Loblaws purchase of Shoppers Drug Mart chain for $12.5
billion is winning rave reviews from market analysts, but it’s bad news for
farmers.
The market analysts predict that Loblaws will use its
increased purchasing power to squeeze suppliers even harder.
And when the squeeze is put on suppliers, they will pass
that squeeze down to the weakest link in the supply chain. That’s obviously farmers.
There will be lots of other unintended consequences.
One will be the demise of a number of medium-scale food
processors, ones that are able to barely meet Loblaws’ requirements for volume,
but won’t be able to produce enough for the combination of Canada’s largest
drug-store and supermarket chains.
There will be suppliers of food products sold in Shoppers
Drug Mart stores who will find their products squeezed off the shelves to make
way for President’s Choice and No-name products from Loblaws distribution
centres.
And I fail to see any gains for Canadian shoppers. They will
face reduced choices and all of the many benefits that flow from competition.
Some say prices will be lowered. I don’t think so. Why would
Loblaws lower prices unless it has to? In fact, prices might go up because it
has one less competitor to pressure it to lower prices.
This is not a merger that makes any sense for either
suppliers or consumers. It only makes sense for shareholders who either own
Loblaws stock or are selling Shoppers.
