A Supermarket Billionaire Steps Into Trouble Over Covid Pay

(Bloomberg) -- Galen G. Weston, the scion of the billionaire family that controls Canada’s biggest grocer, Loblaw Cos., became the company’s public face through his polished appearances in promotional videos and television ads. But the executive’s latest attempt at controlling the message has turned into a public relations fiasco.

In a post on a Loblaw website Thursday, Weston, who’s the executive chairman, shared how he briefly flouted physical distancing rules to help his frail father, W. G. Galen Weston. It was a rare personal glimpse inside a discreet family that controls a $7.6-billion fortune in retail and real estate.

That made the letter’s conclusion more jarring. Weston announced Loblaw would end a temporary pay bump to employees who kept its supermarkets and pharmacies running during the height of the Covid-19 panic, before signing off: “Your safety and the well-being of our colleagues remain our top priority. Be well, Galen Weston.”

The backlash was immediate from consumers and unions representing the company’s employees, who used social media to contrast the decision with the Weston family’s wealth and the company’s booming business during the coronavirus crisis. Loblaw saw a 11% jump in revenue for the quarter ended March 21 as consumers flocked to stores to stock up on food, cleaning supplies and other staples.

Loblaw warned that the stockpiling boost would be fleeting and the Covid-19 crisis also added new costs. While it took the brunt of a social media outcry, its competitors, including the Canadian unit of Walmart Inc., Montreal-based Metro Inc. and Empire Co.’s Sobeys confirmed they too had ended or were about to end a C$2 ($1.50) per hour wage premium.

The nearly simultaneous moves to roll back pandemic wage increases reflect the competitive nature of an industry that operates on thin profit margins. The aggravating factor for Loblaw may have been Weston’s letter, which comes at a time of heightened awareness about the pandemic’s effects on income inequality and health risks for retail workers.

“It feels to me like they’ve got the timing off. The opening of the economy doesn’t mean that we have a cure or that it’s safer for anyone,” said Sarah Kaplan, director of the Institute for Gender and the Economy and a professor of strategic management at University of Toronto’s Rotman School of Management.

“That’s what crises do -- pandemic and other crises -- they create a lot of visibility about a lot of the fractures in our societies, all the inequalities,” Kaplan said. “So for a grocery store to say, ‘Oh, we’re going back to normal’ feels very strange in the face of all of the new evidence about inequality that was always there, but now we see so much more clearly.”

‘Greater Visibility’

Loblaw shares rose as much as 2% in Toronto Friday, while Metro climbed as much as 2.5%. Chris Li, an analyst at Desjardins Securities, called the decision “a slight positive for the industry as wages account for the majority of the pandemic-related costs.”

“This provides greater visibility on costs as sales gradually normalize,” he wrote to investors Friday.

Grocers praised their employees and said they’re giving additional one-time bonuses in appreciation. Loblaw’s C$25 million payout is worth about two weeks of premium, according to the company. So is Sobeys’. Metro and Walmart both offered C$200 to full-time employees and C$100 to part-time colleagues.

The labor union Unifor wants the hourly pay bumps to be made permanent and criticized Loblaw for resisting minimum wage increases in the past. Grocers have been vocal in recent years about the impact of such measures and the consequences on their costs.

Weston addressed the pay issue in his letter, saying he’s a “strong believer in a progressive minimum wage,” adding he would support “any government-led effort to establish a living wage.”

The Weston family is one of the richest on the planet, according to the Bloomberg Billionaires Index. Through George Weston Ltd., it also has investments ranging from commercial real estate to baked goods.

©2020 Bloomberg L.P.