Trust in Loblaw drops after bread price fixing: Study

Grocer trustworthiness falls overall, though consumers put more faith in tough-talking Sobeys
3/20/2018

Canada’s big grocery stores have lost some of the trust of their consumers following the bread price-fixing scandal, and Loblaw has taken the worst hit, according to new research from Dalhousie University.

The consumer survey showed that overall trust in national food retailers has dropped 6.3% since November—before Loblaw confirmed taking part in a bread price-fixing scheme—and trust in Loblaw was down 10%. The study wasn’t bad news for all the big retailers however: Sobeys trustworthiness rose 1.4%.

Lead researcher Vivian Howard, associate dean with Dalhousie’s Faculty of Management, said they were surprised by how much the entire sector was hurt by the bread story, expecting only a minor drop in consumer trust. “A 10% drop for Loblaw was also a surprise for me,” she said. Soon after going public with its role in the 14-year bread price-fixing scheme (and getting immunity from the Competition Bureau in return), Loblaw offered all consumers a $25 gift card at its stores.

“That seemed to be a good strategy on their part to make amends,” said Howard. “I thought there probably had been some decline , but given that it is several months ago and people are receiving their gift cards, I thought people have forgiven and forgotten by this point.”

“We brought the bread price-fixing to light and have therefore become the company most closely tied to this industry story,” said Kevin Groh, vice-president, corporate affairs and communications. “We’re focused on changing processes, doing everything we can to make sure this never happens again, getting $25 Loblaw cards in the hands of our customers, and building their trust.”

READ: Privacy Commissioner launches probe into Loblaw gift card policy

Among the process changes, Loblaw created a new office to ensure competition law compliance headed up by a chief compliance officer reporting directly to board of directors. And all sales and marketing personnel at Weston and Loblaw underwent compliance retraining.

The new Dalhousie research is an impromptu followup to a survey published late last year on consumer trust in four sectors (transportation providers, food retailers, clothing and government departments). Dalhousie had not planned on doing the survey again so soon, but wanted to see if the bread price-fixing revelations changed the initial findings about consumers’ trust of food retailers.

Respondents were asked to rate national food retailers on a five-point scale in response to a series of questions addressing trust, sustainability, corporate social responsibility and ethical practices. One was most positive, and five most negative. Scores of three and higher meant there was no trust. Sobeys’ consumer trust score went from 2.15 in November to 2.12 now, a 1.4% improvement. Conversely, Loblaws’ consumer trust score went from 2.09 in November to 2.29 in March, a drop of 10%. The other food retailers scored in the followup survey were: Costco (2.02), Giant Tiger (2.12), Metro (2.15) and Walmart (2.41). Not enough respondents shopped at those stores to be included in the first survey.

Dalhousie will use the research to understand how the bread price-fixing story impacts where Canadians do their grocery shopping, but it is too soon to draw any conclusions in that regard.

Howard said she was also surprised by the positive Sobeys performance. “We’ve been trying to figure that one out ourselves,” she said, though the strong comments from CEO Michael Medline about having nothing to do with the price fixing may be one reason. “Sobeys has been the most outspoken in denying involvement,” she said. “And that seems maybe to have resonated with consumers and they believe them.”

READ: ‘Keep checking the mailroom,’ Sobeys tells George Weston over price-fixing claim

Asked if the damage to Loblaws’ trustworthiness could be permanent, Howard said Dalhousie would have a better indication when it conducted the survey again in a few months.

“If I were guessing, it wouldn’t surprise me at all, the next time we do the survey, to see Loblaw at the industry average,” she said.

“Consumer memories only last so long,” she said. If Loblaw can go a few months without any new negative stories, consumer trust should start to return. “Another bad news story would be pretty significant.”

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