Major grocers expanding discount footprint as customers keep budgets tight

Expanding discount grocers

Canada’s biggest grocers are investing money and space in discount stores such as No Frills, Food Basics and FreshCo as shoppers look for ways to save on food amid the higher cost of living.

Converting grocery stores to discount is a relatively easy move, experts say, and one that is helping the grocers keep profits steady despite consumers seeking ways to rein in their spending.

“There's all sorts of things that ... people are doing, but one of them is looking for cheaper options. And so they are going to discount stores,” said Michael von Massow, a food economy professor at the University of Guelph.

Each of the major Canadian grocers has several different store brands, also known as “banners” — from high-end to conventional to discount. Loblaw’s main discount banners are No Frills and Maxi, while Metro owns Food Basics and Super C, and Empire owns FreshCo.

All three Canadian grocers’ recent earnings reports have shown sales at discount stores are major drivers of overall sales growth.

But when it comes to expanding, Loblaw is leading the pack with more than 30 new Maxi and No Frills stores opened last year, through new locations or converting full-service stores into discount, according to the company's annual report.

“There is a shift to discount, and we see the opportunity that exists for discount stores,” said Melanie Singh, president of Loblaw’s new "hard discount" division, made up of No Frills and Maxi.

The growth shows no sign of stopping. A few days before its February earnings release, the grocer announced a capital investment plan worth more than $2 billion that will result in more than 40 new discount stores.

“I think it’s a great strategy for them,” said Lisa Hutcheson, a retail analyst at J.C. Williams Group.

“They're investing in this approach because they're recognizing people need that budget-friendly approach, but it will also be a very strong strategy for them financially.”

The grocers are taking different approaches when it comes to discount, said a recent industry report from commercial real estate firm JLL — Empire isn't pursuing further significant expansion into discount, focusing instead on its current portfolio.

Empire bought Ontario chain Farm Boy in 2018 and has since expanded it, and bought a majority stake in specialty grocer Longo's in 2021.

"By maintaining its full-service approach, Empire is banking on a period of decreasing inflation and interest rates, when customers might prioritize the shopping experience over steep discounts," the report said.

However, it noted that Empire has already made some conversions, and is taking a strategic approach in Western Canada.

In the last six years, Empire has opened 52 new FreshCo stores in Western Canada and Ontario, bringing the national total to 147 stores, said spokeswoman Tshani Jaja in an email. The company has also expanded its private-label and value-size offerings, and it launched an 11-week program lowering or locking in prices on around 1,000 items mid-February, she said.

Metro currently has 247 Super C and Food Basics stores, up from 236 in 2020, said spokeswoman Stephanie Bonk in an email. Three Super Cs opened in the company's latest quarter, and another Food Basics is slated to open this year.

"We’ve seen a shift in customers shopping our discount banners over conventional. Private label sales are continuing to grow at a faster pace than national brands and promotional penetration remains high," said Bonk.

Discount stores tend to be smaller than market stores, said Singh, and they have a simpler operating model with less variety among items.

You’re also more likely to see certain “value-added” things at a market store, such as a deli counter, or bakery items being baked on-site, she said.

One thing that the market and discount stores have in common, however, is that their offerings are partly informed by the local community, said Singh.

“We lean into a lot of data to inform those decisions,” she said.

Discount grocery stores often use simpler signage and displays, said Hutcheson. They also often carry more of the company’s private label products, which generally have better profit margins, and employ fewer staff, she added.

Discount stores are also less likely to have specials and promotions, said von Massow, and the stores are often in lower-rent districts.

All this adds up to likely very similar margins to a full-service store, he said.

“I think that the grocers are agnostic to where we shop, as long as they can adjust to that,” he said. “And that’s what we’re seeing them doing.”

Grocers are likely picking conversions strategically, said von Massow: “They’re going to convert underperforming stores to discount stores.”

One thing Loblaw has noticed that speaks to demand: when it converts a store, it sees sales rise at that location, said Singh, and yet its other discount stores in the area don’t take a hit.

Converting a market store into a discount store is simpler than building a new one, said Singh — often, they can even keep the store open while changes are being made, with just a brief closure.

“We've converted several Maxis where we would close it for two weeks, put the sign up on the building, and then reopen it as a Maxi, but construction still goes on in different parts of the store.”

With inflation driving consumers to trade down, Loblaw is best positioned, followed by Metro and then Empire, according to RBC Dominion Securities analyst Irene Nattel in a note about Loblaw’s latest earnings.

In an earlier note on Metro’s earnings, Nattel said Empire’s “overweight exposure” to the full-service part of the sector is a “relative disadvantage” against its competitors amid ongoing price sensitivity.

But Hutcheson says she doesn't think having specialty or higher-end brands is necessarily a hindrance.

"As long as they are understanding their value proposition to their customer and they're delivering what they want ... I think that's fine."

