Empire’s president and CEO Michael Medline on e-commerce, private label and the bumpy relationship between grocers and suppliers
Photo: Mike Ford
In the nearly four years he’s been at the helm of Empire Company Limited, Michael Medline has guided the Stellarton, N.S.-based grocery company through some of the most transformative moments in its long history.
There was the continued Western expansion of Empire’s discount banner FreshCo, the sweeping reorganization program Project Sunrise, the Farm Boy acquisition, the launch of Sobeys’ e-grocery service Voilà and, of course, COVID-19—a defining moment that has thrust massive change upon an industry that has always been slightly resistant to it.
On Medline’s watch, Empire has grown market share and consistently exceeded financial expectations. The company created more than $550 million in savings ($50 million more than projected) through Project Sunrise and embarked on a new, multi-million dollar cost-savings initiative earlier this year with Project Horizon. And he’s not done yet.
In late October, Canadian Grocer spoke with Medline about the relationship between grocers and suppliers (“all we’re doing is hurting each other”), private label (“I think sometimes people do private label just to do private label”) and how the company is preparing for the next wave of COVID-19 (“I think we’re ready, but we’re driven by concerns of safety”). Here are edited excerpts from the interview:
What would you say Empire has learned during the pandemic, not only about its customers but also about its staff? We learned a few things. One is that we can move way faster than we thought possible and make decisions quicker than we thought we could. In a pandemic, you have to make decisions with lightning speed with the data you have, which is not perfect. I think we got good at that. I think we also found out how strong our stores, especially our store managers and franchisees, are. We knew they were good, but gave us a lot more confidence in their abilities. It made us more of an operational culture—less top-down and listening more to the stores, and I think that’s continuing and accelerating, actually. We’ve heard throughout the industry that people who work in grocery stores and distribution centres are tough and will come to work even at risk to their own selves, and so many of our employees—our teammates, we call them—came to work and they felt they were serving a higher purpose.
Empire was quick out the gate to adopt COVID-related safety measures, most of which remain in place today. How do you prepare for the next wave and even the potential of another lockdown? Even though we had a pretty good summer in terms of COVID, we weren’t out of the woods yet in the country, so we just never let our guard down and we kept our protocols in place so we wouldn’t have to bring it back up again. So, we’re in really good shape now. We have a much better understanding of the risks of COVID and how to protect ourselves and our teammates and customers. It’s just not as hard now because we’re not making it up on the fly or buying Plexiglass all over the country to put in place. I would say that we are concerned it will get worse in the winter. We’re worried about queuing outside our stores . We want a nice customer experience even though COVID is going on. That’s really what we’re looking at, new innovations that we can use like queuing software and how can we make our customers more comfortable. Our standards were kept in place so I think we’re ready, but we’re driven by concerns of safety.
Empire offered hero pay to front-line workers through part of the pandemic. With the potential of a third wave or another lockdown, where does the future of hero pay lie? Hero pay was a darn good idea. And we actually coined the phrase—it’s used all over the world. We tried to come up with a name for it, we ended up calling it “hero pay” and everyone else kind of adopted it. When our teammates were coming to work, and no one else was, they deserved a special bonus. And we’ve been pretty clear, if we go back in any region to a full lockdown like we were in March, we’ll go back to hero pay. We might structure it slightly different, but it would be the same kind of reward to our teammates for being heroes like they are every day. <Note: in late November, Sobeys announced it is issuing pay bonuses to eligible workers in locked-down areas of Manitoba, Toronto and Peel Region in Ontario.>
The pandemic accelerated online grocery adoption in Canada. You launched Voilà in June. One of the benefits of Voilà in a COVID era is that robots are filling the orders—so less human interaction with the product compared to store-pick models. What are some of the benefits that will outlast COVID? We think there’s a lot of benefit other than that. Having the robots makes it a far better experience for customers, but also a far more efficient way to do business. And there are the attributes of this system: algorithms to ensure very good product substitutions, we deliver in one hour, and the produce and meats are incredibly fresh. And frankly, there’s nothing else like it out there. Nothing. And so all those attributes win every day of the week. And then on top of that, people like that it’s robot-picked now because of COVID.
