Wednesday, July 13, 2016

Loblaws cutting supplier prices by 1.45 per cent

Loblaws has ordered its suppliers to cut prices by 1.45 per cent after Sept. 4.

As the largest food retailer in Canada, it has enough clout to make it happen.The weakest link in the chain – farmers who lack supply management – will take the biggest hit.

About 18 months ago, Sobeys told suppliers it would be deducting a percentage from their invoices, and Loblaws followed suit.

At least this time suppliers are forewarned.

Sylvain Charlebois, a professor who left University of Guelph for Dalhousie in Nova Scotia, has earned a reputation as news media spokesman for Canadian agriculture and food and he says the clout of the supermarkets pressures processors to modernize and become more efficient.

I think he’s got it exactly wrong. Canada’s supermarket chains have had tremendous clout within the food chain for at least 60 years and I think it’s their greedy pressure that has starved processors of money to invest in modernization.

The situation is remarkably different between Canadian and U.S. food processors, and I think a big part of that difference is the lack of supermarket-company clout in the U.S.

It is only recently that national supermarket chains have emerged in the U.S. – Krogers, Walmart and Costco. All of the others are really just regional chains and so processors can pick and choose their clientele if pressures become too great.

The clout of Canadian chains also explains why there is such keen interest in niche markets, farmers’ markets and local restaurants with more direct links to local farms.

In the 1970s, when the Ontario Federation of Agriculture gave voice to farmers’ concerns about supermarket clout during a provincial inquiry, there was a recommendation that small competitors, such as convenience stores, be granted the option of selling beer and wine.

That, it was argued, would help to balance the competitive playing field.

So what have we got today but exclusive rights for the largest supermarkets to market beer, but only in selected locations.

Some of those locations, such as in Paris, Ont., happen to be right where independents are the strongest.