If consumer behaviour does shift back toward full-service stores over the longer term, the grocers can continue evolving, said Hutcheson.

“I think that making this kind of shift is fairly low risk, because discount stores are easy and rather inexpensive footprints to build or shift to, and then from there they can adjust accordingly.”

How AI is transforming work and skills training

AI transforming training

The rise of artificial intelligence is set to significantly change how employees work and the education they need. Not only is AI already transforming tasks, processes and productivity, but emerging technologies have also made it easier for executives to determine the skills that may be missing from the teams and workforces they manage.

Corporate leaders can share this knowledge when they partner with post-secondary institutions to inform curricula that address their skill shortages. Post-secondary institutions, in turn, can benefit from AI because it makes it easier for potential applicants to assess existing programs. Students can then register for the courses AI has determined will best prepare them for the job market.

AI’s fast adoption is indisputable. But while 2023 was the year that generative AI tools became widely discussed, used and feared across industries, there is a range of opinions on how fast society and business will change as a result.

The consensus likely conforms to a version of the old adage often attributed to 1960s-era Stanford University computer scientist Roy Amera: “We overestimate the impact of technology in the short-term and underestimate the effect in the long run.”

How employees’ work lives are changing

Canadian workers are increasingly using AI in the workplace, and some are even attending corporate retreats or boot camps to learn specific skills and to be able to tout themselves as experts within a specific AI niche.

“Micro-credentials have already started with AI,” says Rob Goehring, who is the founding chair of BC Tech’s AI C-Council, which includes C-suite executives at growth-stage AI companies.

He pointed to Alphabet Inc. offering a series of courses on things such as generative AI, natural-language AI and machine learning. Amazon.com offers similar training, he said.

“There are already a lot of the corporates that provide the toolkits,” Goehring says.

Some of the training on how to use AI is free and consists of a series of videos.

The University of Northern British Columbia, in contrast, has a machine learning and AI bootcamp certificate that costs $5,995 and involves 450 hours of mixed live-virtual sessions and self-study time over 22 weeks ending in June.

Professors at Simon Fraser University (SFU) and the University of British Columbia (UBC) tell BIV that AI is being integrated into virtually all programs at those institutions in some form or another.

Demand for training is rising because of AI’s rise in the workplace.

Consulting firm KPMG last fall surveyed 4,515 Canadians and found that 22 per cent say that they use AI technologies to help them do their jobs.

The survey, taken in October and November 2023, also found that 61 per cent of respondents say they use generative AI multiple times per week for work purposes. That is up from 52 per cent of respondents who reported doing so in a similar survey in May 2023.

KPMG partner Seamus Blackmore points to OpenAI releasing its free public ChatGPT chatbot in November 2022, and how that rapidly changed workplace dynamics.

“The incredible speed of adoption after just one year of being introduced to the general public shows how generative AI has not only revolutionized the way people work, but it’s supercharged the speed of technology innovation as well, with breakthroughs happening at a much faster rate,” he says.

“For business leaders, it’s imperative to keep up with this rapidly evolving technology, understand how it could affect their businesses and adapt their strategies accordingly if they want to compete.”

KPMG’s survey attempted to quantify how much time workers are saving by using generative AI. It found that 58 per cent of users say generative AI helped them save between one and five hours per week at work. That is up from 55 per cent in May.

Better insights on corporate skills matrixes

AI is helping corporate executives gain a better understanding of the skillsets their workers possess, as well as the skills their workforce needs to excel but currently lack.

Many Fortune 500 companies as well as B.C. organizations such as the Immigrant Services Society of British Columbia have used technology made by SkyHive Technologies Inc., which is based in Vancouver and in Palo Alto, California.

CEO Sean Hinton explains that his company pulls in more than 26 terabytes of data from around the world each day. His technology absorbs labour-market intelligence, patent applications, academic research, job descriptions and other information.

This allows his technology to quickly discern what skills are present in any potential client’s workplace.

Most employees today, for example, have digital presences on sites such as LinkedIn.

“They’ve all stated their positions, their titles, their names and said that they are more than happy to share their information for the purposes of job opportunities and professional networking,” Hinton says. “All of that information is activated.”

In addition to finding out the skills that exist in a given workforce, Hinton says his clients usually come to him to discover things such as how skills and jobs are changing in the labour market in real time, the skills gap between a current workforce and an ideal future workforce, and how training can bridge that gap.

Post-secondary institutions that use SkyHive technology would not only be able to better determine the skills or jobs that will be needed in the future, but they will also be able to better market their offerings to students because they have data to back up the marketing for their curricula, he says.

Students that use AI, similarly, could better determine with a quick search which post-secondary institutions offer programs that best teach needed skills.

Employers often partner with post-secondary institutions and AI can help the former determine whether their capital is best spent partnering with a college to offer a training program, or whether it is better invested in training employees in-house and on the job.

