The produce section of a Toronto Loblaws on May 3.Chris Young/The Canadian Press
Timothy Dewhirst is a professor and senior research fellow in marketing and public policy at the Gordon S. Lang School of Business and Economics at the University of Guelph.
Led by Emily Johnson and her Reddit page, Loblaws is Out of Control, several Canadian consumers this past spring called for a boycott of the grocery chain and its affiliated stores during the entire month of May. The move stemmed from widespread frustration about escalating prices and accusations that major grocers have unnecessarily profited from inflation.
In response to the boycott, Loblaw Cos. Ltd. L-T chair Galen Weston commented that it was “misguided criticism.” But last week, we learned that Loblaw and its parent company, George Weston Ltd. WN-T, agreed to a milestone $500-million class-action lawsuit settlement for its role in price-fixing and overcharging consumers for bread products. (Mr. Weston also serves as George Weston’s chair and chief executive officer.)
In the public’s mind, the settlement resurrects a scandal that Mr. Weston must have hoped would be long forgotten. And it lends credence to the idea that Ms. Johnson choosing Loblaw as the brand of focus for expressing legitimate consumer discontent was not misguided, after all.
In general, boycotts and brand avoidance initiatives are commonly emboldened by circumstances where certain companies are perceived to have betrayed the public trust and engaged in egregious acts. Such consumer protests are characterized by signalling efforts to the company in question about what is regarded as appropriate conduct and influencing changes in decision-making.
Why Loblaw specifically? Loblaw operates within an oligopoly, and the company is clearly the market leader. A company’s market dominance frequently represents a key factor that prompts boycotting.
After $500-million Loblaw price-fixing settlement, lawyers set sights on other industry players
Has the boycott proven to be effective? It’s questionable how much it did hurt the company’s bottom line, but that’s not the only definition of success. Consider the fact that Loblaw’s president and chief executive officer, Per Bank, met with Ms. Johnson in person to hear her concerns firsthand.
One topic of conversation was a grocery code of conduct that aims to reduce the power large grocers hold over suppliers, which observers say has an impact on price. Another matter was the challenges that shoppers with tight budgets face when promotions point to the necessity of buying multiple items to get a better price. After initial balking, Loblaw signed the code of conduct in July, and it had said it would end the practice of bulk promotions.
The boycott has also demonstrated that competition in the Canadian grocery sector is insufficient. Sometimes, boycotts and the derogation of companies can be driven by the desire to support an underdog. The Loblaw boycott prompted many consumers to question where they should alternatively turn to do their grocery shopping, but in many instances, their options were limited.
Reflecting continuous consolidation, the concentrated market power of food retailers in Canada has become striking. Just a few food retailers dominate the industry. Loblaw oversee many supermarket chains in Canada, including Zehrs, No Frills, Maxi, Valu-mart, Your Independent Grocer, Real Canadian Superstore, Provigo and Fortinos.
Significant competitors to Loblaw include Walmart and Empire, the parent company of Sobeys, with additional subsidiaries including Safeway, IGA, FreshCo, Foodland and Farm Boy. But neither name conjures an underdog status.
It’s important to remember the implications of such concentration: these grocers will always prioritize their shareholders over consumers and take advantage if market power is allowed to grow unchecked. The alleged bread-fixing scheme by Loblaw and its fellow grocers is easily among the most egregious abuses of their position.
In terms of the focus on Loblaw, identifying an apparent adversary is a fundamental component of social movements. In this instance, a particular company is likely to be identified, as shunning the entire industry is impractical, given that we cannot do without food.
So Mr. Weston has become the poster boy for consumers’ wrath concerning rising food prices. It didn’t help that he, as a billionaire tycoon, was previously the face and voice of low and affordable prices for Loblaw’s No Name products.
Ultimately, the news of Loblaw’s settlement serves as a necessary reminder of the merits of Ms. Johnson’s boycott.