You’ll be paying more at the grocery store soon, supermarket CEOs warn

The CEOs of three of Canada’s major grocery chains doubled down on their expectation that food prices will soon rise at their stores.

Recent cost pressures on the industry, including rising minimum wages in some provinces, increased fuel and transportation costs and an ongoing trade war with the U.S., will soon result in some price inflation, said the chief executives of Metro Inc., Loblaw Companies Ltd. and Empire Co. Tuesday at Scotiabank’s back-to-school conference in Toronto.

Metro CEO Eric La Fleche said consumers should eventually see a return to more normal inflation levels.

“Exactly when and how — it’s all about competitive dynamics. Everybody is competitive. Nobody wants to lose any share. So, let’s see how things play out,” he said.

Metro is starting to see some price inflation already, La Fleche said.

He explained that the cost pressures have been building over the past year, beginning with Ontario’s minimum wage hike from $11.60 to $14 an hour on Jan. 1, followed by rising fuel and transportation costs.

Then came the Canadian government’s retaliatory tariffs on July 1 on a wide range of American products, including coffee, maple syrup, salad dressing and other foods.

“Now, we’re having a — what I would describe it as — a tsunami of tariff-related request for cost increases from our supplier partners,” said Michael Medline, Empire’s CEO.

The company, which is the parent to grocery chain Sobeys Inc., held off on raising prices for some time, he said, but is now reviewing these tariff-related costs.

Empire will pass the extra costs on to consumers where it makes sense in the market, he said, adding it will be careful not to give away any market share.

“We don’t like to pass on cost, but there’s no way you can avoid it with the inflationary pressures that we are now seeing.”

Price increases are likely to be moderate in a historical sense, said Loblaw CEO Galen Weston.

He predicted food inflation of one- to 1.5-per cent, which he said is in the normal range as opposed to higher range in the five to six per cent level.

“We don’t yet see it moving into the mid-single digit levels… We don’t think it is likely to do that.”

The chief executives also outlined their respective plans to grow their e-commerce business, specifically home delivery. Canada’s grocers have been slow to offer delivery, but ramped up their efforts after Amazon acquired Whole Foods Market last year.

Metro already offers home delivery from seven stores in Quebec, which serves about 60 per cent of the province’s population, said La Fleche.

It will start offering the service in Ontario in 2019, he said, but did not provide details on specific locations.

The company relies on its existing assets to fulfil orders rather than partnering with a third-party like its competitors have chosen to do.

“We’re going to e-commerce with a prudent approach,” said La Fleche, adding the company is scaling up and the company may consider using a dedicated facility if it reaches a certain level — but it’s not there yet.

Empire, on the other hand, decided to partner with British firm Ocado to build a fulfillment centre in the Greater Toronto Area that will be fully operational by the spring of 2020. The centre will house Ocado’s signature robotics that can fulfil customer orders within minutes.

Empire offers home delivery in Quebec and learned that their solution there is not scalable, Medline said, adding the company is excited that Ocado’s solution eliminates some logistical issues and is profitable.

Loblaw also partnered with another company to offer home delivery, opting for California-based Instacart, but chose to do so in a quicker fashion. Customers in 17 cities can now use the Instacart app to order groceries for delivery from Loblaw.

“Our view today is that rapid expansion and customer acquisition is the second most important thing to do in the first innings of the e-commerce online grocery world,” Weston said.

Time running out to reach NAFTA deal, U.S. congressman warns Canada in stern statement

WASHINGTON — Republicans in the U.S. Congress are ratcheting up pressure on Canada to get a deal done on the North American Free Trade Agreement.

House of Representatives majority whip Steve Scalise, who represents the state of Louisiana, delivered a stern warning Tuesday about “growing frustration” in Congress with what he calls Canada’s “negotiating tactics.”

In a statement, Scalise says Canada is running out of time to get on board with the bilateral agreement in principle negotiated last month — without Canada’s involvement — between the U.S. and Mexico.

“Members are concerned that Canada does not seem to be ready or willing to make the concessions that are necessary for a fair and high-standard agreement,” the statement reads.