“If you looked at job descriptions across the entire planet, roughly 92 per cent of them reference for AI, at least for professionals, and yet only 30 per cent of the labour supply has skills in these areas,” Hinton says. “So right now, we see a massive gap between demand and what’s available.”

How fast that gap will close depends on how fast AI advances. That in turn depends on whether computer chips become more widely available, and on how much faster they can function, he adds.

Elisa Baniassad, acting director at UBC’s Centre for Teaching, Learning and Technology, says future students will need certain skills to function without AI | Chung Chow


Universities are already adapting to AI

While AI will be able to write essays and perform research much quicker than any human, the basic principles that underly those tasks will still be important for humans to know, says Elisa Baniassad, acting director at UBC’s Centre for Teaching, Learning and Technology.

Decades ago, elementary school teachers taught students arithmetic and stressed how important it was for them to learn multiplication tables because they would not always have a calculator handy.

The advent of smartphones made calculators ubiquitous, but the underlying knowledge of how to work with numbers remains valuable, says Baniassad, who is also a professor of teaching in the university’s department of computer science.

“It’s not just that you won’t have a calculator that is the reason that you need to be able to add,” she said. “You also have to have a nuanced sense of how numbers fit together to be able to do higher-order math, and to be able to reason about physics and most of the things that happen in our world.”

Knowing things such as math, grammar, coding and logical reasoning enables humans to build models for even more complex tasks.

This means that post-secondary education is in an exciting era because educators and society are newly contemplating why computer science students, for example, need to learn syntax and programming languages, Baniassad says. There may be abundant reasons why they should, but for the first, time people are asking the question.

“Right now, we don’t necessarily have a ‘why,’ because we’ve never needed a ‘why’ because we never had something that would just be able to write code for us quite this efficiently.”

Philippe Pasquier similarly tells BIV that students need to learn to function with and without AI.

As a professor and the director of SFU’s Metacreation Lab for Creative AI, Pasquier has watched AI evolve to be integrated into classes across a range of disciplines.

“I encourage students to use ChatGPT – or any of the hundreds of generative AI solutions out there – to help them for research and augmented information retrieval, ideation, writing [and] summarization,” he says.

“In my sound-design class, IAT 340, I task students to design a soundtrack for video excerpts and then ask them to do it again with the help of a computer-assisted sound-design AI system from my laboratory. We can then compare, contrast and discuss the pros and cons of these two creative techniques.”

AI tools for faculty are also evolving fast.

Professors and teaching assistants now use AI to generate exam questions, provide ideas for assignments, write tutorials and provide step-by-step instructions, he says.

Oral exams remain key to determining if a student genuinely grasps material, but multiple-choice exams graded by an AI system are also part of the way students get assessed.

Pasquier and Baniassad say they expect change to continue in the next few years but that it may not be as radical as some people fear.

“I don’t think fields move that quickly,” Baniassad says.

“A lot of the safety practices are going to make sure that any kind of auditing or validation is still very much in place for a while.”

Pasquier adds that while technology moves fast, human-made regulatory systems can slow things down.

“The next 10-to-15 years will see a slow but durable and systematic adoption of these systems in virtually every domain,” he says.

“It is virtually impossible to predict the impact of this technology."

United Steelworkers Local 2004 reaches tentative deal with CN Rail

CN Rail, union reach deal

The United Steelworkers union says it has reached a tentative deal with Canadian National Railway Co. for a new contract covering 3,000 workers in Canada.

USW Local 2004 says the three-year deal covers CN Rail employees who inspect, maintain and repair the railway’s track, bridges and infrastructure across the country.

The union says the new agreement, reached after months of negotiations, is being unanimously endorsed by the union’s nine-member bargaining committee.

It says ratification meetings will take place this month with results expected by the end of March or early April.

CN Rail announced the deal in a separate release, saying no details will be made public until the deal is ratified.

The railway is still working to reach a deal with the Teamsters Canada Rail Conference for a new collective agreement for about 6,000 conductors and other CN Rail workers.


CMHC ends first-time homebuyer incentive, a program critics say 'made no sense'

CMHC ends incentive

Canada's housing agency says it is ending the first-time homebuyer incentive program, which many had criticized as unhelpful.

Canada Mortgage and Housing Corp. said in a notice on its website that the deadline for new or updated submissions to the program is midnight eastern time on March 21.

The plan was meant to help first-time buyers by having the government take on partial ownership of their property.

The government offered a loan of five or 10 per cent of the purchase price that would go toward a larger down payment, with the intended goal of reducing monthly payments.

Under the program, homeowners have to repay the incentive after 25 years or when the property is sold, with the amount owing adjusted to reflect how the value of the property has changed.

The program was hampered in part by eligibility issues including limits to household income and the size of a mortgage the buyer could take on.

Total borrower income couldn't be higher than $120,000, or $150,000 in Toronto, Vancouver or Victoria, while the total borrowing could be no more than four times the qualifying income, or 4.5 times in the three pricey cities.

