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Dec 20, 2017

‘Consumers won’t care’: Skeptics shrug off Loblaw’s attempt to rebuild trust after bread scheme

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Two skeptics are dismissing Loblaw’s effort to regain customers’ trust after the company admitted to a bread price-fixing scheme.

Loblaw is offering customers a $25 gift card after fessing up to the scheme between late 2001 and March 2015, along with distributor George Weston Limited. To receive the card, customers must register online at LoblawCard.ca by May 8, 2018. Registration begins Jan.8.

“My view when this first came out and now is that consumers won’t care about this too much,” Mark Satov, strategy consultant at Satov Advisors, told BNN in an interview Wednesday.  

Cameron Hurst, chief investment officer at Equium Capital Management, echoed Satov’s sentiment and said issuing the gift cards won’t have a major impact on the company’s revenue.

“Ultimately, in terms of their revenue and the earnings impact, it will be de minimis,” Hurst said in an interview with BNN. “This is a $40-billion combined company between Weston and Loblaw. You’re talking 37 basis points at a $150-million charge. It’s nothing.”

Loblaw said the gift cards are expected to cost between $75- and $150-million – not all of which Loblaw will have to pay themselves Satov said.

“It’s going to be nothing,” he said.

“The producers are paying for a chunk. There are going to be a chunk of people who don’t redeem them at all. And there are going to be a chunk of people who don’t shop there who and are now going to shop there.”  

Satov said while he doesn’t think consumers will care about the card, it’s a smart move for the company.

“I think it’s smart because they get to say, ‘look at us, we’re actually spending between $75 and $150 million,’ but they’re not actually spending it. So it’s always nice to do somebody a favour when it doesn’t cost you the actual money.”

Both Loblaw and George Weston said they don’t expect the gift card plan to affect their dividend.

Rival retailers Metro and Sobeys spoke out in response to the scheme saying there’s no indication their staff have violated the Competition Act.