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2009-06-15
Quebec, Canada. Is Wal-Mart Afraid Of Canadian Unions?

"I have always believed strongly that we don't need unions at Wal-Mart," Sam Walton wrote. According to one Canadian investment bank, the grocery industry in Quebec is the nearest thing you'll find to the Garden of Eden -- yet for Wal-Mart -- there's a union worm in the apple. On June 12, 2009, CIBC World Markets, the wholesale banking arm of CIBC, a major North American financial institution, released a 20-page report entitled "Cash Cow: The Lucrative Quebec Market." According to CIBC's market researchers, the grocery market in Quebec "is probably the most lucrative" in Canada, "with generally high prices and a lower discount penetration than anywhere else in Canada." CIBC describes the food industry in Quebec as "a cash cow for all participants." All participants, that is, except one. CIBC says that Wal-Mart's cow has not joined the herd, because it is skittish over union activity in Quebec. Wal-Mart stores in the Quebec towns of Saint-Hyacinthe and Gatineau are already unionized. When a superstore in Jonquiere became unionized in 2005, Wal-Mart shut the store down. At issue for Wal-Mart is the 'card check' laws in Canada, which allow a union to become certified by presenting representation cards from a majority of bargaining unit employees -- without a secret ballot. Wal-Mart said at the time that public polls showed Quebec residents believe union representation should be decided by secret ballot. In Gatineau, when the Tire and Lube center at Wal-Mart became unionized, the giant retailer shut the auto service center down, and told the media that five workers and one manager at the center had been offered jobs at comparable Wal-Mart facilities or elsewhere in the store. The rest of the store remained open, and the other 245 workers were not affected, the company explained. Wal-Mart closed the department after an arbitrator in Quebec approved a union contract for the facility in August of 2008. Given this difficult history with unions in Quebec, the CIBC report says "we do not believe that Wal-Mart will open supercenters in the Quebec market in the near term -- the union situation is a huge barrier." The bank calls Quebec "the land of milk and profits," and says the grocery scene in Canada is experiencing "a relatively steady and calm pricing environment," in part because of the absence of Wal-Mart. "Even the strong growth of Wal-Mart's supercenters hasn't cast a cloud in this situation," the researchers explain, "since the growth of those units has simply replaced the growth from other competitors." In this "mature, calm and lucrative" market, pricing remains relative high, margins are great, and sales are solid, CIBC says. "Wal-Mart has not entered the province with supercenters, and is not likely to as long as labor laws remain unchanged." With Wal-Mart on the sidelines, the existing grocers are engaged in a "quality war" that focuses on new products, new and unique offerings that focus on innovation and service. "In short," concludes CIBC, "this is the type of competitive environment that grocers dream of."

What you can do: Across Quebec, there has been very little square footage growth in grocery stores. CIBC believes that most grocers in Quebec are benefiting from higher gross margins on food than anywhere else in Canada. Market prices in Quebec are 5% to 15% above prices in Ontario, for example. Wal-Mart has no major food presence in the Quebec market. The retailer has 53 discount stores in Quebec province, but these discount stores carry only "pantry" food selections, not a full-line grocery. Wal-Mart as a company is estimated to have $4.7 billion worth of food sales in Canada in 2009, but only $350 million of that comes from Quebec. CIBC estimates that grocery stores in Quebec will sell $21 billion in 'take home' food this year -- but Wal-Mart's discount stores will only get 2% of that market. Basic supermarkets owned by companies like Loblaw, Sobeys and Metro, will capture 82% of that market. Costco, at 6%, get three times the market share of Wal-Mart. Quebec is a major prize for grocers, because the province represents roughly one in four dollars spent on food in Canada. But the population line in Quebec is flat, and there are not many new store growth opportunities in the province, CIBS claims. One of the big unknowns, the CIBC report warns, is: When will Wal-Mart arrive? "The biggest question surrounds the possible arrival of Wal-Mart's supercenters. With no available natural growth in the province and a generally high pricing level, the establishment of even a few supercenters could collapse this lucrative market." The CIBC research team concludes that Quebec is "a ripe market" for Wal-Mart superstores. "The generally high price levels and the relative small presence of discount food stores should theoretically be too tempting for Wal-Mart to ignore. The trouble, of course, is unionization. Labor laws in Quebec include a version of the infamous 'card-check' system, CIBS notes, "and this has already resulted in three distinct unionization battles for existing Wal-Mart discount stores. Although the company grudgingly accepted an arbitrated contract at its Saint Hyacinthe store, and although that contract was generally low-cost and favorable, the very idea of unionization seems to violate the most fundamental principles of Wal-Mart Canada. This is understandable: even the mildest acquiescence by Wal-Mart could be seen as capitulation to unionization, and could open the door for more attempts in other parts of the country. What's more, the first supercenter in the province would probably, as a grocery store, attract a different and more onerous union contract than at Saint Hyacinthe." Readers are urged to call Wal-Mart Canada Customer Relations at 1-(800) 328-0402, or leave a comment at http://walmart.ca/Canada-CustomerService.jsp with this message: "A new CIBC World Markets study says Wal-Mart Canada is reluctant to build superstores in Quebec because of fear of capitulating to unions. This is not fair. How are workers in Quebec supposed to 'live better' unless they have the right to form a union at Wal-Mart? A collective bargaining agreement would raise their wages and benefits, which in turn would give them more discretionary income -- which right now they have to spend at Soby's, Loblaw's or Metro's. I can understand your fears that American workers might see that the 'card check' law in Canada actually works -- especially with the Employee Free Choice Act in play in Congress. But CIBC says that Quebec is the land of milk and profits. This sounds like the very place Wal-Mart wants to be. Sharing some of that profit with your workers is what the card check law is all about. Don't avoid Quebec: it's a grocer's paradise."










 
 
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