Friday News Finds – February 23, 2018

By Tegan Valentine

Hello and welcome back to Top Five Friday Finds – the weekly series in which we share five of the business news stories that dominated the papers (and our conversations) this week.

Wine makers in British Columbia are saying ‘Cheers’ after Alberta Premier Rachel Notley announced the end of Alberta’s ban on importing B.C. wine this week. The ban, imposed February 6 2018, was predicted to impact $70 million worth of wine from B.C. per year. The reason for the ban? An announcement from British Columbia Premier John Hogan that the province would not take additional levels of crude from Alberta. As a reminder, B.C. has actively opposed the expansion of the Trans Mountain pipeline, which received approval from the federal government in 2016 (and was recently promoted by Prime Minister Justin Trudeau). The expanded pipeline would triple the amount of oil shipped from Alberta, and provide Alberta’s bottlenecked oil producers with much needed access to Asian markets. Alberta’s ban on B.C. wine was meant to be a bargaining chip in the trade war – albeit an aggressive one. Its demise comes after Hogan’s government singled their intent to turn to the courts, and ask whether B.C’s ban on increased crude exports is legal.

It’s been a sad few days for Canadian snack-lovers as PepsiCo announced the closure of their Alberta Spitz snack facility. While PepsiCo is the current owner of the popular seed snack brand, the American snack juggernaught only came to own the brand a decade ago after acquiring the business from two Albertan farmers in a 2008 private multimillion dollar deal. The decision to close the facility came as a shock to both employees, and brand founder Tom Droog, as PepsiCo had continued to invest millions of dollars into the original Spitz Plant in the years following its acquisition. Pepsi has cited concerns about the long-term viability of the facility – specifically the ability for the plant to meet increasing volumes requirements (sales have tripled through the course of Pepsi’s ownership, from 5.5 million kgs of seeds per year to 14 million kgs) – as their motivation in shuttering the plant. Droog, however, is sceptical, and worries that the decision to close the Alberta plant is part of a larger push to move production of goods from Canada to the United States (see the Campbell Soup Factory closure from earlier this year).

Attention all pet owners – it looks like your  pet food will soon be coming from a familiar source. On Friday, General Mills Inc – who’s banner brand is best known for producing breakfast cereals such as Chex and Cheerios – announced their decision to purchase Blue Buffalo Pet Products Inc for nearly $8-billion. The acquisition will see General Mills pay $40 per Blue Buffalo share, a premium of 17.2% over Thursday’s closing price. General Mills’ move is consistent with business trends in the packaged food industry. In recent years, major packaged food producers have looked to expand into faster growing business areas such as pet and organic food products, as demand for older brands flounder. Nestlé’s Purina business unit is the largest in the United States, Cargill announced their decision to acquire Pro-Pet in early January, and Mars acquired animal healthcare provider VCA for $7.7-billion last year. Experts anticipate Blue Buffalo will help boost General Mills sales and profit margins within two years. There is big demand for pet food (U.S. retail sales rose 3.7% last year), and Blue Buffalo’s reputation as a provider of natural and premium products makes it attractive to customers.

It’s hard to remember a time before the ‘sharing economy’. In the modern era, ‘Uber’ is synonymous with ‘taxi’, ‘Foodora’ is synonymous with ‘takeout’ and ‘Airbnb’ is synonymous with ‘hotel’, and while peer-to-peer business models have gradually made their way into the collective conscience, it’s important to remember that these business models are still relatively new and viewed with scepticism by prospective users and regulators alike. On Thursday, California based startup Airbnb announced their latest attempt to lure prospective customers with the introduction of Airbnb Plus – a new product line comprised of higher-end accommodations which are subject to strict quality standards. Airbnb, currently valued at $30 billion, hopes the new line will attract business travellers and luxury vacationers who have steered away from the platform in the past – instead craving the predictability and service that come with conventional hotel accommodations. The company hopes the new business practice will show the company’s ability to generate new revenue streams, and ultimately allow for a successful initial public offering (which could take place as soon as 2019). Airbnb Plus is restricted to a handful of pilot customers at present, and the success of the program remains to be seen. This is not the company’s first attempt to expand from its initial accommodations offering. In November 2016 Airbnb began offering “Experiences”, however growth in the segment has been sluggish as customers are wary of paying strangers for excursions, workshops and classes.

And finally, we’ve commented on the impact Ontario’s minimum wage increase will have on the province’s workers – with the hike in hourly rates from $11.60/hour to $14/hour set to trigger a loss of tens of thousands of jobs by 2020 (estimates place lost jobs as between 60,000 and 90,000). This week we’re commenting on the impact new wages have had on Ontario’s consumers – specifically, on the province’s menus. Prices for food purchased at Ontario restaurants rose 1.9% in January. This is the second largest monthly price increase in recent history, with the last comparable price jump seen in January 1991. In both cases the increase was triggered by changes in government policy. 1991’s hike, the biggest one month menu price gain on record (7.2%), occurred following Prime Minister Brain Mulroney’s decision to introduce a federal goods and services tax.

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  1. Pingback: Friday News Finds – March 30, 2018 – Canadian Business Law Blog

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