Heads of Sobeys, Metro, Loblaw share insights at conference
Among the speakers at Scotia Capital's 15th annual Back to School Conference: Focus on the Consumer on September 20, were the leaders of Sobeys, Metro and Loblaw, who shared some of their business insights.
Bill McEwan, Sobeys president and CEO, said that over the last five years, while the company has grown its square footage by 13 percent year after year, store count has only grown by two per cent.
“Our focus hasn’t been on the number of stores that we have occupying the markets across the country, but on quality of the assets and the market share per store basis. So we’ve been heavily focused on enlargements, relocations, renovations, new stores and acquisitions,” he said.
In doing so, McEwan said Sobeys has stores at what it calls ‘decent operating standard’ between 75 to 85 per cent today; where that was 25 per cent of stores at standard seven or eight years ago.
Going forward, McEwan said it’s about the offering in the stores and innovation.
“Our opportunity going forward will be to innovate in a way that takes advantage of the best processes practices systems and technology and engagement of our people across the network through a more collaborative approach coast to coast,” said McEwan.
He said that in the not too distant future the company will optimize its performance by migrating its best practices (from its banners across Canada) in an institutionalized way.
McEwan said the battleground of the future is to over the next five years, attack cost and productivity in an intelligent way to fuel its ability to sustain an improved competitive position.
“We think we’re in a cost and productivity battle, not price war,” he said.
And when it comes to its private label offering, Sobeys isn’t in the business of growing its private label arbitrarily. “We have intelligently retooled and assessed our entire private label program, it’s improving our profitability, contributing to improving and sustaining our margins as we get competitive in other areas, and improving loyalty,” said McEwan.
Sobeys has also put an entire infrastructure in place for customer insights supported by customer loyalty programs. “We reward customers for their patronage with Air Miles or Club Sobeys or Club Thrifty Foods points, as a means of a currency where we can collect the insight which we can apply more intelligently to market more effectively and efficiently,” he said.
The grocer is now exploring in piloted ways with major vendors “strategic information exchange.”
While others would call that selling data, Sobeys doesn’t intend on commoditizing the data, instead it intends to provide it to vendors who can connect with the retailer on a category-by-category basis in a much more open, less profit-driven way against the sale of the data to drive the sale.
Next Metro Inc.’s president and CEO, Eric La Flèche participated in a question and answer session.
He spoke about its loyalty program in Ontario and Quebec.
“At Metro, we were never really big believers in loyalty before; we saw it as an expense as we were just rewarding customers,” said La Flèche. “The big change for us, and loyalty in general, has moved from candy rewards to insights, that you could do something with to leverage and improve your business and sell to your suppliers, and generate revenue for your business–it’s a two-way street now.”
Two years ago, Metro partnered with Dunnhumby, a marketing/insight/loyalty specialist firm in the U.K. that has worked with Tesco over there.
We’ve learned a lot with them about our best customers, they really make us look at our business from a consumer’s lens, said La Flèche.
In Quebec, Metro’s Metro & Moi program has also been quite a success.
Air Miles already existed in the Quebec market with one of its competitors, so the retailer had to come up with something different.
With Dunnhumby’s help, Metro came up with program that was simple yet effective: consumers accumulate points based on what they buy in Metro’s stores which is then converted into dollars and discounts at the same grocery stores.
Customers get rewards every quarter, and cash rebates in the mail based on purchases and loyalty, along with valid coupon offers on products that are relevant to them.
In discount, Metro has launched, in both Ontario and Quebec markets, four banners, that look to improve the produce offer.
“In our conventional stores in Metro in Ontario, we changed the presentation, assortment,” said La Flèche.
In Quebec, it is currently testing a new produce layout in four stores. “We will continue to improve our fresh offer. Especially in the Montreal area, where there is more ethnic (consumers), and more demand; we added 60 odd products, bigger displays, and tonnage is up (in produce sales).”
Closing the conference was Loblaw’s executive chairman, Galen G. Weston.
He noted that the retail marketplace, mass retail and particularly food is pretty “tough.”
“It’s hard to get the top line moving in a robust fashion, consumer confidence is low, and you don’t see much growth coming from any of us other than those who are aggressively putting in new footage,” said Weston.
He called Walmart’s fresh food presence as having a real impact on the fresh food business, saying, “that’s where they’re adding footage, and bringing customers into their stores on a much more regular basis, and frankly, even though we’re quite confident about the way we’re competing against them, you don’t open a supermarket with zero sales no matter how compromised your offer might be. And when you’re putting in footage at the rate they are today, it can’t help but improve their share, and it can’t help but come at the expense of those of us who are incumbents, or have been around for a long time.”
Speaking of food inflation, Weston said “we’re on the bubble as an industry and as a nation, when it comes to food price inflation.”
Biggest evidence of the softness in the consumer segment Weston pointed out is that the vast majority of growth is coming in the discount segment.
“Two-thirds of our business effectively operates at opening price point, a 20-billion food business, where we operate with the lowest food prices in the market,” he said.
Weston said that so far he doesn’t see any indication of aggressive pricing action, or “price war”, but he does see “ever intensifying commitment to aggressive promotional spending. If you’re not putting in new footage as a way of growing, you don’t have inflation or natural market growth buoying your sales, then you turn to promotions to drive volume. That’s something we’re doing and competitors are doing.”
In the area of control label performance, Weston said Loblaw is actually significantly outstripping the sales performance of rest of the organization and the market, giving him some confidence that all that investment is actually working.
The retailer recently launched its premium private label, President’s Choice Black Label, which Weston said shows “President’s Choice reclaiming its position as the value authority in premium and gourmet food.”
As well, Weston alluded to Vicente Trius, the new president of Loblaw, saying the “leadership transition is going pretty well.”
Going forward, areas where Weston says the company has meaningful growth opportunities include a commitment to ethnic Canadian consumer, saying “it’s our commitment to be most effective major retailer when it comes to serving that consumer.”
It owns Asian grocer T&T Supermarket, which Weston says the company will start to move towards leveraging some of their best practices, and bringing it into the appropriate core supermarkets across our network where it makes sense.
Second on Loblaw’s agenda is health and wellness, which Weston said is a “public policy priority and it’s Loblaw’s commitment to be the most responsive and innovative in these areas."
The third most significant factor in Loblaw’s business going forward will be the implementation of SAP in merchandising and supply chain for 2012.
At present, the grocer has just over 50 per cent of categories loaded on to SAP, but Weston predicts as it moves to 100 per cent of categories on SAP, and trying to connect to supply system, “things could get a little hairy.”