Fast Five Shorts | Loblaw To Tag US Sourced Products With Tariff Symbol

Summary

Omni Talk Retail Podcast Summary

Episode: Fast Five Shorts | Loblaw To Tag US Sourced Products With Tariff Symbol
Release Date: March 14, 2025
Host: David Parbank
Guests: Chris Crates, Matt Povich, Unnamed Analyst

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Introduction to Loblaw's Tariff Symbol Initiative

In this episode of Omni Talk Retail, host David Parbank opens the discussion with a significant development from Canadian grocery giant Loblaw Companies Limited. Loblaw has announced its plan to mark products sourced from the United States with a new "T" symbol, denoting tariffs applied to these goods.

David Parbank highlights the strategic move:
"Loblaw plans to slap a new T symbol standing for tariffs on labels for products sourced from America. [...] The new T symbol will help Loblaw's customers make informed purchases."
[00:00]

Loblaw's President and CEO, David Parbank (not to be confused with the host sharing the same name), assures customers that prices won't immediately increase due to Canada's counter tariffs on US goods such as poultry, dairy, and produce. However, he warns that price adjustments on certain items might occur within one to two weeks. Parbank emphasizes Loblaw's stance:
"We are pro Canada and not anti USA. We have made, we have many trusted US Vendors but we will be responsive to our customer needs."
[00:00]

He further reassures consumers that any price changes resulting from tariff removals will be fully reversed: "Customers can be assured that when tariffs come off, any tariff pricing changes will be entirely removed."
[00:00]

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Retailers’ Strategies Amid Tariff Uncertainty

Transitioning the conversation, David Parbank engages guest Chris Crates to delve into the broader retail landscape affected by tariffs.

Chris Crates outlines the current climate: "The general approach [...] retailers are assessing the situation versus taking definitive action yet until they have more understanding of what's in front of them."
[03:49]

He elaborates on the challenges retailers face, including:

• Deciphering the complexities of various tariffs, such as those on steel, aluminum, and imports from China and Mexico.
• Managing fluctuating tariff implementations and their impact on supply chains.
• Diversifying supply chains away from China to mitigate future tariff impacts.

Crates emphasizes the importance of data-driven strategies: "The best people are trying to have data focused conversations with their vendors and their manufacturers to understand what actually the cost impact is."
[02:55]

He also notes that retailers are simultaneously considering price adjustments and stockpiling inventory before tariff changes take effect: "Everyone's starting to look through their supply chains and figure out where there's going to be cost impacts."
[03:49]

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Evaluating Loblaw’s Approach

Switching gears, David Parbank seeks opinions on Loblaw's tariff labeling strategy, bringing in Matt Povich for insights.

Matt Povich commends Loblaw's method, characterizing it as "passive aggressive Canadian" yet effective: "Oh, my God, it's so passive aggressive Canadian. I love it so much and I do love the Canadians. Like, we're just going to put these stickers on and you can make the call."
[05:07]

Povich stresses the paramount importance of price elasticity in retaining customers: "Customers are going to be more price conscious than ever. [...] investing in pricing software and optimization so that you can be ahead of the curve"
[05:07]

He connects this to the broader necessity for retailers to adopt agile pricing strategies to navigate the dynamic tariff environment effectively.

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Consumer Perspectives and Market Implications

The conversation shifts to consumer behavior with input from an Unnamed Analyst.

The analyst offers a consumer-centric view: "Loblaw's initiative is another way to have another conversation with their consumer to drive loyalty. [...] trading up in margin."
[06:57]

Key insights include:

• Consumers expect price increases due to tariffs, similar to past inflation trends.
• Retailers face the dilemma of passing costs onto consumers, renegotiating with suppliers, or strategically increasing prices to preemptively offset future tariff impacts.
• There is an anticipated decline in discretionary spending, making price management even more critical for essential goods.

