The first quarter of 2020 was very good for Canada’s largest grocery and pharmacy conglomerate, Loblaw Companies Limited.
Revenue in the first three months of the year reached $11.8 billion, up 10.7 percent from the same period one year earlier. Earnings before income taxes, depreciation, and amortization were up 12.4 percent, to $1.17 billion.
One factor has been its “omnichannel approach” to reaching customers. It sells groceries through a long list of retailers, including T & T, Real Canadian Superstore, Loblaws City Market, Wholesale Club, and Shoppers Drug Mart.
Loblaw also has more than 600 franchise stores under banners such as No Frills, Provigo, Valu-mart, and others.
It’s one reason why the family that oversees this empire, the Westons, is worth US$8.2 billion, according to Forbes magazine.
British Columbia–based food giants are also trying to reach customers in a multitude of ways.
The Jim Pattison Group’s grocery banners, for example, include Save-On-Foods, Urban Fare, Meinhardt Fine Foods, Nesters Market, PriceSmart Foods, and Choices Markets. Collectively, they attract two million visits per week.
Loblaw and Pattison also have their own in-store brands offered in their outlets.
Flooding the community with different grocery outlets in many locations is a way for Canadian companies to remain competitive against such American goliaths as Walmart, Costco, and Amazon, which now owns Whole Foods Market.
Georgia Main Food Group, controlled by Vancouver’s Louie family, operates IGA and Fresh St. Market.
Union takes Sobeys to B.C. LRB
Last year, Kim Novak became the first woman to head the 101-year-old union local, which represents more than 20,000 workers in a wide range of industries.
Since taking office, she’s been battling Sobeys after it shut down several Safeway stores and rebranded them as FreshCo franchises with different collective agreements.
“We recognize that diversifying a business and being able to increase business and market share is a good thing,” Novak told the Straight by phone. “It’s also a good thing for our members because it allows those businesses to be able to bring in more customers.
"Where we have a major issue is when doing so, you’re undercutting wages and benefits by reducing what people would be paid by decreasing the ability of them to access full-time jobs.”
Because the FreshCo stores are considered independent by Sobeys, Novak said that UFCW 1518 has to negotiate separate contracts with each store.
According to Novak, an arbitrated first contract gave starting FreshCo workers a rate only slightly higher than the minimum wage.
“At Safeway, you have access to hours in classifications that allows you to be able to work your way up a wage scale, whereas at FreshCo that’s not the case,” she said.
UFCW 1518 has filed applications to the B.C. Labour Relations Board seeking to have Sobeys and seven FreshCo franchisees declared a “common employer” with a single bargaining unit.
The union has argued that Sobeys spent millions of dollars converting former Safeway outlets into FreshCo stores in B.C., and that Sobeys hired and trained the workers at FreshCo stores.
“UFCW 1518 expects that there is very strong financial and contractual control by Sobeys over the franchisees and the employees at the store,” the union wrote in its application.
Novak said the union hopes to obtain documents through the disclosure process to support its position that Sobeys is the true employer.
If UFCW 1518 succeeds with its argument, it could have ramifications on other grocery chains, including Loblaw, which maintains that its No Frills discount stores are franchises. Sobeys also owns Thrifty Foods, which is a large supermarket chain on Vancouver Island.
None of the Canadian corporations mentioned in this article, including Sobeys, agreed to the Straight’s request for an interview by deadline.
COVID-19 causes a major shakeup
Sylvain Charlebois, a Dalhousie University professor and food-distribution researcher, is one of Canada’s leading authorities on food policies.
In a phone interview with the Straight, he said that COVID-19 has upset the applecart, so to speak, because it is accelerating grocery chains’ adoption of e-commerce to retain market share.
Seattle-based Amazon, of course, is the market leader in this regard. And when it bought Whole Foods Markets for US$13.4 billion in 2017, it served as a wake-up call to the Canadian grocery sector.
But Charlebois pointed out that online selling also makes it possible for everyone across the supply chain, including farmers, to reach buyers.
“Pepsico is doing it,” Charlebois noted. “Saputo is doing it. Gordon…Sysco, you name it—they’ve all decided to sell directly to consumers.”
The professor also pointed out that real estate is undergoing a major transition due to the pandemic.
Working at home has become a legitimate option for large numbers of people. He suggested that this might even cause more people to leave cities and live in suburbs.
“That will have a huge impact on where grocery stores are actually going to be located,” he said. “You want to reconfigure your e-commerce strategy based on where people are.”
So even though the Canadian grocery chains may now seem flush with cash, there’s no guarantee that they’ll all thrive in the future.
“There are so many things in flux right now,” Charlebois said. “It’s very difficult to understand what’s happening.
“But I would say, right now, the omni-channel approach is becoming more popular,” he continued. “Getting to the consumer in many different ways is going to be a value strategy moving forward.”
This isn't just an issue for the supermarket giants.
Smaller B.C. players—such as Donald's Market and Fruiticana—are also fighting to maintain their market share in an era when groceries are being sold by everyone from Dollarama to HMart.
Workers lose pandemic premium
In the meantime, however, the unions aren't happy that grocery giants recently did away with giving workers an extra $2 per hour pandemic premium.
Some of them appeared before a House of Commons committee on July 6 to tell MPs that some workers have died of COVID-19. Two more recently tested positive in Windsor.
Novak said that prior to the pandemic, people often looked upon going to the grocery store as a mindless pastime at the end of their day, without fully recognizing the workers who made all of this possible.
That's changed in recent months for many Canadians.
Nowadays, she noted, grocery workers have to remain up to date with health protocols to keep themselves and customers safe.
"I think that we, as a society, have underestimated how important that work is," Novak said.