The Death of Grass

When was the last time you were sereved a meal with bread and butter on the side, and were tempted to say, "Never mind the rest of it. Just bring me more of this butter." It may have been a while, but I'd be surprised if it hadn't happened to you. Not all butter is created equal, and were I a higher-end diner, no doubt I would be enjoying dairy delectables on a level with the kind I was served at Rumours on Thursday night on a daily basis. It went nicely with the Doukhbor wedding borscht that you can get everywhere in Grand Forks, and it should, because butter (and cream) are the not-so secret ingredients of Doukhbor borscht. (The beet, in contrast, you throw out before serving. My kind of people.) People, we need to talk about Grand Forks. It's not just the place that my Dad ended up in because a particle board plant was hiring after the Port Alice pulp mill invited him to compete for his own job in the black year of 1982. It's also a horror story. One that could easily have a happy ending.

Braking into the Curve, 2: Immigration to Canada is Not a Solution

i)

 In the year 2000, twenty percent of Canadians were under 14, 10% were over 65. In 2035, 20% of Canadians will be over 65, 15% will be under 14. That's not a formula for a robust economy, or much of anything else.(1)

ii) Last time, I showed you some projections for future Canadian population totals. I took the low estimate as most likely. Why? Because it is the most likely. For example, this projection, which was made in 2012, showed the Canadian population at 35,729,000 in 2015. The January 1 2015 total now out is 35,702,000.   This sort of thing happens often enough that, were I a cynical man, I would be tempted to suggest that fears of overpopulation are inflating the numbers. 

So let us take it that population growth will have virtually stalled out by this time at somewhere below 40 millions.(2) All of that growth will be coming from immigration.

So how many immigrants can we expect? On its face, this is a policy decision. We set the numbers, they come. Living in Canada is awesome. In reality, check out the sharp year-to-year fluctuations, which reflect recession years. Immigrants are rational.

As far as projections go, there seems to be a trend towards optimism, again. The 2014 immigration action plan for 2014 called for a low intake of 250,000, high intake of 265,000, with a target of 261,000. The actual total was 258,953. 

The federal government's immigration plan for 2015 is set at a low of 260,000, and a high of 285,000. Will we underperform again? Check back next year --but notice that I just moved the goal posts here, from the net immigration rate to the immigration rate. People leave Canada, too. Your buddy, Mike from Canada? He's in L.A. now. Statscan thinks that the net Canadian emigration rate in 2012 was 47,100. So knock the Canadian population growth curve negative --soon. Of course, now I'm being the pessimistic one, since if you cut that many people from "above the red line" up in graph ii), the Canadian population growth rate would already be negative. 

Why do we have to worry about the future of immigation?  Immigration to Canada is sensitive to economic opportunity. Note the dips in the chart below.  People are not going to come if there are no jobs. In fact, it is conceivable that they will start leaving. Note the way the chart flirts with the floor in the 1890s? People might have like Canada back in ragtime days

But they liked America better.

What happens if, in the future, the Canadian population growth rate goes negative harder and more quickly than we currently estimate? Well, it's not going to be good news for pensions and eldercare, especially given how much we depend on immigrants to look after our parents for us. (Guilty, and do I mean "guilty.") As I suggested last time, there's a chance that it'll cost you your job, too.

Does all of this sound pessimistic? It shouldn't, because we've been here before, and we've gotten out of this before.

 Somehow, we managed to shift our foot from the brake to the gas pedal between 1945 and 1961. And, no, it wasn't the war, at least, not directly. The birth rate continued to accelerate through the 1950s. Presumably, then, it was the indirect effects of the war. Which is great, because to avert either a long-drawn out, low-level, endemic fiscal and health crisis, or a short and sharp one, we need to find the gas pedal again, and it would be nice to do it without having to fight a world war. Wars are bad. 

1) Unfortunately, these numbers come to us from the  Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2006 Revision and World Urbanization Prospects: The 2005 Revision. and the Population Division tends to overestimate future population growth trends.

2) Per StatsCan: "the low-growth scenario is defined by the following assumptions: a Canadian total fertility rate that reaches 1.53 births per woman in 2021/2022 and remains constant thereafter; a Canadian life expectancy that reaches 85.9 years for males and 87.1 years for females in 2062/2063; interprovincial migration based on the trends observed between 1991/1992 and 2010/2011; a national immigration rate that reaches 0.5% in 2022/2023 and remains constant thereafter; an annual number of non-permanent residents (Canada) that reaches 733,600 in 2014 and remains constant thereafter; a national net emigration rate of 0.16%.