The program wasn't useful since it didn't help buyers put together a minimum down payment, and the restrictions meant some borrowers qualified for smaller amounts than they otherwise would, said James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender.

The government-ownership component also added complications to a convoluted program that was poorly thought out, he said.

"It was literally like they sat in a room by themselves, without anyone who understood the industry, and just made up a bunch of stuff that made no sense," said Laird.

The government already helps first-time buyers by backing uninsured mortgages, but if they want to do more they could allow amortizations to be stretch out over 30 years, he said.

"It lowers the monthly cost ... and there's no complicated co-ownership agreement."

CMHC did not immediately provide comment.

The first-time homebuyer incentive was launched in 2019 with a $1.25-billion commitment.

As of the end of 2022, CMHC had committed $329 million representing about 18,500 applications.

Elon Musk sues OpenAI and CEO Sam Altman, claiming betrayal of its goal to benefit humanity

Musk sues OpenAI

Elon Musk is suing OpenAI and its CEO Sam Altman over what he says is a betrayal of the ChatGPT maker's founding aims of benefiting humanity rather than pursuing profits.

In a lawsuit filed at San Francisco Superior Court, billionaire Musk said that when he bankrolled OpenAI's creation, he secured an agreement with Altman and Greg Brockman, the president, to keep the AI company as a non-profit that would develop technology for the benefit of the public.

Under its founding agreement, OpenAI would also make its code open to the public instead of walling it off for any private company's gains, the lawsuit says.

However, by embracing a close relationship with Microsoft, OpenAI and its top executives have set that pact “aflame” and are “perverting” the company's mission, Musk alleges in the lawsuit.

“OpenAI, Inc. has been transformed into a closed-source de facto subsidiary of the largest technology company in the world: Microsoft,” the lawsuit filed Thursday says. “Under its new Board, it is not just developing but is actually refining an AGI to maximize profits for Microsoft, rather than for the benefit of humanity."

AGI refers to artificial general intelligence, which are general purpose AI systems that can perform just as well as — or even better than — humans in a wide variety of tasks.

Musk is suing over breach of contract, breach of fiduciary duty and unfair business practices. He also wants an injunction to prevent anyone, including Microsoft, from benefiting from OpenAI's technology.

'Nobody needs an extra coat': Apparel sector braces for another year of no splurging

Apparel sector pessimism

Despite an unseasonably warm winter, there's a chill across the Canadian retail landscape.

Less snow than usual in many parts of the country along with high inflation put a damper on splurging during the typically busy holiday season — and now retail industry watchers say apparel companies are staring down an equally fraught year ahead.

"When we look at our consumer research for Canadians right now, it's not as if they are queuing up in order to buy more, let's put it that way," said Sandrine Devillard, a senior partner who leads consulting firm McKinsey and Co.'s retail practice.

Their hesitance to spend is stemming from soaring prices, high interest rates, layoffs and a slog toward recovering from pandemic debt.

When Canadians are spending, Devillard said apparel isn't a priority. Instead, they are focusing on essential purchases like food and pastimes they were deprived of during the pandemic, such as travel or entertainment.

"When they splurge, they'd rather splurge on experiences than buying the extra coat because nobody needs an extra coat, frankly," Devillard said.

That thinking has led to an "extremely volatile" apparel sector where McKinsey expects year-over-year retail sales growth between two and four per cent in 2024, paling in comparison to the double-digital growth some markets saw in 2021.

The typically resilient luxury market will be hit too, with McKinsey predicting its sales growth to slow to between three and five per cent this year, down from between five and seven per cent in 2023.

McKinsey's forecast is partially based on a survey it conducted of 435 fashion industry executives about their outlook for the year, where the word most often mentioned by the leaders was "uncertainty." Some 37 per cent of respondents expected conditions in the fashion industry to remain the same in 2024. Thirty-eight per cent expected the situation to worsen.

Those sentiments cropped up on recent earnings calls from Canada's biggest brands.

Greg Hicks, the president and chief executive of Mark's and SportChek-owner Canadian Tire Corp., blamed "rising interest rates, stubborn inflation impacting discretionary spend and unfavourable weather" for the company's fourth-quarter profit dropping 68 per cent from a year earlier. 

The challenges aren't letting up with credit card data he recently reviewed showing competition across clothing retailers is high.

"Apparel-focused retailers are having a real challenge on the top line and we're therefore seeing the intensity ramp quite a bit," Hicks said.

"SportChek and Mark's are feeling it."

To cope, 69 per cent of the executives McKinsey surveyed indicated they will raise prices this year, compared with 58 per cent a year ago.

Some 44 per cent expect to raise prices by up to five per cent, while 25 per cent have even larger increases in the works.

Luxury parka purveyor Canada Goose Holdings Inc. could be one of the companies that raises their prices.

President Carrie Baker said on the company's latest earnings call that "there’s quite a lot of headroom" for the brand "at much higher price points." She didn't say how much higher they could take prices, but some of the Toronto-based company's parkas already top $1,500.

