Customers shop at the Loblaws at Maple Leaf Gardens in Toronto in 2014. A recent study found that customer trust in the company has dropped by 10 per cent. since last year.Matthew Sherwood
Consumers have less faith in food retailers today than before Loblaw Cos. Ltd. disclosed it had been part of what it called an industrywide conspiracy to fix the price of bread, a study shows.
Consumer trust in Loblaw, the country's largest supermarket retailer, tumbled by 10 per cent while overall trust in grocery chains dropped 6.31 per cent, the study by Dalhousie University's faculty of management says.
Sobeys Inc., the second-largest grocer in Canada, saw consumer trust in it rise a little, by 1.6 per cent, the study found. Sobeys, among grocers targeted in the Competition Bureau inquiry into bread-price fixing, has said it has seen no evidence that it violated competition laws.
Sylvain Charlebois, food-industry professor and dean of Dalhousie's faculty of management, said the survey results are a cautionary tale for food retailers and how they operate. "Companies have to think about how they are going to deliver on their ethical and sustainability promises."
Loblaw sent shock waves through the industry in December when it and the bread-making division of its parent, George Weston Ltd., revealed they had been fixing the price of a wide range of packaged bread products for 14 years until 2015 in what they said was an industrywide conspiracy.
In exchange for confessing to the bureau, Loblaw and George Weston got immunity from criminal prosecution that, if convicted, could have meant up to 14 years in jail, fines of as much as $24-million or both.
As part of its mea culpa, Loblaw issued free $25 vouchers to its customers in an attempt to make up for its wrongdoing.
Still, Loblaw's gesture, which some industry insiders have called a marketing tactic to draw more shoppers, may have backfired.
This month, some customers raised privacy concerns about Loblaw's request from some consumers for information such as a scan of their driver's licence or utility bill in order to receive the card.
Last week, the federal privacy commission asked Loblaw for more information about the request.
Prof. Charlebois said he had initially thought Loblaw had handled the gift-card strategy well and that consumers wouldn't remember its price-fixing transgression. But the latest survey shows that "Canadians haven't forgotten," he said.
Loblaw spokesman Kevin Groh said it has become the company most closely tied to the bread price-fixing story because it brought the matter to light. "We're focused on changing processes, doing everything we can to make sure this never happens again, getting $25 Loblaw cards in the hands of our customers, and building their trust."
Prof. Charlebois and other industry experts have said that Loblaw used a textbook crisis-management strategy to deal with the price-fixing stumble. It went on the offensive, offered the voucher and pointed at competitors in calling it an "industrywide price-fixing arrangement."
An online survey of 500 consumers in early February, conducted for The Globe and Mail, showed that 61 per cent of respondents said they thought Loblaw's strategy of giving away $25 gift cards was "the right approach to fix this issue."
But it also found that 41.2 per cent of respondents were "disappointed" in the news of Loblaw's bread price-fixing, while 9.4 per cent were "angry" about it, 3.6 per cent had a "strong aversion to Loblaws," 28.6 per cent were "indifferent" and 17.2 per cent "still love Loblaws."
The latest Dalhousie study, which polled 1,700 consumers, was done this month as well as last November, a month before Loblaw and George Weston admitted their part in the conspiracy. The survey asked consumers whether they had confidence in food retailers. Dalhousie developed a "consumer trust index" in food retailing to determine how trustworthy, ethical, socially responsible and environmentally responsible Canadians perceive large retailers, including Costco, Walmart, Metro and Giant Tiger.
The latest survey rated Costco highest on those measurements.
Last week, Michael Medline, chief executive of Sobeys, said it is starting to feel a pinch from Loblaw's handing out the free gift cards.
"If you don't think that people giving away some free groceries for whatever reason with gift cards impacts everybody in the market – it does," he told analysts. "To what extent – you can't measure it."
He said he expected "increased pressure on sales" in Sobeys's current quarter "as those curious gift cards from our competitor … continue to hit the market."