Farmers at risk over Ontario retail ‘bloodbath’

Just when it seemed Ontario consumers were becoming farmer friendly, along comes the George Morris Centre with its year-end retail food report.

I read it over the holidays looking for trends that would support the belief that people are more willing than ever to pay the real price for food. But instead, I found the opposite.

Despite all the talk about local food and regional cuisine, grocery buyers are instead taking new steps toward bargain prices.

Here's the situation. The Guelph-based centre, which dubs itself Canada's think tank for agri-food policy, says Ontario's grocery sector is considered to be in the midst of a "bloodbath." Supermarkets have the lion's share of annual food sales, it says — a lucrative $65.4 billion — but their grip is slipping. They're said to be losing about $400 million every quarter to big- box cost-cutters, the kind that sell general merchandise such as furniture and electronics in one aisle, and food in the next.

The report specifically mentions Wal-Mart and Costco as the major competition to supermarkets, and it maintains the growing big-box patronage by consumers has turned the grocery business into a "battleground." It's the year of the rollback, says the centre, and that plus the spread of the giant supercentre concept has all retailers on edge.

It's unlikely to improve. Food prices in Canada have moved up just one per cent in 2007, mainly due to competition (by comparison, food prices are up six per cent in the U.S., says the centre) so at the retail level, something has to give.

Farmers are getting more for some commodities, especially grain, and oil barons are getting more for the fuel used to produce food and transport it to retailers. All this and more is leading manufacturers to push for price increases, putting a further squeeze on retailers' profits.

This is far from the idyllic local-food image that's been portrayed in some circles as the emerging trend in retail. There are certainly regional examples of success in local food retailing, and stories abound about how consumers are campaigning to know more about where their food is produced, how it's grown and what measures have been taken to ensure its goodness.

But the centre's report suggests people are still driven by price — especially now that their dollar can buy more, given the strength of the loonie — and likely convenience. It's a lot easier and cheaper, in the short term to pick up groceries while you're getting whatever else you need at a big-box store than it is to drive a few miles out of town to support a local food producer.

Of course, all this ignores the fact farmers are also entrusted with looking after the environment and maintaining the countryside, in Ontario, elsewhere Canada and indeed around the world.

In a year-end address in the popular U.K. agricultural newspaper "Farmers Weekly," Prince Charles noted how farmers play an "utterly invaluable role in maintaining some of this country's most beautiful and much-loved scenery . . . their skills have been built up over generations, just like their herds and flocks. And continuity of management is what farming is all about."

But farming is harder when retail is not on your side. The centre's report didn't go there, but maybe somewhere down the road its analysts will pen a piece that predicts from an economic perspective about what Ontario would look like with a food retail sector that counts mainly on imports and cheap food. Meanwhile, optimism prevails in some food predictions for 2008.

Analysts believe big boxes will start wearing a local-food face, the same way they did when they sensed organic food was becoming popular. The key is how much consumers want it.

The big boxes are good at not only responding to demands, but creating them, too, and then meeting them. The agri-food sector needs to convince big boxes that consumers want local food, or try to stem the tide of consumers flocking to the discount retailers. And then there has to be a way of proving it's local.

One way or another, farmers must find ways to survive the divisive grocery bloodbath, and make sure local food fever doesn't falter.

About The Author

Urban Cowboy

Raising awareness and promoting dialogue about current food and agriculture issues.


Headshot of Owen Roberts

Owen Roberts is a faculty member in the Agricultural Leadership, Education and Communications program at the University of Illinois. As an agricultural journalist, he is the past president of the International Federation of Agricultural Journalists and a lifetime achievement award recipient from the Canadian Farm Writers' Federation. His programs and research papers have been recognized nationally and internationally through awards from the Journal of Applied Communications, the National Agri-Marketing Association, the Association for Communications Excellence, and others.