IGD looks at the growth priorities for the four major grocery retailers in Canada over the next 12 months, as they focus on top-line growth against a backdrop of increasing cost headwinds.
Loblaw: Loyalty and digital initiatives
Loblaw's activities in 2018, particularly in the first half of the year, will be shaped by the flurry of announcements that were made over the last two months. Its most significant initiative will be the launch of PC Optimum -- a merger of its PC Plus and Shoppers Optimum programs -- on Feb. 1. This will provide the retailer with the opportunity to further personalize and target its offers as it better understands shopper behaviour across its physical formats and digital platforms.
The retailer has also recently started to pilot PC Insiders, a fee-based subscription program. This offers a range of perks to its most loyal customers, including free online delivery for its non-food websites and free pickup for its grocery click-and-collect service. This has been developed to reward customers that shop across a range of the retailer’s brands, both in-store and online. Similar to Amazon Prime, PC Insiders aims to optimize the retailer’s ecosystem, offering benefits that incorporate its physical and online stores, financial services, travel services and private brands. The program will expand over the next 12 months to additional customer groups.
The retailer also recently launched a grocery e-commerce delivery service in Toronto and Vancouver in partnership with Instacart. This will be rolled-out to additional markets throughout 2018.
Sobeys: Securing the turnaround
Though it's early days, Sobeys’ turnaround plan, Project Sunrise, is staring to deliver positive results. With the first phase complete, the retailer will work to improve its brand and customer understanding, with a view to making a more emotional connection with its shoppers.
Having undertaken a major restructuring of the business, which saw around 800 positions eliminated, Sobeys will also have to focus on embedding this new structure. New tools and processes have been introduced, and a significant amount of upskilling and retraining is underway. The scale of change underway undoubtedly carries with it some element of execution risk.
One of the most significant elements of this will be the introduction of its discount format, FreshCo, to Western Canada. To launch the format this year, the business will start converting up to 25% of the 255 Safeway and Sobeys full service format stores in Western Canada. It plans to start out slowly before aggressively ramping up, aiming to convert all the identified stores within four years of converting the first stores. Each conversion will cost around $4 million, which will also include some element of downsizing to fit the smaller-format stores which are planned. Most of the conversions will be former Safeway stores, and will be operated on a franchised basis.
Metro: Optimizing acquisitions and investments
Metro delivered another solid performance in 2017. The retailer continues to be one of the most consistent performers in the sector in terms of delivering sales and profit growth. The main priority for the business will be completing the acquisition of Jean Coutu and delivering its integration plan.
The retailer announced plans to acquire the business in a $4.5-billion deal last October. Following the closing of the transaction, Metro’s existing pharmacy distribution and franchising businesses will be combined with those of Jean Coutu. The combined business will have an overall network of more than 1,300 stores in Canada, including 677 drugstores. This deal deepens Metro’s presence in the healthcare sector, enabling it to capitalize on key demographics and lifestyle trends.
Metro will also be focusing on optimizing its investment in MissFresh, a leading meal-kit company. Since taking a majority interest in the business last August, Metro has made MissFresh more accessible to customers, giving them the chance to pickup pre-ordered kits in its stores. Several stores are also piloting the sale of the kits alongside the in-store prepared foods offer. As part of it broader e-commerce offer, Metro will also expand its online operations into Ontario this year.
Walmart: Digital and physical developments
E-commerce will also be a major area of focus for Walmart in Canada. It will continue to roll-out its grocery e-commerce pickup service to additional locations while also building out its recently launched online marketplace; the retailer has added products from over 30 trusted, third-party sellers to Walmart.ca. Categories covered include home, baby, apparel, toys and sporting goods. This has quadrupled the number of products available through the platform. Plans are in place to invite other sellers to join the site, including those currently selling through its Walmart U.S. marketplace.
With limited plans to open new stores this year, the retailer will continue to invest in remodeling its existing locations. With more than 400 stores across Canada, the opportunities for further expansion are relatively limited. The retailer is, however, refining and rolling out its Supercentre format to additional locations. Walmart Supercentres feature enhanced fresh food ranges, a stronger price and value proposition and upgraded clothing, beauty and toy departments. This represents a bold, new proposition for the retailer, but one which will enable it to further differentiate as the market continues to polarize toward discount and fresh-led formats.
Stewart Samuel is program director with IGD, a global grocery and food industry research firm. This column has been edited. The original version ran here.