Last week, a mom friend of mine sent me an Instagram post about the Loblaws boycott, happening throughout the month of May, admitting she didn’t know much about it but that it sounded interesting. So I thought I’d write about it this week.
Led by creators of a Reddit group called “Loblaws is out of control,” the purpose of the boycott is to send the retailer a strong message and combat food inflation in Canada overall.
Their specific demands? An immediate 15% price reduction; no more retailer-led price increases for the rest of the year; increased cost transparency; identification of products subject to “shrinkflation;” and many more. (They’ve recently updated their demands to include more competition in the Canadian grocery industry.)
Although many experts agree the boycott won’t have much effect, and will likely lose momentum well before the month’s end, the importance of the issue can’t be downplayed. Cost of food, and living, is a top concern for Canadians right now and the 76,000 members of the Reddit group – and many more Canadians – have real concerns and frustration.
I talked to Dr. Stuart Smyth, a professor in the University of Saskatchewan’s Department of Agricultural and Resource Economics, earlier this week about his thoughts on the boycott and how consumers can channel their frustrations effectively. See some highlights below.
What do you think of the boycott?
Some of what they are calling for shows a complete disconnect from any basic fundamental economics and business competencies.
One of their demands is an immediate 15% reduction in food prices. How could any business suddenly reduce the cost of everything they're selling by 15% and still remain solvent?
Loblaws, like every other grocery retailer, is locked into pricing contracts so if they're buying an item at $10 per item, they can't suddenly break that contract and expect to get it for $8.50. They will get ended up getting nothing because the supplier is going to say, ‘you broke the contract and I can sell all of what I'm producing to someone else for $10.’
In this world we're now in, of instant social media, this seems to me more of a frustration and an outrage protest than a credible and logical starting point to have a conversation.
The causes of rising costs of food in recent years are complex and varied (see graph at bottom of post for more information on this). Loblaws is a simple and easy candidate to take most of the blame – especially since the company’s profits went up 9.8% over last year in the first quarter of this year. Are people right to blame the food companies?
The bread price fixing scandal [which resulted in the cost of bread products being sold by a group of Canadian grocery retailers, including Loblaws, being artificially inflated in Canada for more than a decade] shows that companies in the food retail space have deliberately decided to increase the price of, in this case bread, and take advantage of consumers.
Consumers have long memories. And so, they might not remember the specifics of what it was, but they will remember that one of the companies was found guilty of fixing prices. So then that mistrust tends to spill over to the entire sector.
Grocery companies also have responsibilities to their shareholders to make profits. It’s not realistic to ask them not to do so. One better, long-term solution to stabilizing food prices could be increasing the amount of competition in the grocery sector in Canada, which would drive better products and value for Canadians. Do you agree with this?
There's been an incredible amount of consolidation in the retail space over the last even 20 years. Once Walmart and Costco really progressively started to move into the Canadian market, we saw consolidation.
The federal government is saying, ‘we're trying to entice international retailers to come and establish in Canada.’
But Target and Lowe’s are recent examples of American companies moving here, setting up in this space and not making a go of it.
Have the economic changed since Target went under? Maybe minutely in the last few years. But what this tells me is that for an international company to come to Canada, the only markets that would be largely profitable are Montreal, Toronto, and Vancouver. Outside of that, you would have some marginal ones — the next handful of big cities: Winnipeg, Edmonton, Toronto, and a few others in Ontario and Quebec, but you might have 10 markets in the country.
Is that going to provide benefit to some Canadians? A few. But is it going to address the country wide problem? Not in the least.
If you read the Reddit thread, yes there are some extreme views, but in my opinion it’s largely a group of people who are genuinely affected by, and worried about food inflation and feel powerless over what’s been happening in recent years. They want to do something to address this. Are there better options for them to do something that might have more of an impact?
I think where they need to put pressure on is on their MPs. There are a number of alternatives, policy mandates that the federal government is responsible for, but they're simply not willing to take action on.
People could choose whatever one, two or three of those items are the most important for them: the fact that the foreign worker program isn't working very well; the lack of training for truck drivers; the lack of pipeline – even though we just had a new pipeline open, we're still transporting an awful lot of oil by rail in this country, so food prices are higher because of that.
Contact your MP and push for the government to take action on the policies that actually do contribute to higher food prices.
The federal government has been working to implement a Code of Conduct for grocery retailers in this country, which aims to address the lack of competition here and enhance transparency throughout the entire value chain, which will likely be good for the agriculture industry as well. Where are we at on that?
The Code of Conduct has been stalled. The House of Commons is going to break within the next four to six weeks.
Ask your MP: ‘Where's the Grocery Code of Conduct at? Why aren't we seeing that in place? What could we expect this fall?’
I think if MPs hear that message, maybe that will expedite things in the fall and we will actually get something.