Marketing Fairness and “Big Grocery”

I read with interest recently that Loblaw’s, Canada’s largest grocery business had record profits.  For instance, on Thursday, February 23rd, 2017 they reported a net profit of $201 million in the fourth quarter of 2016, which was up 57% from the year before.  That’s big money, the announcement came just after the company had reduced payments on some supplier invoices.  In the grocery business things can get interesting.  From a farmer perspective it is not always fair.

As farmers, we are all food producers, some of us closer to the consumer’s dinner plate than others.  For instance I grow non-GMO food grade soybeans, which are eaten in South East Asia.  However, my corn gets burnt for ethanol or is fed to animals mostly.  My wheat gets milled into biscuits unless it’s fed to animals.  My neigbours on the other hand grow processing tomatoes, cucumbers, strawberries, some, of which have a very short shelf life.  The road to the grocery store is crucial, both in timing and in getting paid for what you do.  Simply put, that $201 million profit in the fourth quarter for Loblaw’s sticks in the craw of many farmers.

It’s not like farmers are against grocery store profits.  I think we are pro profits.  However, I think there is a greater vision that chain grocery stores need to be more considerate of processors and grassroots farmers and pay attention to Ontario or Canadian grown food products.  I prefer Ontario grown strawberries any day to those from California.

For instance at the present time readers of this column know the marketing conflict that is currently going on between Ontario processors, Ontario tomato farmers and the provincial government.  Dirt-cheap tomatoes don’t help anybody.  Simply put, if the grocery chains stores are making $201 million in the fourth quarter of 2016, multiply that by 4 and you get a pretty big number.  If more of that money reached back to the farmers and processors, we wouldn’t be having this current tomato dustup.  In fact, ditto for the rest of our agricultural commodities.

However, vegetable/fruit producers generally are the closest to the consumer’s dinner plate.  A strawberry gets picked, put in a container and has about four days to be consumed before it loses its vitality.  It is similar for some vegetables.  So there are different degrees of price fairness from the field to the grocery store.

Of course, in the free market things can get pretty brutal.  The grocery store might need your produce, but a phone call once everything is packed might cancel the order.  That makes strawberry jam versus strawberry shortcake!  There are many other examples.  The free market is what it is.  It doesn’t apply to milk and chicken in Canada, but it certainly applies to vegetables, fruits and other produce at the other end of the grocery store shelves.

Is that fair?  Or should we simply fixate on the $201 million of profits for the grocery store?  You see when farmers are blamed or even the declining value of the Canadian dollar for increasing food prices, it makes no sense to me.  What about the grocery store chains or what I refer to as “big grocery”?  Do they have a role to play in the price of groceries?  Of course they do, they are the biggest influence by a mile.

Of course, the issue is much bigger than farmers and “Big Grocery”.  Simple put, every night in Canada consumers go to sleep never doubting that there will be food in the grocery stores tomorrow.  In other societies such as in the Third World it is the opposite.  I have seen that.  However, in most Western countries nobody ever thinks about that unless they have experienced the ravages of war.

So as we look ahead fairness needs to become more of an issue when thinking about our grocery stores, their profits and farmers and processors back near the farm.  It’s simply not palatable to have grocery stores with million dollar profits per quarter, but farmers and processors fighting over the dimes and nickels.

Fairness is not a free market characteristic.  Farmers in 2006 blocked some Ontario grocery store food terminals in an attempt to keep those shelves empty.  That was something.  However, in 2017 those grocery shelves are full, prices set and the coast is clear.  There are issues here.  Can we do better?