LOBLAW TO UNION: HELP US BE MORE COMPETITIVE

BRIAN DUNN

HALIFAX, Nova Scotia (FNS) -- Loblaw Cos., Toronto, is hinting it may need concessions from its unions to combat the growing presence of nonunionized Wal-Mart Canada and Costco, although Loblaw continues to dominate Canada's grocery business with a one-third market share.

"The risk remains not with our traditional competitors but rather from the nonunion mass merchandisers," said John Lederer, Loblaw president, at the company's annual meeting here last week. "Nonunion implies lower cost, and lower cost has the potential to translate to lower shelf prices."

Lederer said it was important for Loblaw workers to recognize the changing competitive landscape and to work together with management in a productive manner.

Perry Caicco, a Toronto-based retail analyst with National Bank Financial, said with a combined 7% share of the Canadian grocery market that is expected to reach 10% by 2005, Wal-Mart and Costco will become an issue for Loblaw and other Canadian grocers.

"It doesn't seem fair that some stores are unionized and others not, but those are the cards Loblaw was dealt and they'll have to learn to live with them. However, they have a tremendous relationship with their unions and have gotten a lot of flexibility from them in return for job growth," he said.

While Wal-Mart denies it plans to open supercenters in Canada, Loblaw executives said they have to prepare for the possibility.

The company spent $613 million on capital expenditures last year and plans to increase it to $715 million this year.

Loblaw Chairman Galen Weston rejected a call from a shareholder to remove genetically modified food from company shelves, noting the population is divided on the "unbelievably complex issue."

Weston said Loblaw is sensitive to consumer concerns, noting the company has introduced a line of 57 organically produced food items, which will increase to 200 items by the fall.

First quarter results were released at the meeting which showed a 21% increase in net earnings from a year ago to $60 million. Earnings per share were 22 cents vs. 18 cents, while sales rose 6% to $2.95 billion.

Last year, Loblaw had sales of $13 billion.