What is Loblaw’s biggest asset?
CEO framed coming wage hike not as a fair-wage issue, but an irritating $190-million hole to fill
“Success in business is all about people, people, people. Whatever industry a company is in, its employees are its biggest competitive advantage.” — Richard Branson
Extend a cheerier than usual greeting to the Loblaws grocery clerk Saturday morning. Do not show a hint of irritation when she has to call for a price check. Think of something complimentary to help pass the time. Suggestion: I like what you’ve done with your hair!
Loblaws workers need all the love they can get now that the company’s CEO, Galen G. Weston, has framed the move to increase the minimum wage in Ontario and Alberta as not a people issue, not a fair-wage issue, but an irritating $190-million hole that will have to be filled somehow.
As the chief executive’s comment was made on an analyst’s conference call, we can’t know if Weston was scratching through the corporate ledger with a quill pen as he warned of “aggressive” increases in the minimum wage, which will force the company to accelerate its hunt for cost efficiencies.
This is not what we expect from a progressive leader. This is especially not what we expect from a third-generation leader who has aligned himself with the reimagining capitalism campaign, with its focus on the long term and its rejection of the pressures for short-termism. As a family firm, the Weston-controlled Loblaw Cos. Ltd. is meant to be an exemplar of patient capital. Weston himself even wrote a chapter in a book entitled, fittingly, Reimagining Capitalism. Family firms, the thesis goes, have the luxury of thinking in decades, not quarters.
The opportunity is there for Weston to position himself as a corporate thought leader, of which there are plenty in the world, though few in Canada.
In this instance, the Fight for $15 campaign demands a contemplative response on the issues of inequity and the yawning wage gap. At a minimum, Weston could acknowledge that the company’s people are assets, not just a cost centre.
Here are some numbers. Loblaw appears to be the largest company in the country measured by number of employees: more than 198,000 in its last annual report. The company’s revenues for 2016 came in at $46.4 billion, a 46-per-cent increase in four years. The company’s 2016 net earnings: $990 million.
Weston’s personal compensation for 2016 was $7.5 million, including share-based awards.
A decade ago, I was writing about chronically empty Loblaws store shelves displaying “out of stock” signs with alarming frequency. The company’s distribution was a mess, and even when it was under repair, corporate executives lamented the chain’s inability to efficiently get product onto shelves.
And the odds were against the company successfully passing to third-generation leadership. But Loblaw ably rose from its moneylosing nadir, both through operational fixes and later the acquisition of T&T — the largest Asian supermarket in Canada — and, substantially, Shoppers Drug Mart Corp.
Weston talks now about leveraging data and driving analytics forward. Through the PC Plus card and the Shoppers Optimum card the company controls two of the country’s most successful loyalty programs. The CEO is pleased with the rollout of fresh food at Shoppers urban markets, where self-checkout kiosks will become standard. The blending of health and nutrition between the Shoppers and Loblaws brands appears a natural fit.
Consumers appear to like the “Click and Collect” online shopping option, which will be extended to more than 200 stores by year end from 140 stores at present. That seems a natural evolution from the self-serve, no-waiting groceterias that Theodore Pringle Loblaw launched nearly a century ago.
Is the Loblaw grocery offering at the cutting edge? No. And the company knows it.
Competition in the sector is ruthless. Galen Weston has in the past referred to Lidl and Aldi, both German based and aggressively expansive, as the type of company that could prove a threat in Canada.
What gets missed is the battle those two have waged in the U.K. to see which can become the highestpaying supermarket, with both companies far surpassing not just mandated minimum wages, but wages recommended by the Living Wage Foundation.
In January, Aldi overtook Lidl by this measure. Here’s Matthew Barnes, CEO for Aldi U.K.: “We recognize the valuable contribution that our thousands of store employees make every day. Their dedication and commitment is a key reason why Aldi is the U.K.’s fastestgrowing supermarket.”
Oh right. It all comes down to people after all. jenwells@thestar.ca