Braking Into the Curve

"Sobeys is selling its milk, yogurt and ice cream manufacturing operations in Western Canada for $356 million to Agropur, a Quebec-based dairy co-operative.
The sale includes a total of four plants: two in Edmonton and one each in Winnipeg and Burnaby, B.C.
Together the manufacturing operations employ 281 people, process more than 160 million litres of milk per year and generate about $400 million of annual revenue.
Agropur will license the Lucerne trademark from Sobeys and supply Sobeys, Safeway and IGA stores in the West through long-term supply arrangements.
The co-op's brands include Natrel, Quebon, Agropur, Sealtest and Island Farms and its 6,500 employees process more than 3.4 billion litres of milk per year at 32 plants across North America.
Sobeys is the national grocery division and main subsidiary of Empire Co. (TSX:EMP.A), which acquired the western dairy manufacturing operations as part of its purchase of Canada Safeway last year." [CBC]

The Canadian Broadcasting Corporation illustrates the story with a Sobey's banner.


I suggest an alternative graphic.

I wouldn't be posting this if it were an isolated incident, and you probably do not want to hear about the complicated context. Though you might be entertained by the email that told us that since Agropur was shorting 4 litre jug delliveries 30%, we should increase our orders by 30%. That's not how it works, guys.

In fairness, I should probably also wait to see if it's "growing pains." Truth to tell, I'm sure that it is. We also sold our bakeries to Canada Bread, and they didn't drop the ball. Now, admittedly, that's because our fresh bread shelves, like the yogourt shelves, have intermittently looked like this for years, but at least it hasn't gotten any worse. 

The problem is that in the life of companies, especially supermarkets that live and die on the premise that you go there when you run out of milk, you only get so much time for growing pains. This was avoidable: we used to avoid it all the time. In the future, we will no doubt avoid it again.  But. . . . 

In the future where our relationship with Agropur has settled back into business as usual, we will no longer have dairy operations to sell off to generate a quick $365 million. Don't think that we didn't know what we were doing, either. We hoped that Agropur could handle the business, but there was a reason that we went into the milk business to begin with. The reason we went out of milk was $365 million. 

What with linkrot and stuff, I should probably summarise that the company's financials were weak last spring, and the company told Bay Street that it was looking to cut jobs and costs. Financials for the last quarter of 2014 showed significant improvements. 

Now: the reason I'm summarising my links is that this next bit doesn't seem to have been covered in the Canadian journamalism press at all:

For some reason, not a cut-and-paste friendly format.

Neither is this, from the Globe & Mail, still, thank God, doing actual real journalism:

These are not things of which my employer is unaware. In some remote, ideotypical alternative universe, the price of a stock reflects the value of a company. In that same universe, which quite clearly has no bearing on the way things are done in this one, a retail company's value depends on its sales. Therefore (in this universe), if sales are, in fact, falling, then so should be the shares! 

This is not a good thing. Investments that lose value are bad investments. You should not own them.

In the case of food, it is not hard to understand the main driving force of sales. You look at your target demographic (Canadians), multiply the number by the calories required (adjusted by sex and age profiles), and you get your sales base. All other things (value added, competition, etc) being equal, static or declining calories consumption means declining sales. 

Oh, look!

I know, I know. The notion that Canada's population growth might be flatlining or even going negative is old, old news on this blog. It's still kind of a key point for retail planners. (If you can't pick it up on the crowded right hand side of the graph, the key takeaway here is that in the low-growth projection, which I find most plausible, but which at least should be the planning assumption, the Canadian population rises from 34,754,300 in 2013 to 39,994,000 or so in 2063, and then begins to decline quite quickly. In business terms, the Canadian population has basically ceased to grow. It should also be noted that because of changes in the population age profile, its calorie consumption will decline as population increases but also ages, but that might be getting a little too complicated.It's also fair to observe that by 2063 we may very well have much more serious issues to deal with. 

