Newspaper article The Canadian Press

Why the Price-Fixing Scandal Might Not Be All Bad for Loblaws

Newspaper article The Canadian Press

Why the Price-Fixing Scandal Might Not Be All Bad for Loblaws

Article excerpt

Why the price-fixing scandal might not be all bad for Loblaws

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This article was originally published on The Conversation, an independent and nonprofit source of news, analysis and commentary from academic experts. Disclosure information is available on the original site.

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Author: Michael von Massow, Associate Professor, Food Economics, University of Guelph

The bread price-fixing scandal has garnered Canada's biggest grocery chain a lot of negative media attention.

A recent survey from Dalhousie University suggested that consumer trust in Loblaws has fallen by 10 per cent since the announcement of the bread price-fixing issue.

But will the scandal have a sustained negative impact on Loblaws?

While the company may face civil suits at some point, there is no risk of prosecution under the whistle-blower provisions of Canada's competition regulations. And so the outstanding question is whether the decline in consumer trust results in significant losses in sales and market share to Loblaws.

Several factors suggest perhaps not.

All retailers painted with same brush

It's clear that consumers are becoming increasingly distrustful of business generally. They feel in many cases that bad behaviour is the norm, and aren't surprised when stories like the Loblaws price-fixing emerge.

This is particularly true in this case because Loblaws has claimed (and preliminary findings from the Competition Bureau suggest) that many, but not all, Canadian retailers were involved in the bread scheme.

The Dalhousie study suggested that on average, trust went down for all Canadian retailers following the scandal, although trust in Loblaws declined the most. And so if consumers believe everyone cheats, there's little motivation to switch stores. Food is a staple. We can't choose to forego groceries.

It's worth noting the case of Volkswagen. The emissions scandal that engulfed the German company in 2015 was a significant challenge. Volkswagen paid huge fines and had to retrofit millions of cars. Despite that, the company has seen unit sales growth of 3.8 per cent in 2016 and 4.3 per cent in 2017.

There were financial challenges, and Volkswagen performed in some markets better than others, but customers aren't staying away in droves despite the negative media attention and bad corporate behaviour.

Who is Loblaws anyway?

Another factor that will likely buffer the Loblaws parent company is that many customers likely shop at Loblaws without knowing it.

Loblaws sells food under many different banners including Real Canadian Superstore, Zehrs, Provigo, Fortino's, No Frills and Shoppers Drug Mart. Many customers likely shop at a favourite store without making an explicit connection to the Loblaws name.

That means even those customers who are inclined to punish Loblaws might not even know they are shopping there. …

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