“While we would all like to see Canada remain part of this three-country coalition, there is not an unlimited amount of time for it to be part of this new agreement.”

That appeared to be a response to recent indications from the federal Liberal government in Ottawa that it won’t be held to an artificial deadline, nor will it rush the talks to settle for an agreement that it doesn’t consider fair or good for Canadian industries and workers.

“Mexico negotiated in good faith and in a timely manner, and if Canada does not co-operate in the negotiations, Congress will have no choice but to consider options about how best to move forward and stand up for American workers.”

Foreign Affairs Minister Chrystia Freeland, who is scheduled to return to Washington and resume talks Wednesday with U.S. Trade Representative Robert Lighthizer, had not seen the statement when asked about it prior to question period.

But she said Canada has been negotiating in good faith throughout the 13-month process, and took issue with any suggestion to the contrary.

“From the outset of these modernization negotiations, Canada has been extremely co-operative,” Freeland said. “Canada is very good at negotiating trade deals; Canada is very good at finding creative compromises. We have been extremely engaged.”

Negotiators have been working “extremely hard” and are committed to doing the necessary work to reach an agreement, she added — but they aren’t about to settle for just any agreement.

“It is our duty — it’s my duty — to stand up for the national interest and I will always do that.”

The impact of the Pacific trade deal on NAFTA

Flavio Volpe, president of the Automotive Parts Manufacturer’s Association, speaks with Larysa Harapyn about what the CPTPP and NAFTA means for the auto sector as well as governments.

Trump vows retaliation after accusing China of targeting tariffs on U.S. farmers to sway election

WASHINGTON — President Donald Trump on Tuesday threatened further retaliation against China if Beijing targets U.S. agricultural or industrial workers amid a trade dispute, and accused China of trying to sway the U.S. election by targeting farmers.

Trump made the accusations in a pair of Twitter posts as the two sides launched new trade tariffs in an escalating trade dispute.

Beijing said it would retaliate with tariffs against US$60-billion worth of American products after Trump on Monday imposed 10 per cent tariffs on about US$200-billion worth of imports from China.

Trump said China was trying to use trade to undermine him with his supporters before the Nov. 6 congressional election.

“China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me,” Trump wrote. It was not clear what statement from Beijing the president was referring to in his post.

“There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!” Trump added. Trump won the 2016 presidential contest with strong support from those farmers and blue-collar voters.

In July, Beijing launched a short video in English featuring a talking cartoon soybean vouching for the importance of trade. The cartoon points out that nine out of the top 10 soybean growing states voted for Trump in the 2016 presidential election.

“So will voters there turn out to support Trump and the Republicans once they get hit in the pocketbooks?” asks the bean.

© Thomson Reuters 2018

Will ‘flying cars’ take off? Japan’s government to turn a long-held dream into reality

TOKYO — Electric drones booked through smartphones pick people up from office rooftops, shortening travel time by hours, reducing the need for parking and clearing smog from the air.

This vision of the future is driving the Japanese government’s “flying car” project. Major carrier All Nippon Airways, electronics company NEC Corp. and more than a dozen other companies and academic experts hope to have a road map ready by the year’s end.

“This is such a totally new sector Japan has a good chance for not falling behind,” said Fumiaki Ebihara, the government official in charge of the project.

Nobody believes people are going to be zipping around in flying cars any time soon. Many hurdles remain, such as battery life, the need for regulations and, of course, safety concerns. But dozens of similar projects are popping up around the world.

A flying car is defined as an aircraft that’s electric, or hybrid electric, with driverless capabilities, that can land and takeoff vertically.

They are often called EVtol, which stands for “electric vertical takeoff and landing” aircraft.

All the flying car concepts, which are like drones big enough to hold humans, promise to be better than helicopters, which are expensive to maintain, noisy to fly and require trained pilots, Ebihara and other proponents say.