Price hike chatter comes after Lululemon Athletica Inc. chief executive Calvin McDonald warned analysts recently that the apparel market is a "more dynamic, promotionally driven environment" these days. 

His Vancouver-based company, which is known for its pricey athleisure wear, is resisting the urge to give into these dynamics. It even skipped using "sale language" to promote its Black Friday deals.

Roots Corp. has a similar tack. Chief executive Meghan Roach said on the company's most recent financial call that it has "chosen to be less promotional" over the last three years to boost its margins.

However, "discounts obviously are driving consumer purchasing behaviour," so the company still participates in industry-wide sales periods like Black Friday and Boxing Week.

But even those who take part in discounts might find it harder to entice people into spending as 2024 carries on. Royal Bank of Canada economist Carrie Freestone said shoppers have a "holiday hangover" and have pulled back on discretionary spending even further this year to cope with December bills.

She predicted in a note to investors that retail activity would be "dormant" in the first quarter of the year and "largely flat" further into the year.

Devillard had a similar observation.

"People shop less," she said. "They go less to malls, they go less to stores."

However, it's not doom and gloom for all retailers.

McKinsey's research shows luxury merchandise like jewelry, watches and leather goods will likely be in demand because they're often seen as having value in tough economic times, while consumers sticking with pandemic exercise and outdoor habits will give a boost to sports apparel companies.

Many of these companies are also adept at innovating their way out of a downturn, Devillard said.

"What's not working anymore is being a little bit complacent or lazy or going for the easy route, which is taking some iconic products and just changing the colour or whatever," she said.

"When you have innovation, when you pay attention to sustainability, when you talk directly to a customer and you find your voice, that's when people are ready to splurge."


Zyn nicotine pouches are all over TikTok, sparking debate among politicians and health experts

Debating nicotine pouches

There’s nothing complicated about the latest tobacco product trending online: Zyn is a tiny pouch filled with nicotine and flavoring.

But it has stoked a debate among politicians, parents and pundits that reflects an increasingly complex landscape in which Big Tobacco companies aggressively push alternative products while experts wrestle with their potential benefits and risks.

Zyn comes in flavors like mint, coffee and citrus, and Philip Morris International markets it to adult tobacco users. But videos of young people popping the pouches have racked up millions of views on TikTok and other social media platforms.

That trend has advocates worried that Zyn could become the latest nicotine product to attract underage teens, similar to the way Juul triggered a yearslong spike in vaping. Other experts say that risk is outweighed by the potential to steer adults away from cigarettes and other traditional tobacco products, which account for 480,000 U.S. deaths annually.

“The definition of insanity is doing the same thing and expecting a different result,” said Dr. Jasjit Ahluwalia, an addiction specialist at Brown University. “That is what we’ve done with tobacco for decades. We’ve been all about abstinence, instead of embracing products that can reduce harm.”

Ahluwalia sees nicotine pouches and e-cigarettes as a way to help smokers cut back or quit cigarettes.

That approach is standard practice in the U.K., but it’s outside the medical mainstream in the U.S., where only pharmaceutical-grade medications like nicotine gum and lozenges are formally approved to help smokers quit.

Ahluwalia points out that Zyn works the same way as those products: releasing low levels of nicotine that are absorbed into the gums, reducing cravings. The chief difference, he notes, is that Zyn is sold by Philip Morris, the global cigarette giant and a longtime foe of anti-smoking groups.

The controversy around Zyn recently spilled over into politics, pitting Democrats and Republicans in Washington against each other and spiraling into another skirmish in the nation's culture war.

In late January, Democratic Sen. Charles Schumer, of New York, called on regulators to investigate Zyn, citing its appeal to teens. Several House Republicans then warned constituents that “Big Brother” intended to “ban nicotine.”

Conservative pundit Tucker Carlson, a Zyn user, jumped into the fray, declaring: “Zyn is not a sin,” and touting its unproven benefits, like “enhancing male vitality and mental acuity.”

Zyn users have quickly developed their own online vocabulary, including “zynnies,” “zynner” and “zynsky."

“There’s this online subculture around Zyn that’s been spearheaded by younger males, but a lot of that’s not coming from the brand itself,” said Ollie Ganz, a Rutgers University tobacco and nicotine researcher.

Online videos show young people documenting their first experiences trying Zyn, reviewing different flavor combinations and displaying heaping piles of used canisters.

“It’s concerning to see the countless Zyn-related memes and hashtags that are being amplified and normalized across social media,” said Kathy Crosby, CEO of the Truth Initiative, an anti-tobacco advocacy group.

Truth and other groups point to research suggesting nicotine can interfere with brain development in adolescents.

It’s the Food and Drug Administration’s job to weigh Zyn’s risks to youngsters against its potential to help adults.

