Loblaw CEO Calls for Elimination of All Property Controls in Grocery Industry
The CEO of Loblaw is calling for Canada’s grocery sector to end the use of all commercial property controls.
Per Bank made the call in an op-ed piece published in the Globe and Mail. His comments come as the Competition Bureau is investigating the impact of property controls on competition as part of an ongoing investigation into Loblaw and related fellow grocery retailer Sobeys.
The bureau has invited stakeholders in the Canadian grocery and commercial real estate sectors to provide input on the use of property controls by grocery retailers.
“While we think we have one of the most competitive grocery markets in the world, we are open to the challenge of making sure that it stays that way,” wrote Bank. “Strong competition makes us all better.
“That is why the Canadian grocery industry should end the use of all commercial property controls.”
Competitor property controls are contract clauses that restrict the use of commercial real estate to prevent a tenant’s competitor from operating at the same location. When a retailer sells a property, restrictive covenants sometimes stop the new owner from opening a competing business, noted Bank
The Competition Bureau is investigating whether propert controls are negatively affecting competition in the grocery industry, potentially leading to higher prices, limited choice, and reduced quality for consumers. Property controls may prevent competing businesses from opening new food stores or restrict the types of products competitors can sell, says the bureau.
Bank disputed the claim that Canadian grocers are to blame for higher food prices due to excess proif-taking.
“That could not be farther from the truth,” he wrote. “A false narrative has been propagated that grocers have taken advantage of higher inflation and make excess profits. The reality is that the grocery sector in which Loblaw operates continues to have the thinnest of margins and be the least profitable among all major economic sectors in Canada.
“Instead of [making] such a baseless assertion, we should focus our attention on actual solutions. One is to end all commercial property controls on how and where competitors can compete with one another. This is a meaningful solution that will have a tangible impact, especially in the current industry environment.”
Having served as a CEO for grocery retailers globally, he contended that Canada’s sector is among the most “hotly contested and competitive” markets in the world.
According to Bank, Canadian grocery retailers’ profit margins have remained stable from pre-pandemic levels, averaging around 3% to 4%, while TSX60 companies and top global food manufacturers operating in Canada generate profits of 10% and 15% respectively.
He contended that the country’s high food prices are a global phenomenon driven by supply-chain disruptions, geopolitical turmoil, climate change, increased ingredient and commodity costs and many other factors.
“In this country, Loblaw is competing not only against domestic players and local grocers; we are in active competition with global giants,” Bank wrote. “Walmart and Costco, two of the largest retailers in the world, command approximately a third of national grocery market volumes based on Nielsen data. This is the highest level of foreign participation in the grocery sector of any country in the G7. Vibrant independent and alternative grocery channels also intensify the competitive landscape.”
However, the Competition Bureau is seeking input on several key areas, including:
- Instances where property controls have blocked domestic or international grocers from opening stores in Canada.
- Situations where property controls have restricted food retailers’ operations, such as limiting the sale of specific food products.
- The benefits and drawbacks of property controls from the perspective of food retailers, landowners, or landlords.
In June 2024, the Bureau announced that it obtained two court orders to advance its investigations into the use of property controls by Loblaw and Sobeys’ parent companies.
“The investigations are ongoing and there is no conclusion of wrongdoing at this time,” said the bureau.
In August, following significant changes made to modernize the Competition Act, the bureau invited Canadians to provide feedback on its preliminary enforcement approach to property controls. That consultation has closed and is not related to the latest call-out.
Bank praised the Competition Bureau’s efforts. He said the bureau’s draft guidelines indicate that property controls should only be used in certain circumstances. But the elimination of property controls in the grocery sector will require industry-wide rejection.
“We are ready to remove such property controls if others do so,” he wrote.
Photo: Paul McKinnon / Shutterstock.com
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