Canadian Pizza Magazine

Features Business and Operations Finance
From the Editor’s Desk: November 2005

Collusion At The Vats


April 14, 2008
By Cam Wood

Topics

What is to be done about the evolution of the grocery store? Where its previous purpose was simply to sell fresh food items,
produce and packaged foods for home consumption, the grocery store has
now become a financial institution, pharmacy, photo-lab, wine store and
restaurant.

Collusion At The Vats

What is to be done about the evolution of the grocery store? Where its previous purpose was simply to sell fresh food items,
produce and packaged foods for home consumption, the grocery store has now become a financial institution, pharmacy, photo-lab, wine store and restaurant.

In recent conversations with both chain outlets and independent pizzeria operations, there was one thing made perfectly clear – this is the new threat to the industry, and the rules of engagement are quite different.

For some time now, as we all know, pizzerias have battled with the federal government over Class 5A licensing. The 1995 North American Free Trade Agreement component was brought in to help enable Canadian manufacturers to compete with American manufacturers in the new economic climate.

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However, in 1995, grocery stores were still focused on selling their key brand – groceries.

But with the “big-box mart” mentality of the past decade and the proliferation of the Wal-Marts and Zellers as department and grocery stores, the playing field has changed. Canadian Tire has even moved into prepared food sales with the launch of the newest venture at its gas stations.

Superstores have one objective: to get as much of the consumers’ shrinking disposable income as possible. And in doing so, they are focused on attacking everyone’s business – from the little corner hot dog cart, to the mortgage and insurance providers.

Superstores now have pizza ovens, counter-type ordering, and seating for upwards of 20 diners to enjoy a meal before venturing down the massive aisles to buy some Cheerios, toilet paper, automobile tires and a retirement savings plan. It’s a complicated setup, and who is to say they’re not using that 5A for those deli pizzas. Is anyone really watching?

With the power of a 5A behind them, these stores can serve up profits way beyond the grasp of a local pizzeria operator. Because it’s not bad enough that the McCains and Krafts of the industry claim they do not compete with pizzerias (“It’s not delivery … it’s soggy, doughy crap but we got a huge marketing budget”), but now the Loblaws, Sobeys et al, can do so as well.

A few operators have resigned themselves to accepting the rules will not change. They have a clear understanding of where the dairy commission’s vested interest lay – and it has little to do with Canadian pizzerias.

In a very unscientific survey, the majority of pizza industry professionals that Canadian Pizza magazine spoke with regarding the upcoming cheese price announcement scoffed at the idea of a reduction. When the sales of frozen pizza continually rank as both the fastest growing segment and the leading frozen food purchase, somehow the cheese purchasing levels for fresh pizza makers versus frozen pizza makers means very little to the commission.

With a sales trend that is strongly in favour of the frozen sector, the dairy industry and the manufacturers see little value in a reduction in pricing; leaving only the independent operators to harp over the cost of cheese and the inequality in the Canadian pizza market today.

Truly, the possibility of a reduction in pricing is akin to the petroleum industry admitting they have been gouging consumers for years, and offering major gasoline rebates. Collusion at the gas pumps, collusion at the cheese vats.•