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Post-COVID, Empire's full-service banners have an edge: Medline

The pandemic will have a lasting effect on food consumption and where consumers shop, says CEO
Empire president and CEO Michael Medline

While the gradual return to discount has been a popular topic among grocers these past few months, Empire president and CEO Michael Medline believes the company’s full-service banners are in the best position to help consumers contend with rising food prices.

In their most recent quarterly calls, CEOs from Metro and Loblaw noted a slow and steady return to discount grocery stores as shoppers look for promotions.

In a call with analysts Thursday to discuss its second-quarter results, Medline agreed that the return to discount was near pre-pandemic levels, however, he said sales at its full-service stores (Sobeys, Farm Boy, Longo’s) were keeping their momentum coming out of COVID.

“Where inflation does impact us, our full-service network is in the best position to manage it,” he said. “First, our higher-margin model is more adept at mitigating cost increases, and second, our broader assortment gives value-conscious customers a myriad of substitutions.”

At the start of the pandemic, Canadians favoured one-stop shopping at conventional formats, even if that choice came at a cost. Medline said Canadians were shopping an average of eight food stores a month prior to COVID and during the pandemic that number dropped to one or two. Today, Canadians are shopping five to six stores a month, he said.

“We expect discount will return almost to pre-pandemic levels, but slowly,” said Medline. “In other words, we are not seeing fast significant changes, and in fact, we continue to see a lot of stickiness in our full-service banners.”

Medline said he also expected the eat-at-home trend to continue post-pandemic. “Over the past 22 months, customers have seen and experienced the affordability and convenience in eating at home with their families,” he said. “We believe there is permanence in this shift. We're seeing this is how customers are shopping.”

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Sobeys overhauled its Compliments private-label brand a little over a year ago

Though some of this behaviour is an offshoot of COVID, Medline credited the significant improvements Empire has made to its store network over the past five years. In the second quarter, Empire renovated 45 stores. “We improved our offerings, strengthened our price perception, renovated our stores, to deliver an exceptional in-store experience,” he said.

Sobeys’ Compliments private-label brand has also been a beneficiary of inflationary pressures, giving shoppers the opportunity to save on money, but not compromise on quality, said Medline. Pierre St-Laurent, executive vice-president and chief operating officer, full service for Sobeys, said the overhaul of its private-label brand just over a year ago couldn’t have happened at a better time.

“We're seeing our penetration growing period after a period, which is a good sign for how it's accepted by our customer … And it's really good for our financials because we strongly believe that it's a good margin generator for us.”

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