In a statement, an FDA spokesman said the agency is monitoring underage use, noting that 1.5% of high school and middle schoolers reported using pouches last year. That’s well below the 10% who used e-cigarettes.

FDA officials have allowed Zyn to stay on the market while they review Philip Morris’ marketing application, which has been pending since 2020. If teen use remains low, the company could win FDA authorization for at least some of its offerings, which come in multiple strengths and a dozen flavors.

In 2019, the FDA awarded its first-ever reduced risk designation to a similar product: snus, a tobacco pouch popular in Sweden that contains lower levels of carcinogens than cigarettes. The FDA said smokers who switch to snus reduce their risk of lung cancer, bronchitis and other diseases.

Zyn excludes the tobacco leaves found in snus, leaving only nicotine, which Philip Morris says increases its appeal.

“People can be reluctant to move into an oral tobacco product if they view it as similar to traditional chewing tobacco,” company spokesman Corey Henry said. “Consumer acceptability is a big part of Zyn.”

Philip Morris doesn’t use online influencers or endorsements to promote Zyn, Henry said. Its website is restricted to adults 21 and older. And flavors like cinnamon and peppermint are “familiar to adults,” Henry said.

Zyn launched in the U.S. in 2014, but sales have exploded in the past year, generating $1.8 billion as shipments accelerated year-over-year by over 60%.

On a November call with retailers, one company executive called the growth “gonzo” and “lights out.”

“I didn’t see this coming. I don’t know anyone who did,” said Joseph Teller, a director for oral tobacco products.

Zyn promotions emphasize the pouches' discreet, convenient nature as a “smoke-free,” “spit-free” alternative for smokers “at work” or “on the move.”

But to fulfill the company’s stated goal of a “smoke-free future,” Zyn will need to help users fully switch from cigarettes, rather than alternating between the two.

There’s little data on switching, and preliminary research suggests pouches may not be a great substitute.

Ohio State University researchers recently found it took smokers 30 minutes to an hour to get enough nicotine from Zyn to relieve their cravings. With cigarettes, smokers achieved the same nicotine levels — and relief — in five minutes.

“The pouches we studied, especially the lower nicotine concentrations, did not appear to meet the needs of smokers,” said Brittney Keller-Hamilton, who led the study. “That being said, they didn’t totally flop either.”

For now, smokers who have had success with Zyn say they hope it stays available.

Justin Wafer, 39, was smoking a pack a day last spring while working as a bartender in Portland, Oregon. On busy days, he would also vape if he didn’t have time to step away for a smoke break.

But after his reloadable electronic cigarette broke in May, he decided to try Zyn. These days, he usually pops a pouch every three to four hours and says he hasn’t smoked in more than nine months.

“I don’t see how it’s any different from pharmaceutical solutions like lozenges or gum,” he says. “Except it’s easier to get and tastes better.”

The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.

Tribunal wraps first 'junk fee' case over online fees for Cineplex movie tickets

'Junk fee' case wrapped

The Competition Tribunal heard a second day of arguments Thursday in a case that could decide whether Cineplex can keep charging customers an extra fee for buying movie tickets online.

It’s the first time the tribunal is hearing a case involving "drip pricing" since the Competition Act explicitly recognized it as a harmful business practice in June 2022.

Drip pricing, also known as a junk fee, is a deceptive practice in which customers are drawn into a purchase without full disclosure of the final cost.

The $1.50 fee charged by Cineplex for online purchases meets that category, according to the competition commissioner, who brought the deceptive marketing case to the Competition Tribunal. 

Lawyers for the commissioner argued Wednesday that customers have no choice but to pay the fee, and buying tickets in person at the movie theatre isn't a reasonable alternative.

Cineplex has made almost $40 million from the fees since it implemented them in mid-2022.

The tribunal heard debates over whether the fee was visible enough on the movie giant's website and if it's reasonable to expect moviegoers will scroll down to see the total price.

The competition commissioner says the fees are deceptive because moviegoers don't see the full price of a movie ticket on the very first page when buying tickets.

The fees are instead disclosed "below the fold" or off the screen for the vast majority of moviegoers.

Cineplex said in written arguments submitted to the tribunal that people can completely avoid the online booking fee if they want, and half of all customers choose to buy at the theatre.

It also argued the full price of the ticket, including the online booking fee, is displayed "prominently" and immediately left of the "proceed" button customers must click to buy their tickets.

On Thursday, Cineplex lawyer Robert Russell said that the commissioner's argument is that "everything is about when you see it, not do you see it."

"There's no misrepresentation. There's no omission," he said. "The scrolling issue, the so-called shrouding issues, it's all about when you see it."

The competition commissioner has cited an expert opinion that Cineplex's pricing practices meet the definition of a shrouded attribute — when companies obfuscate or make it difficult to find product information from customers.

Russell told the court Thursday the case could set a significant precedent for businesses that charge one price for online services and another in person.

The case will also be important for determining whether businesses have to fit all relevant information on a screen so a customer can see it without scrolling, Russell argued. 

