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Food

Loblaws' Ketchup Saga proves the consumer is king

The consumer is becoming the true CEO of the food supply chain - By Sylvain Charlebois

Guelph - The politics of food distribution is alive and well, or so it would seem. Without notice Loblaws decided to dump French's Ketchup causing a two-day viral backlash by the public. The pressure was so large that Loblaws actually reversed its decision just a few days after making its decision public. Many are speculating how unfair competitive practices amongst vendors could have had something to do with it. Finding any evidence of this is always challenging. But the ketchup story speaks to how the intricacies of food retailing are becoming more characteristically intertwined with unexpected social uprisings.

The Leamington story is certainly at the epicentre of this recent unorganized rebellion against the food establishment. Heinz, a competitor to French's, closed its Leamington plant in June 2014. This plant closure put many employees out of work and caused several tomato farmers to wonder what to do next, as they were left without a customer. Highbury Canco, supported by local investors, eventually bought the plant and continued to pack some products under the Heinz label, but ketchup was not one of them. The American company French's, mostly known for its mustard manufactured in the U.S., buys most of its mustard grains from Saskatchewan. French's has not only expanded into the ketchup industry but it recently began using tomatoes from Leamington and processing them at the Leamington plant. Interesting strategy, but market access is key in processing.

In Canada, given its market clout, Loblaws can make or break processing companies. Highbury Canco relied on a partnership with Loblaws to increase sales of French's Ketchup and entice more tomato farmers to supply tomatoes to the plant as it grew its market share. Loblaws' decision to pull the product took the wind out of Highbury Canco's sails. Most of the general public were unaware of this going on until the news spread on social media. What was perceived as a rational, strategic, corporate decision at the time by Loblaws caused Canadian consumers to support a company that supports local foods and local jobs. By the time #FrenchsKetchup was the number one twitter handle on Tuesday, the battle suddenly ended with Loblaws' decision to re-list the product.

Increasingly, the consumer is becoming the true CEO of the food supply chain. Empowered by social media, consumers are increasingly prompting how food is produced, manufactured and distributed. In just a few hours, with absolute imperfect information, consumers reversed a well-considered decision made by the largest private employer in the country. It is not just about distribution but rather about how any output is perceived by the marketplace. However, every now and then the "CEO" often shows signs of confusion which can cause concern for the future.

In Loblaws' defence, the grocery business is no easy affair. Consumers angered by Loblaws' decision accused the grocery giant on social media of discriminating against Canadian farmers and processors. Yet this is not an entirely accurate picture. Loblaws' strategic focus is certainly on its own private label, namely President's Choice, one of Canada's most trusted and valued brands. Unlike French's, President's Choice is Canadian. But most importantly, many of these products, including President's Choice Ketchup, are made with Canadian grown tomatoes and the condiment is processed here in Canada. The accusations against Loblaws of not supporting local farmers and processors are unfounded, as far as ketchup is concerned.

In essence, it was David fighting Goliath with a bottle of homemade ketchup. David was clearly Leamington and the wonderful "rise from the ashes" project happening in the community. However, to pinpoint who played the role of Goliath in this case is unclear. It may have been Loblaws, or Kraft Heinz which may have played a role behind the scenes. Protecting real estate in the grocery business is key, and partnerships with important vendors can be critical to any grocer's bottom line. For Loblaws, nurturing its relationship with Kraft Heinz makes perfect business sense. Reversely, in response to the market's reaction, it also makes as much business sense for Loblaws to reverse its decision on French's Ketchup.

What needs to be underscored by the ketchup tale is the collectively recognized currency of locally processed food products. Safeguarding our food systems is not only about farming. It is also about how we add value to our own locally grown commodities. That is a refreshing change, so thank goodness for ketchup!

Dr. Sylvain Charlebois is a Professor at the Food Institute at the University of Guelph. Sylvain is included in Troy Media's Unlimited Access subscription plan.

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