President's Choice won't be calling any of its sauces Memories Of Loblaws any time soon. But the fact that Loblaw and its parent global food empire, George Weston Foods, both took some stock losses over the past year is an alert that the entire food system is in what system analysts dub a "clusterfuck."
Loblaw's $60 million bungling of its warehousing and logistics overhaul, the immediate cause of the company's troubles, is the ultimate alert that the food industry is snarled in a vicious circle of forces it can't control.
These include competition from giants like Wal-Mart, changes in food habits and the stunning fact that our society has arrived at the point where healthy profits are proving impossible to achieve in any aspect of the growing, preparing or selling of food.
Loblaw's drop in value per share over the last three months follows a 50 per cent drop in profits in 2004 for owner George Weston's bakery-centred empire, producer of such icons as Girl Scout cookies in the U.S. and Wonder Bread in Canada. It got sideswiped by the anti-carb Atkins diet craze.
Kevin Grier, senior market analyst with conventional agri-food think tank the George Morris Centre, thinks the $60 million the company lost is part of the firm's "restructuring program to get more efficient to compete more effectively with Wal-Mart and Costco. The bottom line,' he says, "is Loblaw is eating it, it's dealing with it. The company has a history of success as the best grocer in Canada, so you never underestimate Loblaw.'
But it's just as easy to see the company's problems as a cautionary tale about what happens to empires when overextension goes too far and transaction costs get too high.
In this era of what retail consultants call "cross-selling" and "channel blurring," grocers no longer get 94 cents of each food dollar, a proportion they enjoyed as recently as 20 years ago. When food can be pop or coffee and a muffin or cereal bar hoovered down in the car, half of every food dollar now goes to an assortment of gas stations, department, drug and variety stores, restaurants and takeouts wherever people happen to be rushing off their feet when they're looking for a meal replacement.
Grocery retailers have retaliated by expanding their own offerings of door crashers and loss leaders. Many now feature pharmaceuticals, gas and credit cards, as well as up-margin items like clothing and televisions. Several, including Loblaw, are about to learn the hard way that dry goods trends are as seasonal and perishable as food and require specialized expertise as well as a kind of ambience not found near the pet food or digestive aids aisle.
Few corporations stick to their knitting any more, and, as the poet said, "the centre will not hold."
This corporate super-sizing trend is subject to no government or planning queries, let alone regulations, on behalf of the public good. But it will wreak havoc in many areas of life as florist shops, insurance brokers, cleaners, clothing stores and gas stations relocate to a supermarket box store on a giant parking lot no longer near you.
If the corporate bleeding hadn't happened to Loblaw one of the world's premier food retailers, and the textbook model for how to do it right in store design, loyalty-creating private labels (President's Choice) and cutthroat dealings with suppliers the firm's supply rejigging could be dismissed as poor execution.
But that's not the beginning or end of the matter. The fact is, when some of the biggest names in food manufacturing and retailing are feeling the profit stress, the last piece in a crazy-making system is now falling out of place.
Rod MacRae, one of Canada's senior food policy analysts, says the Anglo-American food system is certifiably dysfunctional. The system fails all parties associated with it: the environment, farmers and farm communities, processors and distributors, and consumers. Now that high-profile processors and retailers are hurting, he says, someone should diagnose the entire system as one needing corrective redesign from stem to stern.
Behind the ups and downs of individual or corporate players is the fact that food has become widgetized and this is the rotten apple at the bottom of the barrel, which is now spreading to the likes of Loblaw.
Government policy is premised on the "fact" that food is a commodity, which is why there's no such thing as a food policy in Anglo-American countries, and no such thing as an overarching government ministry or department of food.
We have integrated departments of education, housing, energy and transportation, but food is fragmented and pigeonholed according to its money-making and job-producing role. Thus, we have departments of oceans and fisheries (as if fish didn't live in lakes), agriculture and rural affairs (as if food can't be grown in cities), separate departments for nutrition and compost (as if food nutrition didn't come from soil), ministries of health that spend less than a tenth of 1 per cent of their budgets on food (as if food weren't linked to half of most countries' disease burden).
Widgetization also creates consumers. Citizens don't shop or eat, apparently, and so have no citizens' rights to know whether the food they're paying for is genetically engineered or from a dictatorship or contaminated by rocket fuel. We're more likely to think of the rights of car drivers than the rights of eaters.
The degradation of food into a commodity has now caught up to one of the originators and great profiteers of the grocery store wars, the company that hired William Shatner during the 1970s to ring out the promotional jingle "By gosh, the price is right."
Linguistically, "by gosh" comes from a different era than "clusterfuck," but, by gosh, it's time to say that the food system itself, not just Loblaw warehouses, is in need of an overhaul.