Sobeys is demanding a one per cent price cut from suppliers, a demand that is almost certain to be matched by Loblaws, Metro, Wal-Mart and Target.
Sobeys is swinging clout it gained when it bought the 213 Canadian stores operated by Safeway, mainly across Western Canada. Loblaws has gained clout through its recent purchase of Shoppers Drug Mart.
Similar pressure tactics led to a judicial inquiry in Ontario in the mid-1970s, revealing that Dominion Stores, which was then the largest supermarket chain, ratcheted up pressure on suppliers through a maze of up to 240 rebates, discounts and allowances.
Loblaws, which was then the second-largest, demanded equal treatment.
The 1970s inquiry was sparked by complaints from vegetable farmers and the Ontario Federation of Agriculture hired a lawyer to quiz food-industry executives throughout the lengthy set of public hearings.
This time Marian Chan of Trendspotter Consulting says food processors “are really going to hurt. It’s going to be very difficult.”
They, of course, will use their clout to pressure their suppliers, including farmers who, other than marketing boards, have basically not bargaining power.
As one lawyer said during the public hearings in Toronto in the 1970s, when the elephants fight, it's the mice that get trampled.
As in the 1970s, the suppliers and their trade organizations would not comment, writes Globe and Mail reporter Marina Strauss.
They testified then that they feared reprisals from the chains, including simply refusing to carry their products or marking up prices for their products so sales volume would decline.
Sobeys has told suppliers that it wants the one per cent price cuts to be retroactive to Nov. 3 and said it will deduct that amount from what it pays suppliers beginning this month.