Metro to roll out premium conventional concept

The grocer looks to differentiate itself with a quality food offering and look

The past two years have been a rocket ride for retail and consumer stocks, said Perry Caicco, managing director of CIBC World Markets at its 17th annual Retail and Consumer Conference on Wednesday.

With Target's Canadian debut and Walmart's continued growth, retail and consumer companies have been forced to act and adapt to a new competitive landscape.

One grocery retailer looking to differentiate itself from other conventional players is Metro. The chain's CEO Eric la Flèche told attendeees the grocer is looking to roll out a "premium conventional store concept" in the Greater Toronto Area over the next year or two.

“That’s our plan to have a better premium Metro differentiation," said la Flèche But the key he said is to have the right offer with the right people.

The strategy for Metro on the conventional side is to continue to invest every year to upgrade the Metro network to raise the customer experience. "It’s about fresh, service, and a nice ambiance," said la Flèche.

With its discount banner Food Basics, la Flèche said the banner has always been very competitive on price (on key grocery items), but hasn't been getting credit for it.

Unlike other discounters, Food Basics doesn’t ad match, instead it goes with its in stock guarantee. “We don’t ad match an item you don’t have isn’t a great customer experience,” he said.

READ: Metro launches in stock guarantee at Food Basics stores

However, la Flèche said they’re currently running a test with ad matching in a small market and will see how it operates.

As for the proposed code of conduct for grocery, la Flèche doesn’t see the need at this stage.

READ: La Flèche rejects calls for Ottawa to impose code of conduct

On the M&A front, with ethnic grocery in Ontario focusing on South Asian and Asian consumers, la Flèche said he is “looking at options, and the Adonis-type transaction could happen with an Asian partner but it’s still at the study stage.” As well, Metro will open a second Adonis store in Ontario in May.

Meanwhile, Sobeys' CEO Marc Poulin, identified fiscal 2014 as a “transformative year” for the company.

The launch of the “Better Food for All” campaign, the unveiling of the first Sobeys Extra store in Burlington, and the acquisition of Safeway Canada this past November has given Sobeys a solid infrastructure to build on in the coming months.

READ: Sobeys unveils its latest store, with food discovery and more

Poulin noted the first priority in the Safeway Canada acquisition is to successfully achieve system integration — including converting transaction resources and POS systems — and they are working on educational and training programs, as their success will depend on open dialogue among Safeway and Sobeys colleagues.

Full integration is currently being done “on-time and on target” but Sobeys will continue to provide progress updates.

A new brand tagline and new spokesperson have been integral to Sobeys marketing plan this year.

Poulin identified three customer segments that represent two third of their customer base — the fresh food enthusiasts, the fresh and savvy, and the packaged meal lover. The Better Food for All campaign, championed by celebrity chef Jamie Oliver, is meant to empower, enable and motivate Canadians to eat better.

“The acquisition has given a new platform for growth, and we’re excited for synergy plan we have developed,” Poulin concluded. “We’re well-positioned for long-term sustainable growth. We have a lot to deliver in the oncoming years, but we’re committed to do so.”

Next, the current darling in the retail sector, continue to show its might within the the dollar store space. Michael Ross, Dollarama’s CFO, said that it is almost five times larger than its next competitor.

He attributed the chain’s success to a simple growth-oriented business model that is driven by its direct sourcing capabilities, disciplined execution and growth strategy.

Ross pointed to these three key drivers that enable the chain to grow sustainably and deliver superior results: growing its store network while making existing stores continue to perform; reaping benefits of productivity initiatives; and the responsible use of its cash.

In the past two years, Dollarama has opened 80 stores per year.

He said the Canadian market is still under penetrated (in dollar stores), and Dollarama sees longer term potential for possibly 1,200 additional stores with room for growth, especially in Ontario and western Canada in particular, said Ross.

One initiative that has helped drive same store sales has been its multi price point strategy launched in 2009 and expanded in 2012.

The chain also refreshes 25% to 30% of its SKUs every year to ensure customers always have something new every week.

To open a Dollarama store, it’s a cookie cutter approach, said Ross. He said they’ve had the same shelves for the last 20 years.

He also said the cost to open a 10,000 sq. ft. outlet is $600,000 with inventory. And when the sales ramp up, after two years they're able to pay that down, cash on cash.

Interestingly, when it comes to key locations, Ross said they look to be near prime anchors, with top performers near Walmart stores.

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