Fast Five Shorts | Loblaw To Tag US Sourced Products With Tariff Symbol
In the latest edition of Omni Talk’s Retail Fast Five sponsored by the A&M Consumer and Retail Group, Alvarez & Marsal, Mirakl, Simbe, Infios, and Ocampo Capital Chris Walton, Anne Mezzenga, along with guest hosts from the Alvarez & Marsal Consumer and Retail Group Chris Creyts and David Schneidman break down the week’s retail news. In this short, they cover: Loblaw Tagging US Sourced Products With Tariff Symbol
For the full episode head here: https://youtu.be/zoe5hsCC9jU
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Transcript
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.
Speaker A:And Loblaw plans to slap a new T symbol standing for tariffs on labels for products sourced from America.
Speaker A: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.
Speaker A: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.
Speaker A:Quote we are pro Canada and not anti usa.
Speaker A:We have made, we have many trusted US Vendors but we will be responsive to our customer needs.
Speaker A:Parbank said customers can be assured that when tariffs come off, any tariff pricing changes will be entirely removed, end quote.
Speaker A:Chris Crates what is the general approach you are seeing US Retailers take amid all this tariff noise?
Speaker B:Yeah, it's a great question.
Speaker B:Dominating a lot of time for most of our clients right now.
Speaker B:I think at the beginning scrambled to figure out what's actually impacted.
Speaker B: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.
Speaker B:You know, you have the Canada Mexico tariffs, you have the China import tariffs, you have the steel and aluminum tariffs.
Speaker B:There's so many different levers.
Speaker B:There's questions about how they'll be implemented.
Speaker B: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.
Speaker B:So not just pure steel and aluminum goods.
Speaker B:So there's lots of questions like how will these tariffs stack together.
Speaker B:You know, they weren't necessarily released in the most descriptive, easy to implement way.
Speaker B:So I think there's been a lot of spin cycle trying to number one interpret what's actually going to happen.
Speaker B:Number two, think about how it'll be implemented as you import products.
Speaker B: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.
Speaker B: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.
Speaker B:So there'll be some Less impact here.
Speaker B: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.
Speaker B: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.
Speaker B:So I think there's a portion of that.
Speaker B: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?
Speaker B:And then kind of on the far end of the spectrum you have even some retailers placing, well, it's, it's past now.
Speaker B:So placed, you know, front running orders to try and bring in lots of inventory ahead of these tariffs.
Speaker B:So wide range of, of reactions, kind.
Speaker A:Of trying to, so let me make sure I understand that.
Speaker A:Also I want to ask you a follow up question.
Speaker A: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.
Speaker A:With the exception of China where it seems like maybe people are taking more action on the rerouting of Chinese production.
Speaker A:Is that a good summary or what am I missing?
Speaker B:I think that's right.
Speaker B:But there's work you can do ahead of time while you're waiting.
Speaker B:So I think the work is happening.
Speaker B:For example, you can build models of.
Speaker B: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.
Speaker B:So I think people are laying the groundwork to say, you know, there's four big categories of tariffs that are out there now.
Speaker B:Which skews do we have that could be impacted by these?
Speaker B: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.
Speaker A:Okay, got it.
Speaker A:All right, so let's, let's switch gears here a little bit on this one because I think this will be fun.
Speaker A:So, and what do you, I'm curious what you think of Mr.
Speaker A:Pear bank and Loblaw's approach to this problem.
Speaker A:What's Your thoughts there?
Speaker C:Oh, my God, it's so passive aggressive Canadian.
Speaker C:I love it so much and I do love the Canadians.
Speaker C:Like, we're just going to put these stickers on and you can make the call.
Speaker C:Listen, I think that Chris hit it on the head.
Speaker C: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.
Speaker C:Because ultimately I think that's what, what the biggest challenge is going to be.
Speaker C:Customers are going to be more price conscious than ever.
Speaker C:And so you're going to have to figure out, not like by putting these tariff stickers on.
Speaker C:I think that's fine.
Speaker C:Whatever you want, how you want to message that to your consumers.
Speaker C:But ultimately it's going to come down to price.
Speaker C: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.
Speaker A:Yeah, that's a, that's a great point.
Speaker A:And yeah, if you're a pricing solution provider right now, you're loving this.
Speaker A:I mean, God, because, yeah, the retailer is going to have to invest in upgrading those systems.
Speaker A:That's funny.
Speaker A:That's funny.
Speaker A:I actually just think, I actually personally just think it's brilliant merchandising.
Speaker A:Like, I give kudos to loblaws, like, because, you know, it's just, it's just a smart thing to do.
Speaker A:The art of retailing is taking advantage of situations as they arise.
Speaker A:And that's what they're doing here.
Speaker A:They're going to, and by default, they're going to push their private label products as a result of this too.
Speaker A:You know, that's a great point.
Speaker A:So I think that's what they're doing and it's beautiful.
Speaker A:But David, you get the last word here.
Speaker A: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?
Speaker A:You take the last call here.
Speaker D:Yeah, I want to, I agree with every, with every, with everything that everyone said.
Speaker D:I think I want to take a little bit of different approach here.
Speaker D:I'm going to think consumer first.
Speaker D:So first with the Loblo piece, it's another way to have another conversation with their consumer to drive loyalty.
Speaker D: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.
Speaker D:So I think that's another way for them to drive brand affinity.
Speaker D: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.
Speaker D:So similar to where inflation was a couple of years ago, where there is an expectation that prices will go up.
Speaker D:And I think it's a question of where that will come from.
Speaker D:Discretionary spending will naturally go down, but you also have to be mindful on price increases there.
Speaker D:But on traditional household goods and daily products, the expectation consumers are having, similar to eg is that prices will go up.
Speaker D:And, and I think what will be interesting with retailers is do you automatically pass those costs to the consumer?
Speaker D:Where do you renegotiate with suppliers?
Speaker D:Or even in certain impact, do you see an opportunity to increase price when actual cost does not increase?
Speaker D: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.
Speaker D:And so I think when it comes to traditional food and beverage products and even personal care, consumers are expecting price to increase.
Speaker D:Now the question of how much that is and where that inflection point is tbd.
Speaker D:But it will be interesting to see.
Speaker B:That the other winner you had, Chris, you mentioned pricing software.
Speaker B:Probably the other winner here is like discount and off price retail, right?
Speaker A:Yeah, I was just thinking Walmart wins.
Speaker A:Yeah, Walmart wins in this, in this world they continue to win, you know that 100%.
Speaker A:Yeah.
Speaker A: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.
Speaker A:And so yeah, it's really interesting.