“You may think of ‘Back to the Future,’ ‘Gundam,’ or ‘Doraemon,”‘ Ebihara said, referring to vehicles of flight in a Hollywood film and in Japanese cartoons featuring robots. “Up to now, it was just a dream, but with innovations in motors and batteries, it’s time for it to become real.”

In this Sept. 4, 2018, photo, Fumiaki Ebihara, the flying-car chief at the Ministry of Economy, Trade and Industry, speaks during a interview with the Associated Press in Tokyo, Tuesday, Sept. 4, 2018. The Japanese government has started a “flying car” project, bringing together more than a dozen companies, including All Nippon Airways, electronics company NEC, Toyota-backed startup Cartivator and Uber, the ride-hailing service.

Google, drone company Ehang and car manufacturer Geely in China, and Volkswagen AG of Germany have invested in flying car technology.

Nissan Motor Co. and Honda Motor Co. said they had nothing to say about flying cars, but Toyota Motor Corp. recently invested $500 million in working with Uber on self-driving technology for the ride-hailing service. Toyota group companies have also invested 42.5 million yen ($375,000) in a Japanese startup, Cartivator, that is working on a flying car.

The hope is to fly up and light the torch at the 2020 Tokyo Olympics, but it’s unclear it will meet that goal: at a demonstration last year the device crashed after it rose to slightly higher than eye level. A video of a more recent demonstration suggests it’s now flying more stably, though it’s being tested indoors, unmanned and chained so it won’t fly away.

There are plenty of skeptics.

Elon Musk, chief executive of electric car maker Tesla Inc., says even toy drones are noisy and blow a lot of air, which means anything that would be “1,000 times heavier” isn’t practical.

“If you want a flying car, just put wheels on a helicopter,” he said in a recent interview with podcast host and comedian Joe Rogan on YouTube. “Your neighbours are not going to be happy if you land a flying car in your backyard or on your rooftop.”

Though the Japanese government has resisted Uber’s efforts to offer ride-hailing services in Japan, limiting it to partnerships with taxi companies, it has eagerly embraced the U.S. company’s work on EVtol machines.

Uber says it is considering Tokyo as its first launch city for affordable flights via its UberAir service. It says Los Angeles and Dallas, Texas, and locations in Australia, Brazil, France and India are other possible locations.

In this Sept. 13, 2018 photo, Atsushi Taguchi, a “drone grapher,” as those specializing in drone video are called, who teaches at Tokyo film school Digital Hollywood, speaks during an interview with the Associated Press in Tokyo. Taguchi acknowledged flying cars won’t become a reality for years, but test flights in limited areas, such as an airport, will likely be carried out sooner.

Unlike regular airplanes, with their aerodynamic design and two wings, Uber’s “Elevate” structures look like small jets with several propellers on top. The company says it plans flight demonstrations as soon as 2020 and a commercial service by 2023.

Uber’s vision calls for using heliports on rooftops, but new multi-floored construction similar to parking lots for cars will likely be needed to accommodate so many more EVtol aircraft, if the service takes off.

Unmanned drones are legal in Japan, the U.S. and other countries, but there are restrictions on where they can be flown and requirements for getting approval in advance. In Japan, drone flyers can be licensed if they take classes. There is no requirement like drivers licenses for cars.

Flying passengers over populated areas would take a quantum leap in technology, overhauling aviation regulations and air traffic safety controls, along with major efforts both to ensure safety and convince people it’s safe.

Uber said at a recent presentation in Tokyo that it envisions a route between the city’s two international airports, among others.

“This is not a rich person’s toy. This is a mass market solution,” said Adam Warmoth, product manager at Uber Elevate.

Concepts for flying cars vary greatly. Some resemble vehicles with several propellers on top while others look more like a boat with a seat over the propellers.

Ebihara, the flying-car chief at the Ministry of Economy, Trade and Industry, says Japan is on board for “Blade Runner” style travel — despite its plentiful, efficient and well developed public transportation.

In this June 3, 2017, file photo, members of Cartivator carry propellers of the test model flying car in Toyota, central Japan. The Japanese government has started a “flying car” project, bringing together more than a dozen companies, including All Nippon Airways, electronics company NEC.

