Mi­ni­mum wa­ge hi­kes ser­ving up un­cer­tainty in food in­dustry …

A 32 per cent in­crea­se in the mi­ni­mum wa­ge in 12 months is simply irres­pon­si­ble

La Jornada (Canada) - - PORTADA - Syl­vain Char­le­bois is dean of the Fa­culty of Ma­na­ge­ment and a pro­fes­sor in the Fa­culty of Agri­cul­tu­re at Dal­hou­sie Uni­ver­sity, Se­nior Fe­llow with the Atlan­tic Ins­ti­tu­te for Mar­ket Stu­dies, and aut­hor of Food Sa­fety, Risk In­te­lli­gen­ce and Bench­mar­king, pub

This is tur­ning in­to a very cha­llen­ging year for the Ca­na­dian food in­dustry.

In la­te No­vem­ber, Sta­tis­tics Ca­na­da re­lea­sed its com­prehen­si­veRe­cent Sta­tis­tics Ca­na­da num­bers in­di­ca­te that gro­cers are in trou­ble. Food in­fla­tion is abo­ve two per cent for the first ti­me sin­ce April 2016. This is ty­pi­cally good news for gro­cers, in­crea­sing their mar­gins. But gi­ven ma­jor head­winds af­fec­ting the in­dustry, gro­cers need to get even mo­re crea­ti­ve to reas­su­re in­ves­tors.

Lo­blaw Com­pa­nies Ltd. has reason to be par­ti­cu­larly wo­rried, ha­ving just posted un­derw­hel­ming fourth-quar­ter re­sults. Food re­tail sa­les drop­ped by 1.2 per cent and to­tal re­ve­nues slip­ped by 0.9 per cent.

Des­pi­te strong sa­les at sub­si­diary Shop­pers Drug Mart, Lo­blaw exe­cu­ti­ves in­di­ca­ted that re­forms af­fec­ting the pri­ce of ge­ne­ric drugs will im­pact pro­fits.

But hig­her wa­ges seem to be the big worry for the com­pany, as pro­vin­cial go­vern­ments nud­ge to­ward $15-an-hour mi­ni­mum wa­ges. And Stat­sCan num­bers may sug­gest whe­re things are hea­ded with mi­ni­mum wa­ge in­crea­ses.

On­ta­rio mi­ni­mum wa­ge hi­kes li­kely pus­hed me­nu pri­ces hig­her in Ja­nuary, es­pe­cially in fast food, whe­re most of the in­co­me ear­ners are paid mi­ni­mum wa­ge. And this is li­kely just the be­gin­ning. Af­ter a 22 per cent hi­ke on Jan. 1, On­ta­rio’s mi­ni­mum wa­ge is due to in­crea­se again to $15 an hour on Jan. 1, 2019.

Al­ber­ta will join the $15-an-hour club in Oc­to­ber and Bri­tish Co­lum­bia in­tends to pass the $15 mark in 2021. Ot­her pro­vin­ces, li­ke Que­bec and No­va Sco­tia, are thin­king about fo­llo­wing suit. The $15 cam­paign will not go away any ti­me soon.

Ob­viously, most of us agree that peo­ple should earn a de­cent li­ving. The cha­llen­ge with On­ta­rio, though, is how quickly wa­ge hi­kes are being im­ple­men­ted. A 32 per cent in­crea­se in 12 months is simply irres­pon­si­ble.

Res­tau­rants - many of them fa­mily-ow­ned - will ha­ve dif­fi­culty co­ping.

The gro­cery bu­si­ness is al­so being af­fec­ted by hig­her mi­ni­mum wa­ges but in­di­ca­tors are subtler. He­re’s one exam­ple: The pri­ce of to­ma­toes, one of the most po­pu­lar pro­du­ce items, jum­ped by mo­re than 30 per cent in a month. This was li­kely be­cau­se of mi­ni­mum wa­ge in­crea­ses, sin­ce it’s unu­sual for the pri­ce of any fruit or ve­ge­ta­ble to in­crea­se by even four per cent in a sin­gle win­ter month (par­ti­cu­larly when the va­lue of the Ca­na­dian do­llar re­mains re­la­ti­vely sta­ble against its U.S. coun­ter­part, as it has).

For Lo­blaw, the Bram­pton, Ont.-ba­sed re­tail giant, it’s a god­send to see food in­fla­tion ri­se again. It means it can tweak cer­tain pri­ce points and in­crea­se mar­gins wit­hout most peo­ple no­ti­cing. But the com­pany will need to get very crea­ti­ve. Sto­re traf­fic is an on­going is­sue, so con­ver­ting to on­li­ne ac­ti­vity will be cri­ti­cal, es­pe­cially with what’s on the ho­ri­zon.

In the U.S., Ama­zon con­ti­nues to crea­te ha­voc in the gro­cery lands­ca­pe. Bloom­berg just re­por­ted that two gro­cers, Winn-Di­xie pa­rent Bi-Lo and Tops Friendly Mar­ket, could de­cla­re ban­kruptcy this month. This is li­kely due to the omi­nous sha­ke­down in the in­dustry cau­sed by Ama­zon and its re­cent ac­qui­si­tion of Who­le Foods.

This is only the be­gin­ning. Ama­zon is slowly cap­tu­ring mar­ket sha­re in gro­ce­ries, des­tro­ying well-es­ta­blis­hed pla­yers one by one, as it did in ot­her sec­tors li­ke books.

Lo­blaw is rea­lis­ti­cally con­cer­ned that Ama­zon will ma­ke its way

in­to Ca­na­da.

But the­re’s still ho­pe. Hig­her me­nu pri­ces may slow down the food ser­vi­ce sec­tor’s string of suc­ces­ses in re­cent years. Food and la­bour are a res­tau­rant’s hig­hest ex­pen­ses, crea­ting an op­por­tu­nity for gro­cers to com­mit mo­re tho­roughly to both ready-to-eat and ready-to-co­ok spa­ces. This could be Lo­blaw’s next mo­ve, but they clearly need to think dif­fe­rently about how to grow the bu­si­ness.

In­te­res­tingly, Lo­blaw ma­de no men­tion of its $25 gift cer­ti­fi­ca­te cam­paign whi­le pos­ting its fourth-quar­ter re­sults. The gift cards we­re laun­ched be­cau­se of its self-con­fes­sed in­vol­ve­ment in the bread pri­ce-fi­xing sche­me in De­cem­ber.

No­net­he­less, Stat­sCan num­bers con­firm what many sus­pec­ted: bread pri­ces are drop­ping across the country. BMO sta­ted ear­lier this year that bread pri­ces we­re down 2.5 per cent sin­ce De­cem­ber, af­ter Lo­blaw dis­clo­sed its in­vol­ve­ment in the sche­me. Ac­cor­ding to Stat­sCan, bread pri­ces drop­ped 1.7 per cent in Ja­nuary alo­ne. In fact, most ba­kery pro­ducts seem chea­per than they we­re a month ago.

This may be a sign that gro­cers are trying to ma­ke amends with the pu­blic, sin­ce the story has gar­ne­red so much at­ten­tion. Only ti­me will tell if the ag­gres­si­ve dis­coun­ting we’ve seen in sto­res will con­ti­nue.

But we do know that the Ca­na­dian food in­dustry is fa­cing in­crea­sing pres­su­re on se­ve­ral fronts. -TROYMEDIA

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