Columnists
Days in the Driver’s Seat
My daughter in Vancouver was the first to bring it to my attention. She was buying groceries at her local Loblaw’s and turned to the snack food aisle to pick up some tortilla chips, where she was met with…absolutely nothing but rows of empty shelves. She wondered whether the delivery truck had beetled off to Ottawa to show solidarity with the blockaders; or whether there had been a catastrophic failure in the tortilla crop affecting only Tostitos.
The following day, I got my answer from Mr. Pierson, the proprietor of our local Foodland supermarket. It turns out there is a standoff between Frito-Lay Canada and Loblaw Companies Ltd. over the pricing of the whole gamut of salty snack foods that Frito-Lay sells to Loblaw’s. Frito-Lay has experienced cost increases that prompted it to increase its prices charged to retailers. Normally, that increase would be passed on to shoppers by upping the retail price, but Loblaw’s was not keen on doing that, saying it was “laser focused” on not increasing consumer prices.
That left Loblaw’s with a dilemma: should it ask Frito-Lay to bear some or all of the price increase, or absorb the increase itself? Negotiations between the two companies did not lead to a friendly resolution of the issue, and now Frito-Lay has opted for the nuclear option of removing its products from Loblaw’s shelves. And then the dispute entered the public domain. Unfortunately, the operation of the Emergencies Act has just been terminated, so there is no prospect of intervention by federal, provincial or municipal governments and their various police forces to resolve this standoff; they’ll have to do it on their own.
The wild card in this dispute is the customer base. Will customers show their loyalty to Loblaw’s, even though they won’t be able to buy Frito-Lay products there; or will they prefer loyalty to Frito-Lay, and go elsewhere to shop for a complete range of grocery items that includes Frito-Lay products?
Make no mistake, salty snacks like potato chips, corn chips and tortilla chips are big business. Frito- Lay is the biggest operator in the game, owing such brands as Lays, Miss Vickie’s, Doritos and Sun Chips. (It used to own the Hostess brand, but that was melded into Lay’s). Frito-Lay is in turn owned by the Pepsico soft drink mega-corporation. Loblaw’s is the biggest grocery chain in Canada with retail outlets like No Frills (or No Thrills, as I prefer to call it), Real Canadian Superstore and Shoppers Drug Mart, and brands such as President’s Choice and No Name. Its 2020 revenue was in excess of $50 billion.
Each of the companies can draw on incredible marketing resoruces. Pepsico presents itself as a company on the leading edge of pop culture. I wouldn’t be surprised to see a commercial in which people far younger and cooler than you and I are scarfing down Frito-Lay snack foods while watching the Super Bowl half time show, with alternative shots of a loser loner munching disconsolately on No Name potato chips while watching Jeopardy!; or another commercial showing a shopper with an almost full cart confronted by an empty shelf, who then abandons the cart, walks out of the store and heads for the Metro store to pick up the weekly supply of essentials, including Frito-Lay products.
Loblaw’s, on the other hand, can draw on its image as a purveyor of fun food to families, delivered in the affable suburban dad image of its president Galen Weston. He could remind people that President’s Choice chocolate ginger popcorn candy cane ice cream is only available from Loblaw’s, or try to convince them that they would be healthier and happier buying rice crackers instead of potato chips.
Each company has also shown a ruthless side. When Old Dutch potato chips expanded into Ontario in the 1990s, Frito-Lay took its competitor out of play by buying all its stock off the shelves at a hundred supermarkets, extracting promises that the shelf space was reserved for Frito-Lay, For its part, a few years ago Loblaws paid a $107 million penalty for price fixing on bread sold in Canada.
But each company is good at least one thing: making money. Both sides will prosper best if Frito-Lay products are on Loblaw store shelves. So you can rest assured that the two parties will eventually reconcile and come up with a plan that keeps them both grudgingly happy and passes the rest of the cost on to the consumer. Until then, you might as well enjoy your days in the driver’s seat.
And there is another option, however unpalatable it might be. And that is to forgo salty snack goods completely. The line-up forms to the right for all who wish to take this pledge.
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