Japan’s auto and electronics industries have the technology and ability to produce super-light materials that could give the nation an edge in the flying car business, he said.

Just as the automobile vanquished horse-drawn carriages, moving short-distance transport into the air could in theory bring a sea change in how people live, Ebihara said, pointing to the sky outside the ministry building to stress how empty it was compared to the streets below.

Flying also has the allure of a bird’s eye view, the stuff of drone videos increasingly used in filmmaking, tourism promotion and journalism.

Atsushi Taguchi, a “drone grapher,” as specialists in drone video are called, expects test flights can be carried out even if flying cars won’t become a reality for years since the basic technology for stable flying already exists with recent advances in sensors, robotics and digital cameras.

A growing labour shortage in deliveries in Japan is adding to the pressures to realize such technology, though there are risks, said Taguchi, who teaches at the Tokyo film school Digital Hollywood.

The propellers on commercially sold drones today are dangerous, and some of his students have lost fingers with improper flying. The bigger propellers needed for vertical flight would increase the hazards and might need to be covered.

The devices might need parachutes to soften crash landings, or might have to explode into small bits to ensure pieces hitting the ground would be smaller.

“I think one of the biggest hurdles is safety,” said Taguchi. “And anything that flies will by definition crash.”

 

Follow Yuri Kageyama on Twitter at https://twitter.com/yurikageyama

 

Trade war between U.S. and China could last 20 years, warns billionaire Jack Ma

Billionaire Jack Ma sent out a grave warning regarding the trade war between the U.S. and China: It’s going to last longer and have a bigger impact than most people think.

China’s richest man said the dispute could last 20 years and persist beyond the presidency of Donald Trump, as the world’s two strongest economic powers battle for global supremacy. China needs to strengthen its economy to deal with the conflict and shift trade relations from the U.S. to regions like Southeast Asia and Africa, the chairman of Alibaba Group Holding Ltd. said during a speech at the company’s investor day conference in Hangzhou.

“Short term, business communities in China, U.S., Europe will all be in trouble,” Ma said, pacing a stage in an open white dress shirt and punctuating his remarks with forceful jabs. “This thing will last long. If you want a short-term solution, there is no solution.”

His comments came just hours after China vowed to retaliate against U.S. plans to levy tariffs on about US$200 billion in Chinese goods. Ma said Alibaba will also be affected by the rising tensions, given its wholesale business allows American merchants to source products from China. But he also said the trauma will offer unprecedented opportunities for companies that can take advantage of them.

“We should not focus on this quarter or next quarter or next year’s profit. This is a huge opportunity,” he said. “If Alibaba cannot sustain and grow, no company in China can grow. I’m 100 per cent confident in that.”

Ma’s remarks carry particular weight because he is an icon of Chinese innovation and has been seen as an ambassador to the U.S. Last year, he met with Trump and promised to create 1 million jobs in the U.S. through 2021.

But Ma, a week after he announced plans to hand over the chairman role to Chief Executive Officer Daniel Zhang, left no doubt Tuesday about his support for his own country. If the U.S. insists on levying tariffs on Chinese goods, then China should shift its business to the rest of the world, he said.

“When problems come, learn how to hide, learn how to train,” he said. “I believe Daniel and his team will have the wisdom to fight for the future.”

Ma’s speech underscored the void he will be leaving when he steps down in a year’s time. His soliloquy was accentuated by comments on everything from geopolitical gambits to the importance of self-awareness on individual limits.

He even took a jab at competitor JD.com Inc.’s founder Richard Liu — while rebutting the idea he was forced out of the company. Ma said he received many queries from acquaintances, including questions on whether he was experiencing a “Minnesota” situation, a reference to current rape allegations that JD’s Liu is facing. That elicited a burst of laughter from the crowd.

Ma said he was confident of leaving the company in the hands of Zhang as the CEO bolsters Alibaba’s ambitions in e-commerce, so-called new retail and entertainment. Those initiatives will help sustain revenue growth for the financial year ending in March of 60 per cent, a figure that Chief Financial Officer Maggie Wu first disclosed in May. That kind of growth will likely help Alibaba outpace its global peers, she added.

