Metro's momentum

Last year was a good year for Metro. Amid fierce competition, the retailer racked up sales of more than $16 billion at its network of 1,600 stores. It stayed on track with its integration of Jean Coutu, the pharmacy chain it scooped up in 2018 for $4.5 billion. It opened 10 food stores and completed 20 major renovation projects at existing locations, while also making progress on its $400-million modernization project of its Ontario distribution network, breaking ground on a new fresh product distribution centre in Toronto last fall.

But at its Annual General Meeting in late January, the retailer’s president and CEO, Eric R. La Flèche, told shareholders that while proud of Metro’s success, “We are taking nothing for granted because competition is still very stiff and customer expectations are changing and increasing constantly.”

In early May, as grocers continued to grapple with COVID-19, La Flèche spoke with Canadian Grocer about everything from Metro’s mission to provide a great customer experience to the extraordinary business of selling groceries during a global pandemic, and what learnings can be taken from the crisis. Here are edited excerpts from the interview:

Metro has achieved a lot of success over the last year. What would you say has put the company in a position to achieve that success?
I think it’s many things over a long period of time. We take a lot of pride in our long-term track record. We’ve assembled a good team, we have invested every year in our store network and our infrastructure, so we’re reaping the benefits of our decisions over the long term. We focus on our key pillars of customer focus, execution, financial management and team— this is really the basis for our results. We don’t win every time and it’s far from perfect, but over the long term it has served us well and we’ve been able to grow and be a better company.

Speaking of Metro’s customer-focused strategy, according to Léger’s WOW Index (which evaluates customer experience), Metro ranked high in 2019. What’s behind these results?
It’s years of work and continuous improvement. I’ll say, 12 years ago we implemented our customer promises and we measured and rewarded people based on that. In fact, most of our people’s annual incentive plans have a component related to customer satisfaction—so it’s on everybody’s mind. It’s our mission to provide a great customer experience. At the end of the day it’s all about setting objectives, measuring them and rewarding them—that gets you results.

How has the integration of the Jean Coutu drugstore chain been progressing? Why was this acquisition so important?
We’re far along in the integration, but we’re not completely done and, unfortunately, we’ve been set back a few months because of COVID. Jean Coutu was a strategic acquisition for us, for sure. We were already in pharmacy distribution and franchising in Quebec with Brunet, but we wanted to grow pharmacy. Jean Coutu is the No. 1 brand in Quebec—it’s a fantastic brand, one of the most admired companies, year-in, year-out. It’s been a good fit. The integration is on-track and the synergies/objectives we set are being met: we’re at $65 million, on a $75-million target.

Pre-COVID-19 there was growing urgency around sustainability, but with the current crisis it seems to have taken a bit of a backseat.
Backseat, yes. We’re talking a little less about plastic these days than we were. As a matter of fact, we’re going backwards a bit—we’re using plastic bags again, a lot more than we would like. I hope that’s not the new normal, but it’s the normal right now, unfortunately.

Can you talk about Metro’s progress in this area?
We’ve been at it for a long time and in a more focused way for the past 10 years. We’ve done a lot to improve our performance, and we’re still trying to improve because it’s the right thing to do and our customers want it. I’m pretty proud of what we’ve done so far—the policies we’ve adopted and are enforcing in sustainable fisheries, packaging, printed productive. Personally, I miss the office and the collaboration and seeing people and being in the stores more, but I have to say that telework has worked and will be part of the new normal. I think we will have to be more flexible going forward; we’ll have to think about that a little more.

COVID-19 has accelerated online shopping. Can you talk a bit about the company’s investment in this area?
We’ve been at e-commerce for over three years now; our model is the store-pick model, and we do home delivery from a few hub stores and that model was serving us well. It was swamped with the crisis, and truly the surge and demand for e-comm surprised everybody—us too. We had to adapt really quickly and our people worked extremely hard to double our sales, but even with that we were not meeting the level of demand. We were at capacity so we added ancillary services like M Priority which is a web-based service for seniors, mostly, and for people who are quarantined or those with limited mobility. It’s available at almost 100 stores in Ontario and 135 Metro stores in Quebec. It’s a service where customers can go on the web and fill out an order—not an e-comm order, it’s not a transactional site. We then send the order to the local store and the local store picks the order and calls the customer for payment and arranges for pick up or delivery. That has added some capacity to our e-comm service. It’s been well appreciated by seniors.

And we also formed a partnership with Cornershop . They come in with their pickers/drivers to our stores and they deliver to the customer’s home. So that’s, again, adding some e-comm capacity for us. COVID-19 has accelerated trial and awareness of e-comm on the food side. E-comm was very modest prior to so we’re a bit further down the road.

There’s a lot of talk about what the “new normal” looks like, particularly as it relates to customer expectations. Do you think they will be higher going forward?
Well, I think they’re higher every year. As for the new normal, it’s a bit early to say as we’re still in this, but we expect some changes or behaviours will last longer. People will expect our stores to be very clean and that we keep measures such as the Plexiglass and handing out hand sanitizer as you walk into the store. I don’t think that’s going away anytime soon.

Out of crisis, opportunities often emerge. What opportunities do you see emerging from this situation?
We were fortunate in the sense that we provide an essential service and people are still coming into our stores. Other retailers are going through much, much, tougher times. The opportunity for us is to serve our customers well—it’s an opportunity to solidify the trust of our customers towards our brand; for me, that’s a key one. And reinforcing the bonds with our employees is the second one. The crisis has been a rallying cry. People thrive under pressure and in crisis mode more than anyone would expect, especially our store employees and our warehouse staff.

Another opportunity is that people at home are cooking more so there’s an opportunity for us to make sure they keep those new habits; I don’t want to be too funny with wordplay here, but there’s an opportunity for us to “nourish” those eat-at-home habits. There are other opportunities, too. health focus, which was there before the crisis, will be even more reinforced. This is a health crisis we’re living through, so that’s going to be more top-of-mind than ever, post-crisis. It’s an opportunity for us as a food and pharmacy retailer to respond to those health desires or needs of our customers.

As Metro positions itself for the future, what will be the key areas of focus?
Our priorities are to finish the Jean Coutu integration. We hit a roadblock with COVID, but it’s a key priority for us to complete the integration. We’re almost there.

The other big strategic front for us is the modernization of our distribution network. We announced a couple of years ago in Ontario a major investment in Toronto to build new distribution centres, mostly automated, for fresh and frozen products, so that’s underway. Thank god, construction wasn’t stopped for too long in Ontario, so that’s proceeding. We may experience a bit of a delay because our partner for technology is a German company and we need the German experts to come in and install the technology. They’re not travelling these days, so there are a few delays there, but it’s a big priority for us to modernize distribution, starting with Ontario. And in March, just before the crisis hit, we announced a similar investment in Quebec, which will start next year . A big investment for us—it’s $800 million for the two provinces, to really add capacity, improve efficiency to serve our stores better and address labour challenges with more automation.

On the retail front, we’re very focused on continuing to invest in our stores, building the right merchandising programs, a lot of it centred on health and wellness. And e-comm—it was already on our strategic priority list, and it’s clearly still there.

COVID-19 aside, what would you say is a big challenge facing grocery?
One of the biggest challenges is to meet the evolving needs of our customers, whether that’s e-comm or brick and mortar. It’s a challenge facing all retail- ers. You need to be ahead of them , but not too far ahead of them; you have to be a little bit ahead and serve where their needs are or where their needs are going. The challenges are not going to change. It’s always been that way. In retail, you have to evolve constantly.