Loblaw boycott: Why has the grocer become a ‘lightning rod’ for frustrations?

Click to play video: 'Loblaw boycott begins — will Canada’s biggest grocer feel the pinch?'
Loblaw boycott begins — will Canada’s biggest grocer feel the pinch?
WATCH: The campaign to boycott Loblaw stores has officially kicked off, but will Canadians stop shopping at the grocery giant's various banners — including the Real Canadian Superstore, Shoppers Drug Mart, No Frills, T&T, Zehrs, Provigo, and Dominion? – May 1, 2024

An online campaign urging shoppers to boycott Loblaw stores is unlikely to leave a lasting scar on the company’s bottom line, some experts say, but the phenomenon could hint at a deeper crisis of consumer confidence for Canada’s largest grocer.

Wednesday marked the beginning of a month-long boycott planned against Loblaw’s properties, from grocery stores to Shoppers Drug Mart to the company’s various services.

The campaign was organized on r/Loblawsisoutofcontrol, a Reddit group with more than 67,000 members venting their frustrations with the rising cost of living and groceries widely, but Loblaw specifically.

While food inflation has cooled lately from decades-high levels seen nearly two years ago, Canadians are continuing to report rising costs on their grocery bills in recent months, according to recent polling from Ipsos conducted exclusively for Global News.

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Click to play video: '8 in 10 Canadian households seeing grocery bill increases: IPSOS poll'
8 in 10 Canadian households seeing grocery bill increases: IPSOS poll

How did we get here?

Throughout the current inflationary period, many consumers and politicians have pinned the blame for rising prices on Canada’s highly concentrated grocery sector.

Loblaw itself acknowledged in social media posts last year that it had become the “face of food inflation” in Canada, but has argued, along with other grocers, that increased costs from its suppliers are at the heart of the grocery price hikes.

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Users on the subreddit advocating the boycott are not convinced, often collectively denouncing promotional tactics or public statements from Loblaw.

Jennifer Singh, CEO of public relations firm She’s Newsworthy Media, tells Global News that she’s not surprised that social media frustrations have reached the boycott boiling point.

“It’s very easy for tens of thousands of people to band together on an online platform and air out their frustrations,” she says. “Gone are the days where people are necessarily picketing outside of a big retailer.”

Click to play video: 'Loblaws boycott picks up steam as resentment grows online'
Loblaws boycott picks up steam as resentment grows online

David Soberman, professor of marketing in the Rotman School of Management at the University of Toronto, says Loblaw has become a “lightning rod” for Canadians’ frustrations with rising grocery prices largely because it’s the biggest dog in the yard.

“When an industry is put under a magnifying glass, as is the case with our grocery sector, the people need a whipping boy,” he tells Global News.

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“Loblaw, being the biggest company in that industry, really is getting a lot of the criticism that can be just as fairly levelled at some of the other players in the industry.”

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That was also the point made by Loblaw chairman Galen G. Weston at the company’s annual general meeting on Thursday as he and CEO Per Bank sought to reassure shareholders.

The boycott is an example of “misguided criticism,” said Weston. He said allegations of profiteering by the grocers are untrue.

Loblaw’s profits, stock price are rising

Fears of a month without business from a segment of Canadian shoppers do not yet appear to be concerning Loblaw’s shareholders. The company’s stock price has been largely rising on the TSX in 2024, up roughly 19 per cent year-to-date.

The first day of the May boycott also coincided with Loblaw’s first-quarter earnings release, where the company reported an annual jump of nearly 10 per cent in net profits.

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Analysts on the accompanying earnings call Wednesday did not ask Loblaw executives about the impact such a boycott could have on the company’s financial outlook.

Instead, Bank extolled the success the company was having attracting cash-strapped customers with its promotions and a deeper push into the discount grocery segment.

“Canadians are recognizing that we are providing the combination of value, quality and service that they want, and they are rewarding us with their business,” he told analysts. “They are voting with their feet.”

Click to play video: 'David Soberman explains the movement to boycott Loblaw locations'
David Soberman explains the movement to boycott Loblaw locations

Global News reached out to Loblaw on Wednesday to ask for comment on the May boycott plans. A company spokesperson noted that “the last few years have been tough for Canadians” and said Loblaw is doing “what we can to combat inflation at our stores.”

