Are retailers driving consumer demand?

Consulting agency says retailers control what is on Canadian supermarket shelves but some food retailers disagree

The phrase “grocery store customer” provokes a standard mental image — a 35-year-old woman reaching for a carton of milk, while a toddler plays with a toy in the grocery cart.

Farm groups and organizations like Farm & Food Care Canada, which talk to consumers about food production, spend a lot of time worrying about that stereotypical woman.

They worry what she thinks about things like free-run eggs, genetically modified crops and growth hormones for beef cattle.

Consequently, they spend time and money trying to educate her and millions of other consumers about farm practices in Canada.

But is that woman really the customer of Canadian farmers? Maybe someone or something with significantly more power is the customer?

Data from Food Solutions Group, a Winnipeg consulting agency, shows that five retailers control nearly 80 percent of food sales in Canada.

Combined, Loblaws, Sobeys, Metro, Costco and Walmart represent 78 percent of annual sales.

Given their market share, the companies have the power to impose practices on their food suppliers and last year they collaborated to do just that.

In March, grocery members of the Retail Council of Canada said they would buy only cage-free eggs by the end of 2025 with the goal of improving the welfare of hens.

The decision upset egg farmers and some animal welfare experts because science suggests that barns with enriched cages provide comparable welfare to open housing. Plus, organizations and producer groups had just developed a code of practice for laying hens and the announcement usurped their efforts.

Massive restaurant chains like McDonald’s and Tim Hortons are taking similar stances on cage-free pork, cage-free eggs and sustainable beef.

Given their immense influence, the retailers and restaurants may be the real customer for many Canadian farmers.

In the case of cage-free eggs, producers will need to deliver on the retailers’ expectations, whether they agree with the policy or not. Which means the customer, the food retailer, is right.

“I think there needs to be an acceptance of the fact that (if) that’s what they’re going to be purchasing, then yes, we (farmers) have to supply that product,” said Clinton Monchuk, executive director of Farm & Food Care Saskatchewan.

That doesn’t mean farm groups should remain silent if Sobeys or Loblaws makes an announcement about “humanely raised” pork.

Monchuk said agricultural leaders have a responsibility to explain and defend practices when retailers and restaurant chain leaders don’t understand the hows and whys of production.

“(But) if they have made (a) choice based on full information, then yes, as being responsible farmers … we need to provide that product,” he said.

“If they haven’t been educated, that’s a different story.”

John Graham of Food Solutions Group and former public relations strategist with Canada Safeway isn’t convinced that food retailers are the customer or have the power to dictate farm practices.

“(About) 99.9 percent of the time, what is on the shelves is what we see consumers are asking for…. whether it is gluten (free) or free-range eggs or humanely certified product,” he said. “It’s always consumer driven, unless it’s a really innovative product that’s first to market for a retailer.”

Mike Von Massow, a food agriculture and resource economics professor at the University of Guelph, backed Graham’s argument that retailers respond to consumer demands.

That’s why grocers have options on their shelves, such as free-range eggs or organic milk.

“Retailers rarely make those decisions (for customers), they offer choice.”

But the same can’t be said of restaurants. Major fast food chains make choices about their food suppliers because they can’t offer regular eggs, free run, free range and organic eggs.

“If you’re going through the drive-thru… and say, ‘I’d like the cage-free breakfast sandwich’, their system doesn’t allow that,” Von Massow said. “(So) these (restaurants) are making decisions on behalf of consumers.”

The restaurant chains have power to influence farm practices because of the volume they buy and sell.

Plus, they have immense marketing budgets and use part of those funds to make consumers aware of programs like sustainable beef.

“Whether it’s a full service restaurant and the server’s telling you all about it or (it’s) a quick service restaurant like A & W and they’re screaming it from the mountain top … that is shaping people’s opinions of those attributes,” Von Massow said.

“So the boardrooms of the big restaurant companies matter.”

U.S. Department of Agriculture stats show that restaurants definitely matter:

  • In 1970, in America, about 26 percent of total food spending was on food away from home.
  • By 2014, spending on food away from home topped 50 percent.
  • “In Canada we’re probably still under 40 percent and climbing,” Von Massow said.

Farm & Food Care and other farm groups are very aware that restaurants and grocers have influence, Monchuk said, which is why representatives of the ag industry meet regularly with company leaders.

However, it’s also critical that ordinary Canadians understand why farmers apply pesticides or give cattle antibiotics when an animal is ill.

As a result, information campaigns are important.

“That’s where we want to do our job … to make sure the factual, truthful information is getting out there to consumers.”

But educating 35 million Canadians on the ethics and sustainability of current farm practices is a tall order. Maybe it’s more efficient and a better use of resources to explain farm practices in the boardrooms of Loblaw’s or Tim Hortons.

Von Massow said producers and lobby groups can certainly “educate” executives and regular Canadians about modern farming, but such efforts may fall short.

In those cases, farmers have a choice. They can accept that the customer is right and deliver on the expectations, or choose not to sell to that customer.

But farmers have to remember that customers also have choices, Von Massow said.

They can choose to buy no-added hormone, antibiotic-free beef from another supplier, or choose not to buy beef at all.

“We sometimes need to be aware of that risk.”

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