Year in review: Supermarket battles heat up, wireless wars cool off
Twelve months is more than enough time to see companies and businesses rise and in some cases fall, carefully crafted government policies come apart at the seams, entire sectors of the economy rattled, and profits evaporate at big retail chains. Canadians saw all of that and more in 2013.
We take stock of some notable developments below in a year-end obituary of sorts.
The Canadian smartphone-maker barely made it out of 2013 alive (or at least intact), a year that when looked at in the rearview mirror will likely be the one when a device once ascribed the same addictive powers as crack faded into obsolescence.
While the fight for chattering teenage users and soccer moms was won by Samsung and Apple long ago, BlackBerry had to battle hard in 2013 just to retain its core business user base – and there, things are looking doubtful as well, experts say.
An open letter to business customers shortly after new chief John Chen took over in late November affirmed the Waterloo, Ont. tech giant’s commitment to its device lineup and touted the smartphone’s “best in class” strengths: security and business-focused software services.
But IT department heads concerned by “all the corporate distractions” amid mass layoffs and upper management changes appear to be speeding up plans to convert their companies over to iPhones, Steven Li, analyst at Raymond James said in a recent note.
Even if it’s not conceding it publicly, BlackBerry is preparing quickly to find life beyond making phones, Li notes. That means 2014 will be another period of upheaval amid the “coming transition,” he said.
SUPERMARKET PROFITS, R.I.P.
Target, a big U.S. discount chain, changed the Canadian retail game in March when it unleashed the first wave of new store openings across the country. The roll out is delivering the first real jolt of bricks-and-mortar compeititon to the established order since Walmart jumped into the market way back in mid-1990s.
The move has been costly for retailers – including Target – but a boon for shoppers, who have benefited through a flurry of deals on everything from groceries to kids clothing.
The pressure has been most acutely felt by supermarkets, who are also contending with a move from the biggest retail behemoth of all, Walmart, to sell food items – itself a response to Target muscling on its traditional turf.
As some shoppers who have shifted habits this year can attest to, Walmart and Target aren’t after your produce dollars, rather, they’re focused on cherry-picking your weekly shop for processed foods, like frozen pizzas, ice cream and some canned goods. The reason: they can leverage their existing supply chains to buy bigger volumes of these brand name items and sell them to you for less than what your supermarket does.
“At their best, they can sell brand products at much bigger quantities and therefore, at a discount,” Kenneth Wong, a business professor at Queen’s University says. No matter if you’re at a Loblaw or Walmart, “Campbell soup is Campbell soup.”
The collective response from the grocers has been to get bigger in the hopes of being able to play the same volume game. In May, Sobeys’ parent company Empire Co. Ltd bid for Safeway Canada. That deal was followed by Loblaw Co. Ltd.’s blockbuster bid for Shoppers Drug Mart.
The competitive landscape will continue to exert pressure on food prices next year, experts say. That’s a good thing for shoppers, if not for workers whose wages are taking a hit as well.
READ MORE: Scrutiny urged over supermarket mega-merger
NEW WIRELESS COMPETITION WANES
In late September, Mobilicity, one of three new independent wireless carriers (well, newish), limped into bankruptcy court in Ontario. It’s now for sale, but with the most logical buyers – the country’s wireless giants Rogers, Bell and Telus – blocked by the government from purchasing the struggling operator, there are few takers.
Wind Mobile, its larger rival, meanwhile has marched on but still faces long if not impossible odds on ever becoming what the carrier and Ottawa had envisioned four years ago when it launched services: To become a viable fourth option to the Big Three. And as the smaller carriers struggled through 2013, wireless rates did what you would expect – creep higher.
To salvage Ottawa’s bit to boost competition in the sector, a hurried attempt was launched to lure U.S. giant Verizon into Canada this past summer either through the purchase of Wind and Mobilicity or via a commitment from Verizon to an upcoming auction for airwaves.
READ MORE: Would Verizon have lowered cellphone bills?
The attempted ended in defeat for Ottawa, as well confirming to most that the federal government’s long-held policy to develop a viable fourth option has been a categorical failure.
Industry Minister James Moore and CRTC regulatory head Jean-Pierre Blais are still searching for ways to follow through on the government’s “pro-competition” agenda, such as mandating lower “roaming” rates larger carriers charge the smaller ones to let customers use their networks when outside their home coverage areas.
But to most, it’s too little, too late.
“We doubt that lower mandated roaming rates will change the seemingly binary outcome” for new entrant Mobilicity, Dvai Ghose, head of research at Canaccord Genuity in Toronto: “Sell to an incumbent or cease operations.” With Wind unofficially for sale, as well, the same might be said for it.
DECLINE OF BLUE-COLLAR ONTARIO
A surprise decision by H.J. Heinz Co. to shutter it’s century-old ketchup production plant in Leamington, Ont. this fall means 740 well-paying jobs – positions held by multiple generations of families in the small southwestern Ontario town – will vanish overnight.
Unless a new tenant is found, the iconic facility, whose three walkways connect buildings on separate sides of Leamington’s main drag, Erie St. at the centre of town, will sit empty, serving as a poignant example to visitors of the struggles Ontario’s beset manufacturing sector is laboring under.
This year was supposed to be one of easing cost pressures for manufaturers, with the Canadian dollar retreating back from parity with the U.S. greenback. A recovering U.S. economy was also supposed to bolster Ontario, a province still considered strategically important to companies selling wares into the U.S., the world’s largest economy.
Instead, more than 30,000 jobs have been purged, while the loonie remained stubbornly high through much of the year.
A drumbeat of plant closures has grown steadily louder. A month after the Heinz announcement, Kellogg announced plans to close its longtime London, Ont. cereal facility at a cost of 650 jobs. Faurecia, an automotive parts supplier in the town of Bradford is headed for closure, putting another 650 out of work.
“There has been this hollowing out,” David Soberman, a business professor at the Rotman School of Management, said. “A lot of that is driven by the fact that our labour costs are high. The Canadian dollar has made us much less competitive.”
Higher employee costs are a primary driver pushing auto production – once a cornerstone of Ontario’s economy – out of the province and into southern U.S. states or Mexico, experts say. Unifor, the country’s biggest private-sector union, is scrambling to preserve good pay for workers but lower overall costs for GM and other car makers to arrest that trend.
A silver lining, if one can be found, is that the loonie is expected to retreat by several cents to as low as 88 cents next year – a value that makes the economics of manufacturing in Ontario far more attractive, experts say.
Still, there’s little doubt many blue collar jobs are gone for good – casualties of the invisible hand of globalization, experts say. Replacing some will be high-skill jobs requiring ample education and training – a well-established narrative for Ontario’s economy.
Cisco for example, plans to open up shop in Ottawa this year, paving the way for 1,700 new positions in the region, it says, a figure that could climb to 5,000.
“We tend to look at the glass as half empty rather than full,” Prof. Soberman notes. “You do have certain factories going up and industries that are thriving here.”
© 2013 Shaw Media