The analyst underscores the complexity retailers face in balancing consumer expectations with operational costs: "Consumers are expecting price to increase. Now the question of how much that is and where that inflection point is tbd."
[07:45]

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Strategic Winners and Economic Dynamics

Wrapping up the discussion, Chris Crates identifies sectors poised to benefit amidst tariff volatility: "Probably the other winner here is like discount and off price retail, right?"
[08:53]

David Parbank adds to this by highlighting that retailers with robust pricing strategies, such as Walmart, are well-positioned to excel: "Walmart continues to win, you know that 100%."
[09:01]

He also revisits economic principles, noting that consumer expectations of inflation can drive actual inflation, creating a feedback loop that retailers must navigate carefully: "The expectations of inflation are just as important as the actual inflation because one drives the other."
[09:01]

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Conclusion

This episode of Omni Talk Retail provides an in-depth analysis of how tariffs, particularly those affecting US-sourced products, are influencing retail strategies in Canada. Loblaw’s introduction of the "T" symbol serves as a case study for broader industry responses, emphasizing the need for agile supply chain management, sophisticated pricing strategies, and a keen understanding of consumer behavior. As retailers navigate these challenges, those who effectively leverage data and optimize pricing are likely to emerge as market leaders.

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Notable Quotes:

• Loblaw CEO Pearbank: "We are pro Canada and not anti USA. We have made, we have many trusted US Vendors but we will be responsive to our customer needs."
  [00:00]
• Chris Crates: "Everyone's starting to look through their supply chains and figure out where there's going to be cost impacts."
  [03:49]
• Matt Povich: "Customers are going to be more price conscious than ever."
  [05:07]
• Unnamed Analyst: "Consumers are expecting price to increase. Now the question of how much that is and where that inflection point is tbd."
  [07:45]
• David Parbank: "The expectations of inflation are just as important as the actual inflation because one drives the other."
  [09:01]

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This summary encapsulates the key discussions from the episode, providing listeners with a comprehensive understanding of Loblaw's tariff symbol initiative and its implications within the retail industry.

Transcript

[David Parbank]

Loblaw plans to identify products sourced from the US With a tariff symbol, according to Canadian grocer Shout out to them for their first ever Fast5 appearance. And Loblaw plans to slap a new T symbol standing for tariffs on labels for products sourced from America. Loblaw Companies limited President and CEO Pear bank, the early front runner for best retail CEO name in human history, said prices won't rise immediately as a result of Canada's counter tariffs on US Goods like poultry, dairy and produce. But when they do on some items in as little as one in one to two weeks, he said the new T symbol will help Loblaw's customers make informed purchases. Quote we are pro Canada and not anti usa. We have made, we have many trusted US Vendors but we will be responsive to our customer needs. Parbank said customers can be assured that when tariffs come off, any tariff pricing changes will be entirely removed, end quote. Chris Crates what is the general approach you are seeing US Retailers take amid all this tariff noise?

[Chris Crates]

Yeah, it's a great question. Dominating a lot of time for most of our clients right now. I think at the beginning scrambled to figure out what's actually impacted. As you think about working with vendors, with manufacturers, how their supply chains are impacted, you know, the velocity of new updates on the tariffs, I feel like every day I get a new text that hey, this has changed. You know, you have the Canada Mexico tariffs, you have the China import tariffs, you have the steel and aluminum tariffs. There's so many different levers. There's questions about how they'll be implemented. You know, with the steel and aluminum tariffs, the way it's written, it's actually only on the FOB portion of the goods that contain steel and aluminum. So not just pure steel and aluminum goods. So there's lots of questions like how will these tariffs stack together. You know, they weren't necessarily released in the most descriptive, easy to implement way. So I think there's been a lot of spin cycle trying to number one interpret what's actually going to happen. Number two, think about how it'll be implemented as you import products. You know the some of the good news here is, you know, we've kind of been through this cycle before in, in tariffs so there's a, you know, a playbook that a lot of folks have have written already and how to deal with tariffs. The other kind of tailwind, if you will, is a lot of folks have started diversifying their supply chains away from China kind of as a result of the last cycle. So there'll be some Less impact here. But you know, the, the kind of universal approach that folks are taking or should be taking is, you know, everyone's starting to look through their supply chains and figure out where there's going to be cost impacts. I think what the best people are doing is trying to have data focused conversations with their vendors and their manufacturers to understand what actually the cost impact is so that you're not taking, you know, additional, call it margin seeking cost increases from your vendors because a lot of times they can tuck in stuff like that under the guise of, oh, cost of business has increased because of tariffs. So I think there's a portion of that. And then, you know, everyone's thinking about how do I start, where can I raise prices to account for this, where do I have elasticity, where do I not have elasticity? And then kind of on the far end of the spectrum you have even some retailers placing, well, it's, it's past now. So placed, you know, front running orders to try and bring in lots of inventory ahead of these tariffs. So wide range of, of reactions, kind.