Not to put too fine a point on it, but if your sales are going to fall indefinitely, there is no future for Canadian retail. You need to sell your Empire shares and buy investments that have a positive return. Government bonds have a positive return. Hiding money under your mattress at least avoids a negative return.

Needless to say, when fundamental issues of money are invoked, the problem ceases to be one which a retail company can fix.  the buck is firmly passed to the government.

Is there a politician reading this? (I know, fat chance of that.) But, if there is, there's this guy, Jim Keynes. He has an idea how to fix it. Don't believe him? Look at the war. Really, any war, but World War II is the really good example.

So, if you're frustrated by the fact that your grocery store ran out of milk the other night, now you know what you should do. Start a war. Or something.

The End of Target

Target died in Canada this week, for a lot of reasons. Here, I'll point you to the Globe and Mail, though I did not think that its story was particularly good. It stresses prices, speed of rollout and locations. All of these are important, but in each area it was stepping into the shoes of an existing retailer, Zellers.

The exception was one of adding groceries to the mix. So, uhm ha, ha! Harder than it looks, isn't it, losers? Grocery might prove to have been a category error, and an explanation for chainwide problems, but the  focus on Target Canada's terrible Out-of-Stock conditions has been on durable goods. The pictorial that should still be up at the last link was taken last spring. Target has been floundering for months.

I'm going to, very briefly, offer an alternative explanation. Sometimes, you run out of time to do something, so it doesn't get done. For example, it's 2:30 in the afternoon, and I got too ambitious with another project earlier in the week, and now I've run out of time for fiction this week. Hence this brief post. (Which may have taken longer than four pages of fiction, but never mind.)

Running out of time is a normal thing. Jobs get skated. Here's a slightly whimsical meditation on Canada's current below trend inflation rate as an index of things-getting-skated.

The trend is 0.05% below the Bank of Canada target, so, I'm suggesting, the Canadian economy is 0.05% behind the amount of work that is budgeted. Don't press me on causality --this is magical thinking, here.

Why does a work force skate the work? Because its target in productivity per hour is unrealistic. In stores that have been open for more than one year, this is because the target has been cut beyond what the work force can deliver. In stores that haven't, you have a problem.

Target, as we know, is a non-union workplace. By keeping the Zellers locations it bought closed for a year, it avoided being classified as a "successor employer" and opened free of the encumbrance of the United Food and Commercial Workers, with what it deemed market-place competitive wages. So far, no-one has suggested that it was because the work force it got at the rates that it paid wasn't up to the job.

But, come on, $10.50/hour?  This random site claims that a one-bedroom in Vancouver "outside city centre" is going for over a grand a month. Math: 40 times 10.5 times 4.5 is $1800/month. You can pay your rent on a Target wage, or you can eat, but not both. 

This isn't to say that people aren't working at Target. Remember that old horror story about the familly with the child locked in the attic because [insert scary bit here?] In the retail sector of our modern age, the cash registers are increasingly staffed by those kids, because the families have found that they can let them out for the day and they'll make $10.50/ hour at Target.

Or they're desperate immigrants. Employers like Target hope that they'll be houswives and students, but then they write schedules that people with outside commitments can't meet, and you're back to relying on people-who-experience-life's-challenges-more-intensely-than-some-other-people. And that's why jobs get skated.

The key thing is to not skate crucial jobs. The failure of Target shows that they're already being skated. I won't get into my work place, but I will say this: I heard a story the other day about a burst colostomy bag in the produce department of one of our stores back in 1986. They had a janitor and two service clerks to help clean it up back then. I'm sometimes down to  three people in the store, period, these days! (For all of five minutes when night crew is late and it's the relief janitor, but still.)

In twenty years or so, at the rate things are going, it'll happen in a grocery store in, oh, say, Prince Albert, and a typhus epidemic will start and sweep through the old age homes and exterminate my generation and give Canada a fresh new start.  You, me? We're going to die, alone, in a cot on a concrete floor in an overcrowded arena under triage in Victorian-style quarantine rules, and a nurse from Cameroon or the CAR, or wherever there's left for Canada to draw immigrants from, will take the bedding out one door, while the orderlies take your body out the other, both for burning. 

It's going to happen. That's the end game. Unless someone does something somewhere. Note that this is really easy to fix. We did it without even hardly noticing in 1939--45. Not fixing it now is a choice we're making.