Since 1er May, despite a national boycott, Galen Weston’s fortune increased by nearly $700 million. Loblaw’s stock has been at a record high in recent days. While the so-called boycott may ultimately prove inconsequential, it highlights the urgent need to address the grocery industry’s underlying problems.
The so-called boycott campaign against Loblaw, primarily launched on social media platforms such as Reddit, where anonymity predominates, is believed to have started on 1er may. Despite these assertions, no notable change in traffic to Loblaw stores has been observed, at least not until now, and even less so in Quebec. Surprisingly, shareholders seem largely indifferent to this boycott; Indeed, Loblaw’s stock soared nearly $7, reaching an all-time high of almost $156 earlier this week, six days after the boycott began. This increase increased Galen Weston’s fortune by almost $700 million, according to some estimates. Contrary to the boycotters’ intentions, which were intended to have a negative impact, financially, on the Weston family and Loblaw, the opposite effect appears to be occurring. This phenomenon persists even if the company’s revenues decline for a quarter or two.
Since the movement did not spread to other chains during the first month, and in some cases prices even increased more sharply elsewhere than at Loblaw, the boycott is likely to fail. From the start, it lacked logical and practical foundations. However, last week, Galen Weston said Loblaw was being wrongly accused of abuse. He was partially right. While no verified reports support Loblaw’s claims of retail price gouging, it would be inaccurate to completely absolve the company.
Indeed, Loblaw, alongside Walmart, plays a significant role in the challenges faced by food processing and independent grocers. Not only is food processing undercapitalized, but independent grocers are also suffering under the domination of a few large companies controlling more than 80% of the food retail market in Canada. The fact that Canadians are spending less at grocery stores affects processors and independent grocers more than large retailers like Loblaw. To protect their margins, Loblaw and Walmart are likely to implement new fees and pressure suppliers to lower prices. Processors are trying to respond by raising prices to offset these higher costs imposed by grocers. This cat and mouse game has been going on for years and penalizing end consumers.
A lesser known fact is that suppliers pay grocers for the privilege of doing business with them, giving these retailers significant power in the supply chain. While it may seem beneficial to consumers when grocers impose price cuts on suppliers, it can lead to tighter margins for processors, potentially forcing them out of business. To protect both manufacturing and independent grocers, a code of conduct is essential. This code would have to be followed by all grocers, including giants like Loblaw and Walmart, and would be coordinated by government and led by industry to resolve disputes within the supply chain.
Currently, manufacturers must comply with Loblaw’s terms or cease operations. Many silently closed their doors because they lacked the capacity to challenge the retail giants. These closures lead to reduced consumer choice and, therefore, less competition. This is the real issue that the boycott campaign should have highlighted, rather than taking a populist stance fueled by collective animosity towards a single company and individual, Galen Weston.
Strengthening our grocery industry and making it more competitive will require a broader understanding of supply chain economics among consumers. Neither Loblaw nor Walmart directly exploits consumers; rather, they make life difficult for processors, which introduces more price volatility into the market and ultimately harms consumers. Boycotts are not the solution; instead, we must rally support for more price stability through a code of conduct for the food industry. Over time, this would help both food manufacturing and independent grocers thrive, once again making Quebec and Canada an attractive location for investment.
The key to moving to a more competitive food distribution landscape is ensuring Loblaw and Walmart comply with this new code. So, Mr. Weston, instead of lamenting the situation, should take concrete steps to address the real problems affecting consumers.
reference: www.lapresse.ca