Grocery price cuts are in retailers' food court | The Grower


Category:  News & Politics

Via:  jbb  •  2 weeks ago  •  0 comments

By:   Owen Roberts

Grocery price cuts are in retailers' food court | The Grower
High grocery prices have irked consumers to the point of boycott, specifically against Loblaw. Columnist Owen Roberts warns about some trickle-down effects on the farm.

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Grocery price cuts are in retailers' food court

. Owen Roberts - May 27, 2024

Other than the electric vehicle sector, you'd be hard pressed to find an industry as caught up in confusion and controversy right now as food retailing. Growers have mostly avoided the blame of price hikes. But when the public - and governments - are finger-pointing at who's to blame for high food prices, then it's time to raise your antennae.

Here's why. Food retailers play a huge role in making quality food accessible to consumers. They are almost always the interface between producers and the public. So naturally, people consider them responsible for prices.

Prices have consumers on edge and Canadians have lined up at food banks like never before.

The federal government called on the retail chain in the fall of 2021 to develop a Grocery Code of Conduct to govern their behaviour when negotiating with suppliers. The meetings have dragged on, until Loblaw president and CEO Per Bank announced on May 16 that the company would sign, provided that hold-outs would sign too. Over to you, Wal-Mart Canada and Costco.

The Standing Committee on Agriculture and Agri-Food has called on five of the country's biggest grocers - Loblaw, Empire, Metro, Wal-Mart and Costco -to do something to stabilize food prices.

Sure, the grocers said. How about aggressive discounts, price freezes and price-matching campaigns?

Um, OK…but wait. Those measures already happen in grocery stores. This is a chronic, frustrating smokescreen. And with just a handful of retailers dominating 80 per cent of the market, there's hardly anywhere in the mainstream for consumers to turn. Loblaw Companies, for example, own discount chain No Frills and Maxi.

The same thing is happening in the U.S. There, the Federal Trade Commission has for now blocked the largest supermarket acquisition in history - that is, Kroger's proposed $24.6 billion acquisition of another grocery giant, Albertsons.

The commission said what everyone believed: the deal is anti-competitive. The Biden government loathes monopolies; in the food sector, it's seen terrible collusion and price manipulation between meat companies that took advantage of consumers over the pandemic and made obscene profits. Again, the shrinking ownership base and lack of competition were cited as the cause.

Excessive profits irk Canadian food shoppers too. While they were limping along through the pandemic, Loblaw was unapologetically posting huge profits. Most lately, Loblaw chief financial officer Richard Dufresne gushed that company earnings and sales will keep rising because it's gaining market share in the discount segment. It will spend $2 billion in capital investments for stores such as No Frills and Maxi this year.

All this means that even when consumers turn to discounters, more and more they face the prospect of lining Loblaw's pockets or as one consumer said, "trading our loyalty points for higher prices."

In May, some disgruntled shoppers said they had enough, and aimed their ire at Loblaw. On the same day the company reported $13.58 billion in first quarter profit (a 4.5 per cent increase from a year earlier), a group on the social media platform Reddit said "Loblaws is out of control." The group launched a 30-day boycott of Loblaw's 2,450-plus stores and brands such as the Real Canadian Superstore, Zehrs, Your Independent Grocer (IGA), Valumart, Shoppers Drug Mart, Provigo and City Market.

The group said it was fighting what it called "greedflation" and wanted to see prices come down 15 per cent.

Loblaw chairman Galen Weston was unmoved. He responded by calling the group's efforts misguided and said a steep price cut like that would sink his ship. He failed to gain much sympathy with the boycotters though: a week into the boycott, Loblaw share price hit an all-time high of $156.

If the boycott works or even gives the appearance of working, expect a trickle-down effect on the farm. Imagine the opportunity this boycott gives retailers like Weston to say sure, we'll charge consumers less, but farmers must sell to us for less, too.

What a field day: retailers finally getting the chance to chisel producers with consumers' support. Farmers who failed to comply would look greedy, like retailers do now.

I'd like to think this wouldn't happen, at least not in a year when net cash income is forecast to fall 14 per cent. Take another 15 per cent away? That's when ships would truly sink.

The ball is in retailers' court.


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