“As a business, we are acutely aware of the fact that we have to win our customers’ business each and every day,” the statement read. “That won’t change – we’re going to keep working hard to deliver on our commitment to value and to rebuild the trust grocers have enjoyed for more than 100 years.”

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The spokesperson highlighted plans to open 40 new discount stores and new promotions as proof Loblaw is investing in affordable options for customers.

Bank said in an interview with The Canadian Press earlier this week that he wants to “fix” the experience of dissatisfied customers and said it’s on Loblaw to continue delivering value to win their business.

“We don’t have a contract with our customers. They can choose to shop elsewhere tomorrow if they don’t like the offer that we’re giving,” he said.

Singh tells Global News that this language – that there’s no “contract” between customers and the grocer – marks a misstep in Loblaw’s efforts to improve its reputation.

“Something along that line doesn’t really show that they’re interested in building a relationship,” she says.

Will the Loblaw boycott work?

The Liberal government has also waded into the firestorm around grocery prices in Canada, promising efforts to promote competition in the sector and potentially lure international retailers to the market in a bid to tamp down food inflation in the long run.

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Ottawa has also been pushing for Canadian food retailers to sign a grocer code of conduct, something Bank hinted Wednesday he’s “more optimistic” about now despite Loblaw previously having reservations about the voluntary regime’s proposals.

Industry Minister François-Philippe Champagne told reporters on Tuesday that the heads of Canada’s biggest grocery chains should be listening to their customers in the wake of the boycott movement.

“I think it’s a call for action that says to the big grocery chains, people want to see action and they want to see help,” he said.

Click to play video: 'Why aren’t more foreign grocers in Canada? Lack of space a hurdle: Minister Champagne'
Why aren’t more foreign grocers in Canada? Lack of space a hurdle: Minister Champagne

But Soberman says the messaging from grocery CEOs that they’re doing their best to stabilize prices rings “hollow” to him.

Instead, he says it would be more productive for companies to talk about what they’re doing to control costs in their stores, because that’s a more “credible” tact for a business to take.

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Ultimately, neither Singh nor Soberman says they think the month-long boycott will significantly hurt Loblaw’s business.

“The history of boycotts is, typically, they don’t have a big effect,” Soberman says. “The reality is, people have habits. Many people like shopping at Loblaws, despite the fact that there’s some people that are upset and they’ll continue to go there.”

Singh notes that with only a few options between Loblaw, Metro Inc. and Empire Co. in Canada, a boycott is not necessarily realistic for many Canadians, particularly those in rural and remote communities who may only have one grocer in their vicinity.

Loblaw’s expansive portfolio has fully entrenched the grocery giant in Canada’s retail landscape, she says.

“It’s going to take a lot more to bring down a Canadian retailer like this,” Singh says. “Whether or not their reputation has taken a hit, it’s not going to impact their bottom line.”

While Soberman doesn’t think some customers forgoing Loblaw brands for a month will have a disastrous impact on the business, he warns there are knock-on effects that could stem from the boycott.

Click to play video: 'Will the proposed Loblaw boycott reap any rewards?'
Will the proposed Loblaw boycott reap any rewards?

If Loblaw’s casual customers hear about the organizers’ concerns and decide to step into a rival grocer just to test the waters, that can loosen the retailer’s grip on a segment of the market. While that might not show up immediately in Loblaw’s quarterly earnings, that phenomenon can compound over time, Soberman argues.

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“The number one thing in retailing that you need is store traffic. And the last thing you want is your loyal customers to sample the competition,” he says.

Despite promises of promotions and a decline in the annual food inflation figures, Soberman says the frustrations of shoppers won’t just go away when the boycott ends on June 1 – something policymakers and grocers alike will have to reckon with for months to come.

“The bottom line is that people are upset when they go in to buy groceries, and when they see the bill at the end of their grocery shop,” he says.

“Until we start seeing those bills starting to level off, I think that upset is going to continue.”

– with files from Global News’s Anne Gaviola and The Canadian Press

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