A non-profit Loblaws could save you $3.20
This month has seen the NDP endorse an attempted monthlong boycott of all grocery stores owned by Loblaw Companies Ltd., Canada’s largest grocery retailer.
In the House of Commons, NDP Leader Jagmeet Singh said consumers had been forced into their position “because the prime minister refuses to take on the corporate greed which is driving up prices for Canadians.”
The NDP’S Matthew Green also sponsored an anti-loblaws petition by boycott organizers seeking, among other things, to “explore the possibility of implementing price controls.”
It’s not at all clear if the boycott is having a measurable effect on Loblaw sales. It’s been organized through a Reddit group, Loblaws Is Out of Control, that has 73,000 members — a fraction of the estimated 10 million Canadians who predominantly source their food from a Loblaw subsidiary, including Real Canadian Superstore, No Frills, Shoppers Drug Mart and Loblaws.
But the boycott did spur Loblaw CEO Per Bank to request a private meeting with boycott organizer Emily Johnson.
The boycott is demanding an “immediate 15 per cent price reduction,” as well as price controls across the entire food industry.
But what if they were to take it a step further and demand the complete elimination of Loblaw profits, force them to become a non-profit, and channel any net earnings into reducing prices?
The result would be about $3 in weekly savings for the average consumer.
For roughly the first three months of 2024, Loblaw brought in a profit of $459 million. But if Loblaw were to spread that $459 million in price cuts across its thousands of retail items, the weekly savings for an average Loblaw customer would come to about $3.20 per week.
For a family of four, that’s $12.80 — or about $55.64 per month. A 2023 analysis of the Canadian grocery market by the U.S. Department of Agriculture determined that Loblaw stores represent about 27 per cent of the Canadian retail food market.
As of the most recent count, Canada’s population stands at about 41 million.
This means that the equivalent of about 11 million people are sourcing their meals from a Loblaw retailer.
With net profits of about $35.3 million per week, it works out to $3.20 once shared equally among those 11 million shoppers.
And even that figure is generous given that Loblaw derives an increasing share of its profits from non-food businesses, such as the pharmaceuticals sold through its Shoppers Drug Mart chain, alcohol sold through its branded liquor stores or the clothing sold through its Joe Fresh private label.
Shoppers Drug Mart, in particular, saw an eight per cent spike in pharmaceutical and health service sales in the last quarter of 2023. In that same period, “food retail” sales rose by just two per cent.
For some Canadians, $3.20 per savings each week wouldn’t even cover the average annual cost of carbon pricing. According to detailed estimates compiled by the Parliamentary Budget Officer, even after carbon rebates are factored in, residents in certain provinces are already seeing a noticeable hit to their income. In Alberta, for instance, carbon pricing in the current fiscal year is expected to impose net household costs of $1,018.
The reason the savings of a non-profit Loblaw would be so slight is because groceries are famously one of the lowest-margin sectors of the economy, with profits generally representing between one and three per cent of total revenue.
Compare this to the seven per cent profit margin enjoyed by Canadian furniture stores, according to numbers maintained by Innovation, Science and Economic Development Canada. Or the 10.8 per cent profit margin you can earn as an alcohol or soft drink wholesaler.
Even as Loblaw enjoys record-high POST-COVID profits (their profits rose by a tenth in the first part of this year), their overall profit margin is still running at just 3.5 per cent.
To earn that $459 million in profits for the first quarter of 2024, Loblaw had to bring in total revenue of $13.6 billion. That’s about $1 in profit for every $33 in sales.
If you leave a Real Canadian Superstore with $500 in groceries, this means that just $17 of that bill is likely to enter Loblaw’s ledgers as net profit.
This isn’t to say that Loblaw isn’t a massive company, and that its operations haven’t turned the Weston family into one of Canada’s wealthiest. Canadian grocery margins are also noticeably higher than those in the U.S., a situation that exists in large part due to lack of competition.
But Loblaw remains able to record nine-figure profits each quarter due largely to volume. The company controls about 2,400 stores across all five Canadian time zones.