Yahoo Finance Loblaw changes tune on code of conduct with CEO 'cautiously optimistic' on deal
Loblaw (L.TO) CEO Per Bank says he’s now “cautiously optimistic” about an agreement on a grocery code of conduct, a significant shift for Canada’s largest grocery chain.
In a first-quarter earnings call on Wednesday, Bank says recent efforts by Loblaw teams “working closely” with a government committee had given him a “new perspective” on the code.
“I think the code is beginning to get into a place where I'm starting to become cautiously optimistic,” he said. “Where it’s going to land, of course I’m not sure but I'm more optimistic now than before that we can land an agreement on the code.”
Bank’s declaration comes as a consumer-led boycott of Loblaw and affiliated stores takes shape, and amid widespread concern among Canadians about rising food prices.
Last December, Loblaw and Walmart executives said they would not sign the code of conduct, with Loblaw chairman Galen Weston saying it presented a “significant risk of higher prices and empty shelves.”
Documents show that federal government officials discussed the proposed code of conduct with Loblaw and Walmart Canada over a period of months last year, but felt the risk remained that the two grocers may not sign on voluntarily.
The grocery code of conduct, which has been in development for years, is aimed at setting standards for dealings between suppliers and grocery retailers. The process of creating a code was initiated to address fees that large grocery retailers charge suppliers, an issue that cropped up in 2020.
Focus on value
The public’s concern about the price of food can be seen in Loblaw’s results, with discount grocery stores a major part of the narrative on the earnings call. “Canadians remain very focused on value,” said CFO Richard Dufresne. “Our Maxi and No Frills banners have continued to outperform.”
That trend is driving a further push into the discount space, with more than 50 discount stores now planned for 2024, Dufresne says. He adds that some of these will be new footprints, but many will involve conversions of existing stores to discount banners.
Bank says the trend towards hard discount may slow from the pace of recent years, but it isn’t likely to stop. “I think the shift to discount will continue over the next many years like it has done in probably any other country where discount is a dominant factor."
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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