[David Parbank]

Of trying to, so let me make sure I understand that. Also I want to ask you a follow up question. So, so, so would, so would you say that generally speaking, retailers right now are assessing the situation versus taking definitive action yet until they have more understanding of what's in front of them. With the exception of China where it seems like maybe people are taking more action on the rerouting of Chinese production. Is that a good summary or what am I missing?

[Chris Crates]

I think that's right. But there's work you can do ahead of time while you're waiting. So I think the work is happening. For example, you can build models of. Here are all the skews that could be impacted, whether it's a 10% China tariff, now a 20% China tariff, you can modulate some of those things. So I think people are laying the groundwork to say, you know, there's four big categories of tariffs that are out there now. Which skews do we have that could be impacted by these? And then building the model in a way such that, you know, as certain tariffs drop through negotiations or certain tariffs increase, you have the groundwork to, to be able to simulate impact to cost and therefore pricing.

[David Parbank]

Okay, got it. All right, so let's, let's switch gears here a little bit on this one because I think this will be fun. So, and what do you, I'm curious what you think of Mr. Pear bank and Loblaw's approach to this problem. What's Your thoughts there?

[Matt Povich]

Oh, my God, it's so passive aggressive Canadian. I love it so much and I do love the Canadians. Like, we're just going to put these stickers on and you can make the call. Listen, I think that Chris hit it on the head. Like, what's really important here is for retailers to be making sure that they have the most price elasticity to bring customers in the door. Because ultimately I think that's what, what the biggest challenge is going to be. Customers are going to be more price conscious than ever. And so you're going to have to figure out, not like by putting these tariff stickers on. I think that's fine. Whatever you want, how you want to message that to your consumers. But ultimately it's going to come down to price. And it gets back to, you know, the conversation we had with Matt Povich from ravionics last week of like, what are you doing to invest in pricing software and optimization so that you can be ahead of the cur, really give your organization the agility that it's going to need to handle the constantly changing tariffs and just continuously offer your customers the best price possible and give them the least amount of impact to their daily shopping.

[David Parbank]

Yeah, that's a, that's a great point. And yeah, if you're a pricing solution provider right now, you're loving this. I mean, God, because, yeah, the retailer is going to have to invest in upgrading those systems. That's funny. That's funny. I actually just think, I actually personally just think it's brilliant merchandising. Like, I give kudos to loblaws, like, because, you know, it's just, it's just a smart thing to do. The art of retailing is taking advantage of situations as they arise. And that's what they're doing here. They're going to, and by default, they're going to push their private label products as a result of this too. You know, that's a great point. So I think that's what they're doing and it's beautiful. But David, you get the last word here. What do you think, what do you think on, on what they're doing or what do you think on the state of tariffs, like how the industry is reacting? You take the last call here.

[Unnamed Analyst]

Yeah, I want to, I agree with every, with every, with everything that everyone said. I think I want to take a little bit of different approach here. I'm going to think consumer first. So first with the Loblo piece, it's another way to have another conversation with their consumer to drive loyalty. But then also I'm not going to say trade down to private label because in many ways for them it's trading up in margin. So I think that's another way for them to drive brand affinity. As it relates to consumer perception on tariffs, based on the research we've done, there is a little bit of an expectation that all prices are going to increase as it relates to tariffs from Mexico, China and Canada. So similar to where inflation was a couple of years ago, where there is an expectation that prices will go up. And I think it's a question of where that will come from. Discretionary spending will naturally go down, but you also have to be mindful on price increases there. But on traditional household goods and daily products, the expectation consumers are having, similar to eg is that prices will go up. And, and I think what will be interesting with retailers is do you automatically pass those costs to the consumer? Where do you renegotiate with suppliers? Or even in certain impact, do you see an opportunity to increase price when actual cost does not increase? So do you, you know, premeditatedly, I'm not even sure if that's a word, increase prices to, to offset future cost increases via tariffs. And so I think when it comes to traditional food and beverage products and even personal care, consumers are expecting price to increase. Now the question of how much that is and where that inflection point is tbd. But it will be interesting to see.

[Chris Crates]

That the other winner you had, Chris, you mentioned pricing software. Probably the other winner here is like discount and off price retail, right?

[David Parbank]

Yeah, I was just thinking Walmart wins. Yeah, Walmart wins in this, in this world they continue to win, you know that 100%. Yeah. I mean the other part to me is like I go back to Econ 101 that the expectations of inflation are just as important as the actual inflation because you know, one drives the other. And so yeah, it's really interesting.