"It’s not a small issue," he said. "That’s an immense implication for a precedent from this tribunal in terms of online commerce."

The tribunal wrapped up the hearings on Thursday without delivering a ruling. 

Musk's X asks judge to penalize nonprofit researchers tracking rise of hate speech on platform

In court against researchers

Attorneys for X Corp. and a research organization that studies online hate speech traded arguments in court Thursday after the social media platform sued the non-profit Center for Countering Digital Hate for documenting the increase in hate speech on the site since it was purchased by Elon Musk.

X, formerly known as Twitter, alleges the center's researchers violated the site's terms of service by improperly compiling public tweets, and that its subsequent reports on the rise of hate speech cost X millions when advertisers fled.

U.S. District Court Judge Charles Breyer appeared skeptical during oral arguments Thursday in San Francisco, questioning X's attorney how the center violated any platform rules simply by reporting on posts that were already publicly available.

“I can't think of anything basically more antithetical to the First Amendment than this process of silencing people from publicly disseminating information once it's been published,” Breyer said during back-and-forth with X's attorney.

The case is being watched closely by researchers who study social media and the way it both reflects and shapes public discourse.

In its suit, filed in the Northern District of California, San Francisco-based X alleges that the center's researchers improperly collected a vast amount of data for its analysis, using third-party software to “scrape” the site. Such actions violated the terms of service that all users agree to, said Jon Hawk, an attorney for X.

The company is seeking millions of dollars in damages to compensate for lost advertising, and the staff time it took to look into how the center compiled its reports.

“When they published the report and the advertisers saw the report, then they stopped spending money,” Hawk said.

Attorney John Quinn, arguing for the researchers, said they only used automated search tools to analyze posts that were publicly available on the site, and that X's lawsuit is a poorly thought out effort to silence its critics.

“Given the nature of what happened here, the use of a search function to look at tweets, I think that’s a hard case to make,” Quinn said.

The center is a nonprofit with offices in the U.S. and United Kingdom. It regularly publishes reports on hate speech, extremism or harmful behavior on social media platforms like X, TikTok or Facebook.

The organization has published several reports critical of Musk’s leadership, detailing an increase in anti-LGBTQ hate speech as well as climate misinformation since his purchase.

The center is not the only group that has pointed to the rise of hateful material on X since Musk’s purchase in October 2022. Last November, several big advertisers including IBM, NBCUniversal and its parent company Comcast, said that they stopped advertising on X after a report from the liberal advocacy group Media Matters said their ads were appearing alongside material praising Nazis. It was yet another setback as X tries to win back big brands and their ad dollars, X’s main source of revenue. X has also sued Media Matters.

Later that month, Musk went on an expletive-ridden rant in response to advertisers that halted spending on X in response to antisemitic and other hateful material, saying they are are engaging in “blackmail” and, using a profanity, essentially told them to go away.

Thursday's hearing was called after the center filed a motion to dismiss X's lawsuit. Breyer said he will take the motion under consideration.

Musk is a self-professed free speech absolutist who has welcomed back white supremacists and election deniers to the platform, which he renamed X last year. He initially had promised that he would allow any speech on his platform that wasn’t illegal. “I hope that even my worst critics remain on Twitter, because that is what free speech means,” Musk wrote in a tweet last year.

Nevertheless, the billionaire has at times proven sensitive about critical speech directed at him or his companies. Two years ago he suspended the accounts of several journalists who covered his takeover of Twitter.

First US moon lander in half a century stops working a week after tipping over at touchdown

Moon lander stops working

The first U.S. spacecraft to land on the moon since the Apollo astronauts fell silent Thursday, a week after breaking a leg at touchdown and tipping over near the lunar south pole.

Intuitive Machines’ lander, Odysseus, lasted longer than the company anticipated after it ended up on its side with hobbled solar power and communication.

The end came as flight controllers received one last photo from Odysseus and commanded its computer and power systems to standby. That way, the lander can wake up in another two to three weeks — if it survives the bitterly cold lunar night. Intuitive Machines spokesman Josh Marshall said these final steps drained the lander’s batteries and put Odysseus “down for a long nap.”

“Good night, Odie. We hope to hear from you again,” the company said via X, formerly Twitter.

Before losing power, Odysseus sent back what Intuitive Machines called “a fitting farewell transmission.”

Taken just before touchdown, the picture shows the bottom of the lander on the moon's pockmarked surface, with a tiny crescent Earth and a small sun in the background.

The lander was originally intended to last about a week at the moon.

Houston-based Intuitive Machines became the first private business to land a spacecraft on the moon without crashing when Odysseus touched down Feb. 22. Only five countries had achieved that since the 1960s, including Japan, which made a sideways landing last month.

Odysseus carried six experiments for NASA, which paid $118 million for the ride. The first company to take part in NASA’s program for commercial lunar deliveries never made it to the moon; its lander came crashing back to Earth in January.

