Loblaw CEO Per Bank says higher traffic at its grocery retailers, including No Frills, is proof that customers see value in Loblaw’s stores.Chris Young/The Canadian Press
Calls for a boycott of stores owned by L-T are an example of “misguided criticism,” chairman Galen Weston said on Thursday as he pushed back against demands to reduce food prices.
Mr. Weston added that he understands why criticism of retailers has been mounting, as consumers are frustrated with the higher cost of groceries. During the company’s annual meeting on Thursday he acknowledged that it is “natural that Loblaw would be singled out” for criticism as Canada’s largest grocer.
But Mr. Weston and Loblaw chief executive officer Per Bank both called out accusations of profiteering as misinformation during their remarks at the meeting.
“Inflation is a global issue and it is not specific to our company or to our industry,” Mr. Weston said. “Allegations of profiteering on the back of inflation are untrue.”
The rate at which food prices are rising has slowed recently, with food inflation 1.9 per cent higher in March compared with the prior year, according to Statistics Canada. That is a marked improvement from peaks of around 11 per cent early last year, but does not change the fact that grocery prices are now much higher than they were just a couple of years ago.
That has had an impact on Canadians’ household budgets, and led to widespread anger. On social media, some have encouraged a boycott of Loblaw-owned stores starting on Wednesday. A Reddit page dedicated to complaints about Loblaw and other large grocers now has 67,000 members.
The Reddit group has listed demands related to the boycott that include price caps on essential items, an end to “price gouging,” and clearly identifying “shrinkflation,” or items that have shrunk in volume while staying at the same price. A previous demand for an immediate 15-per-cent reduction in prices was dropped in the most recent list. On Thursday, Mr. Weston said that a price decrease of that scale would be equal to roughly three times Loblaw’s annual earnings, and would drive the company out of business.
A study of the grocery industry by the federal Competition Bureau, released last June, found that the sector needs more competition in order to bring prices down and give consumers more choice. Following years of consolidation, five grocers now control roughly 80 per cent of the retail market in Canada.
Because the largest grocers are the access point to so many consumers, suppliers have complained about the fees they are able to impose – in the form of deductions from invoices – for suppliers to deliver products to stores or distribution centres, for example, and to be placed on store shelves. In 2020, fee hikes announced by both Loblaw and Walmart led to renewed calls for a code of conduct to govern the relations between retailers and suppliers.
“This just goes to show how much market power the retailers have. That should be part of this debate,” said Sven Anders, an economist at the University of Alberta who studies the food industry. Suppliers having to absorb such fees can contribute to higher prices, he added.
Retailers, for their part, have attempted to shift the narrative, pointing to those suppliers’ repeated, “outsized” requests for price hikes in recent years. Grocery executives have also pointed out that the causes of food inflation are wide-ranging, and include extreme weather events, conflicts such as the war in Ukraine, commodity price increases and labour shortages.
A report from the Bank of Canada last year found that as costs rose during the pandemic, “consumer-oriented firms” including retailers held their profit margins roughly steady, passing on those costs to consumers in the form of higher prices. But the report found “little evidence of rising markups amplifying the inflationary impact of rising costs.”
Still, as prices have shot up, grocers’ profits have increased alongside sales, leading to criticism from politicians and consumers. Last year, executives from the largest grocery chains were called to Ottawa to answer questions about food inflation, with the federal government urging companies to take steps to rein in prices.
The moderators of the Reddit group that gave rise to the boycott have distanced themselves from some online who are encouraging people to steal from Loblaw stores, writing on the page that they are not associated with those messages and condemn “all illegal activity.”
Mr. Weston said on Thursday that he is hopeful Canadians will reject calls to engage in shoplifting.
“There’s a group of people who have been relentlessly propagating a narrative they know is false, and it is now being used to justify theft on a grand scale,” he said. Loblaw’s CEO echoed that sentiment.
“As I’m sure you agree, stealing is wrong in any scenario,” Mr. Bank said.
The meeting occurred the day after the Brampton, Ont.-based company reported a 9.8-per-cent increase in profit in its first quarter, saying that customers are visiting its stores more often, including discount banners such as No Frills and Maxi. Mr. Bank said that the higher traffic was proof that customers see value in Loblaw’s stores.
Loblaw also announced an increase in its dividend paid to shareholders on Wednesday. The boycott organizers had previously asked for a halt in dividend increases.
Same-store sales – an important metric that tracks sales growth not tied to new store openings – increased by 3.4 per cent in the first quarter.
“Value-seeking behaviour continues to reign supreme and Loblaw is benefitting from a strong value image, discount presence and leading private labels,” CIBC analyst Mark Petrie wrote in a research note on Wednesday, adding that the sales growth “would imply that consumers are not letting any frustration get in the way of their shopping habits,” and that the boycott is unlikely to put material pressure on the company’s results.