack maker Neal Brothers sees sales surge amid Loblaws fight with Frito-Lay

Canadian snack company Neal Brothers says orders have gone through the roof as a result of a fight over potato chip prices between Loblaws and Frito-Lay.

Frito-Lay, themaker of snack brands such asCheetos, Doritos, Lays, Ruffles and Sunchips, set off an unexpected food fight last month when it abruptly cut off one of Canada's biggest grocery chains because of their refusal to raise prices.

Frito-Lay, which is owned by PepsiCo., said it took the extraordinary step because it is facing "unprecedented pressures from rising costs of items, including ingredients, packaging and transportation." Itwas pushing Loblaws to charge customers more for their products in order to recoup those higher costs, the company said.

But Loblaws refused to pass on those costs, with the grocery chain saying it is "laser focused" on keeping prices as low as possible.

The result has been someempty shelves for snackersbut alsoan opportunity for alternatives such as Richmond Hill, Ont.- based Neal Brothers, which makes premium, natural and organic snacks.

"Two weeks ago today, I got an urgent call from a great partner of ours at Fortinos," company founder Peter Neal told CBC News in an interview.

Fortinosis a chain of23 grocery stores in Ontario, owned by Loblaws, and the company was in desperate need of chips to replace the inventory lost to Frito-Lay's suddendecision.

WATCH |The food fight between Frito-Lay and Loblaws, explained:

Pricing dispute could lead to chip shortage at Loblaws stores

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Duration 2:08

A pricing dispute between Loblaws and Frito-Lay Canada could result in a chip shortage on supermarket shelves.

Sales risenot sustainable

Shortly after that call, Neal got a similar one from parent company Loblaws, asking for what he describes as a "huge" request compared to their normal order.

"We were able to fulfilpart of it, and the rest of it we'll hopefully be able to fulfil early next week," Neal said.

"We just had another order come in yesterday, and that will put us up to, by the end of next week, a good 100 per centor more."

While Neal is enjoying the new business, he doubts the company can sustain at this level of productionand hopes that once the current surge calms down, sales might level off at a plateau that's maybe 20 per cent higher than the previous baseline.

"We'rehoping consumers will see our productfor the first time, and once this is all over, and we're not in those main aisles, they will seek us out in the natural food section."

WATCH| Follow your food from farm to fork to see why prices are going up:

Following rising food costs from the farm to the store

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Increasing expenses along the supply chain and even the weather are some factors behind rising food costs Canadians are seeing at the grocery store.

Sylvain Charlebois, director of the Agri-Food analytics lab at Dalhousie University in Halifax, says the fight between Frito-Lay and Loblaws may have come as a surprise to shoppers, but it is far from the only such fight behind the scenes.

"Make no mistake: many other manufacturers and grocers are involved in similar tug-of-war disputes," he said in an email. "It's happening in dairy and bakery, so many food categories are impacted by this."

Costs rising everywhere

Supply chain disruptions coupled with high inflation are pushing up the price of all sorts of food, and that trend is unlikely to dissipate any time soon

"For years, during supply-chain games, food manufacturers had to blink first," he said."[Frito-Lay's] move signals that the sector is tired of and desperate to stop supply-chain bullying."

While Neal's pleased with the new business, the surge is hardly a windfall. Because the company that bears his nameis facing the same supply chain problems and higher costs that everyone else is. Trucking costs alone have tripled, and sometimes even quadrupled, Neal said.

"People say,'You must have won the jackpot,'but no ... it's good for visibility, but we are making less money on every bag now."

"It's really, really challenging right now," he said. "This is worse than March and Aprilof 2020 when the pandemic first started."