Latest / Kvetch & Release / Is Loblaw ditching No Frills bulk deals fair play or a price hike in disguise?

Transcript

Is Loblaw ditching No Frills bulk deals fair play or a price hike in disguise? · Kvetch & Release

• 0:00
  Welcome back to AM eight hundred CKLW. John Lidkey. Here I was flipping
• 0:06
  through the Toronto Sun. I came across a new article column that resonated with
• 0:11
  me about Loblaws. We talk about Loblaws often here on the show. How
• 0:16
  could we not? They were one of the large chains in the country.
• 0:19
  Of course, of grossers they are, you know those you know the multi
• 0:22
  pack discounts that you could get. Sometimes you go in and you see buy
• 0:26
  one for five dollars, but you can get it if you buy two or
• 0:29
  more, it drops down to four dollars apiece. They've announced we're getting rid
• 0:33
  of it, terminated, goodbye. What does that mean? How is it
• 0:37
  going to impact people? What stores are this that specifically I'm excited to bring
• 0:41
  on right now? Doctor Sylvain Charleboi you know him as the food professor.
• 0:46
  He wrote the column about this is Loblaws ditching No Frills, bulk deals,
• 0:51
  fair play or a price hike in disguise? Doctor? How you doing good?
• 0:55
  How are you doing really well? Thanks for joining me here. So
• 0:58
  what does this mean? What's happening here? Well, essentially No Frills,
• 1:04
  owned by Blah Blah, has decided to get rid of of multi buyer discounts.
• 1:11
  They're known in the industry as volume discounts, so you basically, for
• 1:15
  example, you walk into a store and they'll offer you two loaf of breads
• 1:21
  for five dollars instead of one low for three dollars, so basically forcing consumers
• 1:26
  to buy more in volume for a better price, for a better unit price
• 1:33
  essentially, And this practice has been around for many, many years. In
• 1:38
  fact, it was really pushed by Costco, the ball buying phenomena, that
• 1:44
  is Costco and so to. As a response to that, grossers were offering
• 1:52
  more volume discounts over the last several years, but a lot of people didn't
• 1:59
  like them because because they felt they were discriminated against. If you basically lived
• 2:05
  alone, if you're a senior who doesn't eat as much, you felt like,
• 2:09
  well, deals were for certain people and not for you, And it
• 2:15
  became really a problem for grossers, including blab blaw. So they decided yesterday
• 2:22
  to eliminate multi by discounts at one of their banners, which is the largest
• 2:29
  one No Frills, and you can find No Frills in many parts of the
• 2:31
  country, but it was really interesting to see that banner make an announcement in
• 2:38
  July, and the decision only affects one shame, not all of them.
• 2:46
  So how is this going to impact consumers? Is this just a is this
• 2:50
  a vibes based thing where people aren't going to feel bad anymore because they think
• 2:53
  that this was, you know, not helping them in one way, or
• 2:57
  is this actually going to be a dollars and cents thing for people as wallets.
• 3:00
  Well, I think a lot of consumers will see this as a win,
• 3:05
  but to be honest, I don't know, Like, I don't know
• 3:07
  if it is a win because on the one side, you do have a
• 3:13
  large portion of the population which really appreciated these these deals, and on the
• 3:23
  other hand you also have people who feel well, everyone will be will be
• 3:28
  treated fairly. But the problem is that this new treatment may not be as
• 3:35
  affordable because all of a sudden you may actually just push prices higher for everyone.
• 3:40
  So a study out in Europe was published last year looking at multi buy
• 3:46
  discounts and many chains actually got rid of them, only to see that that
• 3:53
  larger groups or families households that do buy more in bulk, we're buying more
• 4:00
  and wasting more as a result. So I Honestly, the decision is interesting,
• 4:05
  but I'm not sure if consumers actually win, because it'll will need to
• 4:11
  monitor prices over time to see if indeed consumers win. And has this practice
• 4:16
  been used elsewhere in the world. Oh yeah, absolutely, it's common practice.
• 4:23
  I mean, we've seen that in Asia and Europe. But depending on
• 4:28
  how inflation has impacted consumers psyche and of course it's pretty obvious in Canada that
• 4:35
  a lot of people were affected by food inflation. Some groscers have decided to
• 4:41