Is there any concern the data Empire is collecting on Voilà users is skewed because of the pandemic? No. Our forecasted basket size is almost bang on right now. If we had another lockdown, basket size would skew higher, we would probably run out of customer slots to serve everyone and there would be different kinds of buys. I’d say our predictions are a little better than we expected, but almost right on.
Right now you have Sobeys.com, which is rich with content including recipes, tips and meal ideas—with a tab for Voilà. Will we see a hybrid version, where maybe people can shop recipes, for instance? We got slowed down a bit by COVID on construction. Many of the really exciting bells and whistles—they’re more important than that, they’re incredible innovations—online, especially around personalizing it for the customer, will be over the next six months. Month after month we’ll be adding new innovation on the site. At the beginning, we just wanted to get it open and serve people within the because we knew there were a lot of people who were not comfortable going into stores and leaving their homes. So we hurried that, and now we’re catching up with all these accoutrements.
Is a multi-banner rewards program coming? We’re always looking at ways to improve our customer experience through our loyalty program and our crush of data and personalization so we can serve customers better. So, I think you should stay tuned over the next three years.
You are investing heavily in private label. What opportunities have you identified in that space? Well, we did the work on category resets last year. We got a lot of information in terms of where we could broaden our assortment in private label, but also where we had to grow. When we do customer research, the quality of our products extremely high. I think the Compliments rebranding and repackaging tells a better story in terms of that quality. We’re also going to be expanding our private label, but in areas that customers want. I think sometimes people do private label just to do private label. We want to do it where it’s going to add value to the customer. I think that will lead to much greater penetration of private label in our stores, which has been a goal of ours for the last few years. And, I think the biggest thing we’re doing now that’s different is we’re not treating private label completely separate—it’s working in tandem with our merchants and operators, so it’s not out there orphaned from the rest of our business. We’re thinking about the customer experience holistically across national brands and private.
What have you learned from Farm Boy products that you have applied to Compliments? Farm Boy has probably the most loyal following for their private-label brands of any retailer. Customers just love their private-label brands. Originally, when you make acquisition, a lot of people think the big company can teach the smaller company what to do. really good, but they thought they could learn some things from Farm Boy, and the Farm Boy team is helping our team develop even more exciting products. That’s probably the greatest surprise about the entire acquisition of Farm Boy. We knew would be successful, we knew the stores outperformed everyone else, but Jean-Louis Bellemare and Jeff York are just incredible leaders who share their knowledge and, in turn, they’re open to learning as well.
Loblaw and Walmart have announced a hike in supplier fees and a Canadian Press story suggests Sobeys is next. Can you comment? I don’t know where that came from because we never contemplated it. I think people are just guessing because a grocer. It’s not part of our values. We wouldn’t do that.
The relationship between grocers and suppliers can be contentious. What do you think it would take to improve the relationship? Don’t get me wrong, I think a little friction is good. I think people believe if they’re giving up something that it hasn’t been a very good negotiation. But you’ve got to do it with principle and value. I don’t think it can be solved unless the grocers sit down with suppliers and bang out some general rules to make this better. All we’re doing is hurting each other. We’re not making it a very hospitable place to do business. We’re not helping Canadian customers. We’ll negotiate hard, we’ll make sure that our company and our investors are taken care of, we’re not fools, but we will make sure there’s a level playing field and not unilateral moves to redistribute wealth. That’s just not fair.
How has collaboration been impacted with teams connecting virtually, rather than in person? It’s my No. 1 issue right now. We don’t have one head office, so we were always pretty good at . And you know, the first few days you go, “Oh this is pretty good” it’s not as good as collaborating in person. It’s more difficult to communicate it’s more difficult to have important sidebar conversations to solve issues. It’s harder to transmit your culture and values; although I think we’re doing a very fine job of it. We’re slowly trying to get people back in the office safely—safely is the key word there, we don’t want people getting sick—because our team finds it better to be in person. And if people are not comfortable with that, we respect that, that’s cool. I can’t wait for the day when we have a vaccine and we get back to normal and people can work together more collaboratively.
What has happened to mentorship and talent development with your people now working from home more? How do you tackle that? It’s harder. We have leaders who have joined our company since COVID started; we have teammates who have joined since and some of them haven’t met their bosses in person. I think you have to do two things better. You have to set your objectives and instructions and what you expect of people to be much more clear. And two, you have to speak to them more often so they don’t feel they’re out there on their own. That’s what I try to do.