With US$80 billion worth of strategic investments planted, Vice Chairman Joe Tsai said the company is nowhere near finished with deals. Some of Alibaba’s most expensive investments have been spearheaded by Zhang — including at least US$8 billion worth of deals for traditional chains that underpin efforts to reinvent retailing in China.

Bloomberg.com

No recourse for regulators if Ontario government opposes embedded fee plan

The Ontario Securities Commission will have little recourse to salvage a plan to scrap embedded fees tied to mutual fund sales if the provincial government maintains its opposition to the proposal, according to industry watchers.

“The Minister of Finance has the final say on rules that the OSC proposes,” said Anita Anand, a professor at the University of Toronto’s Faculty of Law, noting that the government has long had the power to reject the rules or send them back for reconsideration.

Though it is rare that that happens — there were a couple of noteworthy cases more than 15 years ago involving over-the-counter derivatives and the use of advisor titles — the public nature of the current disagreement and the early stage in the process is drawing attention.

Last Thursday, shortly after the OSC and Canada’s 12 other provincial and territorial securities regulators rolled out for public comment a proposal to ban certain fees including deferred sales charge (DSC) commissions on mutual funds, Ontario Finance Minister Vic Fedeli issued a statement saying his government under Doug Ford “does not agree with this proposal as currently drafted.”

The statement said the proposal came from a process initiated by the former Liberal government and that the new government plans to work with “other provinces and territories and stakeholders to explore other potential alternatives.”

Some industry watchers suggest Ford’s Conservative government — which has already rocked Toronto’s city council with a surprise plan to slash its numbers and the rare plan to use the constitutional notwithstanding clause to override a court decision that rejected the plan — has put a chill on the regulatory process.

“It is a disturbing turn of events to see the province intervene in the policy-making process in this way … before stakeholder comments have even been delivered to the independent body that has charge of the capital markets in this province,” said Anand, who specializes in ethics and investor protection.

However, others downplayed the politics, saying it was little more than a more public manifestation of the type of consultation and negotiation that often takes place between the government and the regulator before formal approval is requested for policies.

“The OSC developed (the proposed) policies consistent with the objectives of the prior government, following consultation of the sort that is typical between the OSC and the government,” said an experienced securities lawyer, who requested anonymity because he deals with the regulator and did not want to be seen to be taking sides.

“The new government has different objectives and … is letting its views be known. The only difference is that its objections are more public than usual,” the lawyer said.

But another lawyer who has worked extensively with regulators and government, who also requested anonymity to protect those dealings, said there are likely to be longer-term implications from the “not subtle” manner in which the Ford government has intervened in the process.

Among those could be less attention paid to the OSC, this person said.

“Why waste your time with the commission? If the decision-making is taking place somewhere else, you go somewhere else.”

OSC chair Maureen Jensen, who was appointed in 2016 by Ontario’s former Liberal government, last year had her term extended until 2021. But industry watchers suggested the remainder of her tenure could be rockier than the first couple of years, given the Ford government’s actions last week.

“Maureen Jensen has proven to be an excellent (OSC) Chair and I sincerely hope that she will remain in this role,” Anand, the University of Toronto law professor, said Monday.

Asked for comment on the finance minister’s statement last week, OSC spokesperson Kristen Rose said: “Our Minister’s support is critically important to the OSC, and we are respectful of our government’s authority to decide whether any rules published for comment ultimately come into effect.”

The apparent impasse over mutual fund fee reform could lengthen a process that has already gone on for more than five years. At the outset, regulators had considered an outright ban on all embedded fund fees that have been criticized for eating into investor returns, following similar moves in jurisdictions including the United Kingdom.

When Canadian regulators under the umbrella of the Canadian Securities Administrators announced in June that they would ban deferred sales charge commissions on the sale of mutual funds, some investor advocates viewed the decision as a watered-down compromise.