  be a little bit more sensitive to that issue and and if they feel that
• 4:46
  they were doing something that may have been seen as unfair, they basically got
• 4:51
  rid of them and so blah blahs decided to do that. So it's not
• 4:56
  the first chain to do that, but it is the first chain to do
• 4:59
  that in handeda per se. Okay, So if Lablaws is only doing this
• 5:02
  at No Frills and No Frills is primarily a you know, more of a
• 5:08
  discounted store, I suppose than some of their other brands. I'm thinking,
• 5:12
  like real Canadian Superstore. What does that say about the differentiation and the choice
• 5:15
  of only doing it at the one brand. I don't know, like I
• 5:23
  do think that blah blah is seeing this as a pilot. It wants to
• 5:28
  know how consumers will react to the change. I honestly am not sure if
• 5:36
  they know how consumers will react. Again, you're seeing a lot of reaction,
• 5:42
  both negative and positive about the decision. My guess is that it's a
• 5:47
  bit of a weight in sea game seeing whether or not we are going to
• 5:53
  see more deals. Of course, it is no frills, and typically no
• 5:56
  frills no frills, it's just it's about a bare bune own food retailer.
• 6:00
  There's just no artifice. There's just nothing else but food there. So typically
• 6:06
  you should be getting some good deals at no frills. But those those those
• 6:12
  multi by discounts were pretty interesting for people we needed more food, my my,
• 6:17
  I think the best option would have been to offer people asking for a
• 6:23
  better unit price discount, and a lot of people do that. They go
• 6:29
  to the cashier and say, listen, I don't need two loaf or three
• 6:31
  loafs of bread. I only need one, and they actually do apply to
• 6:35
  discount most of the time. At least it's that was That's been my experience,
• 6:41
  so that that would have been probably the better option for for law laws
• 6:46
  at this point. So do you think other grocers are going to follow suit
• 6:49
  with this? I don't know. I mean, you have to understand why
• 6:56
  volume discounts actually exist in the first place. I mean, the whole reason
• 7:00
  why they exist is to accommodate supply chain inventories or inventory conundrums. So typically
• 7:09
  you would see if suppliers say, well I got too much of this,
• 7:12
  why don't we actually volume discount for a while to bring down inventories. That's
• 7:15
  kind of how why it was really a bit self serving for the industry.
• 7:21
  So it depends how other grocers see this issue. I mean, you'll you
• 7:27
  will continue to see surpluses up the food chain, and you've got to find
• 7:31
  a way to actually discount some of that stuff and download products onto onto the
• 7:39
  market. So it will be interesting to see whether or not they do follow
• 7:42
  suit, But my guess is that they'll be again, they'll they'll be watching
• 7:45
  very close see how people react to in No Frill's decision. Okay, well,
• 7:48
  I want to ask you one last question while we're on the topic of
• 7:51
  Loblaws. Of course, there was the boycott Loblaws event that took place in
• 7:57
  recent months. There I was wondering from your respective did it have any impact
• 8:01
  overall? Is this decision maybe a response to negative consumer sentiment that was experienced.
• 8:11
  I don't know. I don't think that the I mean, I'm not
• 8:16
  even sure if there was a boycott, to be honest, it was manufactured
• 8:18
  through social media, But whether or not people actually did boycott loab Blaw,
• 8:24
  I don't know. We'll see. We'll see that when they actually post quarterly
• 8:28
  results in a few weeks from now. But my guess is that when you
• 8:33
  aim at Loblaw is if la Blaw is a target, you're likely going to
• 8:39
  hurt a lot of people except Loblaw because they'll turn around and squeeze suppliers.
• 8:43
  And that's actually may be part of this. They may be squeezing suppliers and
• 8:50
  but margins won't be impacted by Lobblaws. In fact, the share price of
• 8:54
  law Blaw is hired. And then then on May first, when the alleged
• 8:56
  boycott started, well, if that says anything, it doesn't look like at
• 9:03
  least it worked on their bottom line there when it comes to share prices.
• 9:05
  Well, hey, doctor Charlette Blay, I want to thank you so much
• 9:07
  for your time and for walking us through this column that you wrote much appreciated,
• 9:11
  Take Care, Bye bye, thank you very much. We'll be back
• 9:13
  right after this