NASA views these private landers as scouts that will pave the way for astronauts due to arrive in another few years.

Until Odysseus, the last U.S. moon landing was by Apollo 17's Gene Cernan and Harrison Schmitt in 1972.

Electronic Arts cutting about 5% of workforce with layoffs ongoing in gaming and tech sector

Layoffs at Electronic Arts

Electronic Arts is cutting about 5% of its workforce, or approximately 670 employees, as layoffs in the technology and gaming sector continue after a surge of hiring in recent years.

The video game maker said in a regulatory filing that its board approved a restructuring plan that includes the layoffs, as well as closing some offices or facilities.

The Redwood City, California, company had 13,400 workers globally as of March, 31, 2023, according to a filing.

“While not every team will be impacted, this is the hardest part of these changes, and we have deeply considered every option to try and limit impacts to our teams,” said CEO Andrew Wilson. “Our primary goal is to provide team members with opportunities to find new roles and paths to transition onto other projects.”

He said the layoffs would be largely completed by early next quarter.

Electronic Arts estimates incurring about $125 million to $165 million in total charges related to the restructuring. The company anticipates approximately $50 million to $65 million in charges associated with office space reductions and about $40 million to $55 million related to severance and employee-related costs.

The announcement comes just days after Sony said that it would cut about 900 jobs in its PlayStation division, or about 8% of its global workforce. Sony cited changes in the industry as a reason for the restructuring.

The tech sector has been hit hard by layoffs. Microsoft said last month that it would cut nearly 2,000 workers after its acquisition of Activision Blizzard. And Riot Games, the developer of the popular “League of Legends” multiplayer battle game, said in January that it was laying off 11% of its staff.

Still, most large tech companies are much larger now than they were before the pandemic, when hiring surged in the sector.

CIBC reports $1.73 billion Q1 profit as concerns about mortgages, U.S. offices ease

CIBC's $1.73B Q1 profit

CIBC says it has sorted through the issues in its U.S. office portfolio and that its Canadian mortgage book is performing well as it reported profits that beat analyst expectations.

The bank has seen increased scrutiny over concerns about its exposure to the U.S office space, and the higher proportion of its business dedicated to Canada's housing market compared with its peers.

"We continue to successfully navigate through a fluid economic backdrop and execute on our client-centric strategy," said chief executive Victor Dodig on the bank's earnings call Thursday.

CIBC reported a first-quarter profit of $1.73 billion as its revenue rose five per cent compared with a year earlier.

The results came as provisions for credit losses amounted to $585 million, up from $295 million in the same quarter last year.

Provisions rose in part as the ratio of impaired loans in its U.S. office portfolio rose to 19.7 per cent, up from 1.8 per cent a year earlier. 

The office market has been under strain as a shift toward more remote and hybrid work has hit demand for office space, while high interest rates have pressured commercial borrowers.

Impaired loans are up substantially even as the bank has worked to reduce its exposure to the market. Loan balances to U.S. offices are down 12.5 per cent from a year ago to US$3.5 billion.

Dodig said the bank has now worked through the main issues with the portfolio.

"The team ... has done a very good job in rectifying a problem with U.S. real estate that none of us were pleased with," he said.

Dodig said the bank was disappointed with the performance of the loans, but that no one expected a global pandemic and the issues in the U.S. office portfolio are now behind them.

"We worked through it. And that issue, as we've outlined, is really in the rearview mirror as we work through the rest of the year."

He said the bank is also very comfortable with its Canadian mortgages as borrowers have deposits that remain higher than pre-pandemic levels and unemployment remains low.

"They're employed, they're working through things. That doesn't mean they're not anxious. But from a bank standpoint, the loan-to-value across the board is on average 50 per cent ... so that doesn't remain a concern."

Revenue for the quarter totalled $6.22 billion, up from $5.93 billion a year earlier.

On an adjusted basis, CIBC says it earned $1.81 per diluted share, down from an adjusted profit of $1.94 per diluted share a year earlier.

Analysts, on average, had expected a profit of $1.66 per share, according to estimates compiled by financial markets data firm Refinitiv.

CIBC said its Canadian personal and business banking business earned $650 million in the quarter, up from $590 million a year earlier, helped by higher revenue driven by higher net interest margins and volume growth and lower expenses, partially offset by an increased provision for credit losses.

Meanwhile, the bank's Canadian commercial banking and wealth management business earned $498 million, up from $469 million a year earlier.

CIBC's U.S. commercial banking and wealth management business lost $9 million compared with a profit of $201 million a year earlier as it faced higher expenses including a $91-million charge related to the special assessment imposed by the U.S. Federal Deposit Insurance Corp.

The bank's capital markets and direct financial services group earned $612 million, the same as a year earlier.

CIBC's "corporate and other" group saw a loss of $23 million for the quarter compared with a loss of $1.44 billion in its first quarter last year.

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