Though the overhaul would remove some types of embedded fees — particularly those on discount platforms where no advice is given, and other that penalize investors for cashing out early — it would leave a variety of embedded fees in place.

Chrystia Freeland to return to Washington this week to resume high-level NAFTA talks

OTTAWA — High-level meetings are set to resume this week in Washington in an effort to bring Canada into a revised North American Free Trade Agreement.

The renewed effort comes as the Opposition Conservatives criticize Prime Minister Justin Trudeau for the tactics his government has been using to get a NAFTA deal done.

Foreign Affairs Minister Chrystia Freeland said Monday that she and U.S. Trade Representative Robert Lighthizer have agreed to meet again face-to-face to try to reach an understanding about each other’s positions on NAFTA, although an exact meeting schedule hadn’t been set.

Freeland said trade officials from Canada and the U.S. have been meeting in the American capital since last Thursday, continuing what the minister described as “intensive” talks aimed at reaching a deal.

The discussions are being held under a Sept. 30 deadline for getting the text of an agreement to the U.S. Congress.

President Donald Trump started the clock ticking last month when his administration informed Congress of a U.S.-Mexico trade pact, which he invited Canada to join.

Freeland told reporters in Ottawa, where MPs were returning to Parliament after their summer break, that she and Lighthizer would meet later this week.

“The specifics of our calendar we haven’t quite yet worked out.”

The Conservatives have for the most part, until now, made efforts to project a team Canada spirit with the Liberals as the talks have progressed.

But Opposition House Leader Candice Bergen criticized the prime minister Monday for his approach to the talks, saying the Conservatives would have done things differently.

“We certainly wouldn’t have gone in and lectured on things like gender rights and the environment,” Bergen said when asked how the Conservatives would have handled the negotiations.

“What the prime minister had done in these trade negotiations is tick people off,” she said.

But when it comes to the NAFTA talks, Trudeau said during a live interview event with Maclean’s Magazine in Ottawa Monday night he would not do anything differently.

Trudeau was asked about two incidents that irked Trump — the first being comments he made during his press conference in Charlevoix, Que. after the G7 summit and secondly — Freeland’s acceptance speech at an award ceremony in Washington where she denounced Trump’s “absurd” tariffs and argued for the preservation of the world’s rules-based order — with or without the United States.

“As I’ve said from the very beginning, Canadians expect me, particularly with this administration, expect us as a government to do two very important things: One is have a constructive relationship with the American government and two, continue to stand up clearly and strongly for our values and our principles and Canadian interests.”

Doing both of these things sometimes “bump up” against each other, said Trudeau, adding that it is important to highlight to Americans who Canadians are and where they stand.

Trudeau said Canada could be days or weeks away from signing a new NAFTA, but qualified his optimism by saying they may not be that close, reiterating that the government is looking to sign a good deal.

While Canada has been pushing for chapters in NAFTA aimed at strengthening labour protections and gender equality, the overall negotiations are said to have stalled over Canada’s insistence that an agreement contain an independent dispute-settlement mechanism.

Trudeau has also vowed to protect Canada’s supply management for dairy and poultry products against U.S. demands for greater access by its farmers to Canada’s dairy market.

Supply management has been a big issue in the provincial election campaign in Quebec, home to about half of Canada’s dairy farms.

Quebec Liberal Leader Philippe Couillard has warned there will be “serious political consequences” if there is any further dismantling of the protections for dairy farmers through NAFTA negotiations.

The issue was expected to play prominently Monday evening in the provincial party leaders’ second election debate — this one in English.

Ontario Premier Doug Ford and his economic development minister, Jim Wilson, were scheduled to travel to Washington on Wednesday for an update on the NAFTA talks, which the premier characterized as critical to his province’s agriculture, automotive and steel industries.

Ford’s team is expected to meet with Canada’s trade officials, as well as the Canadian ambassador to the United States, and the premier said in a statement that he planned to stress the need to protect Ontario workers.

Freeland said she would welcome any efforts by the provinces to bolster Canada’s position at the bargaining table. “I think that the involvement of premiers from provinces and territories across the country has been very positive.”