Retailers talk shop at CIBC retail and consumer conference

3/28/2013

Target, conventional upgrades and discount were top of mind for retailers presenting at the CIBC Retail and Consumer Conference in Toronto on March 28.

Here’s a rundown of each retailer presentation.

Shoppers Drug Mart

Shoppers president and CEO Domenic Pilla said that the company’s growth strategy is being driven by three core pillars: health, beauty and convenience.

“It isn’t one plus one plus one equals three–it’s greater than three,” he told analysts.

Pilla said that Shoppers has maintained a “prudent” balance sheet, growing the business not through acquisition but by investing capital in expanding existing stores, adding new features such as its beauty boutique offering.

Pilla said that future front-store growth for the company would be fueled by several factors, including a renewed emphasis on health for its private-label Life brand.  “Life is going be about get well and stay well, and we think we have an opportunity to significantly increase the penetration on the over-the-counter side of the business,” he said.

Shoppers also plans to add a mobile platform for its Optimum loyalty card, which Pilla said will enable the company to capture more customer data and create more individually tailored offers to its customers.

“The single biggest reason that our customers don’t scan is not because they don’t have the card, it’s because they don’t have it with them,” he said. Almost 70 per cent of customers walk into a Shoppers store carrying a smartphone, he said.

While acknowledging that the company is in “turbulent waters” because of ongoing factors like provincial drug reforms, Pilla told the conference that his company has the “best boat” – asset mix, employees, etc. – to successfully navigate the challenges.

Empire Co. (Sobeys)

Sobeys executives say that Target’s recent arrival in Canada does not pose a significant challenge to its traditional full-service grocery business.

Sobeys chief financial officer Paul Jewer said that while Target does present another grocery option for Canadians, its primary focus on dry goods means it is not a viable alternative to full-service stores like Sobeys.

“We believe our differentiated food offering will allow us to continue to convince customers that, although there are opportunities to serve parts of their grocery needs at other players, if you are looking to do a full grocery shop in this country, we are still the best full-service provide,” said Jewer.

Jewer predicted that Target would actually drive additional traffic to Sobeys stores in areas where the two are in close proximity. Sobeys also has an arrangement in place to supply Target stores with selected food items.

Empire also continues to strengthen its grocery operation with the ongoing conversion of its Ontario-based discount banner Price Chopper to FreshCo, which CIBC World Markets managing director Perry Caicco referred to as one of the “most remarkable banner changes” in the grocery industry.



The company has converted approximately 76 Price Chopper stores to FreshCo, with plans to convert the remaining seven stores before the end of the current fiscal year.

FreshCo also represents Empire’s “primary thrust” in the growing ethnic food market, said Jewer. In addition to a dedicated ethnic section in each store, the banner has also experimented with partnering with third-party suppliers on meats and seafoods. “We’re pleased thus far with the results of that activity,” said Jewer.

Jewer said that Empire would continue to focus on serving Canada’s multiple ethnic communities, but ruled out the launch of a dedicated ethnic banner or format.

“People talk about one offer to serve the ethnic community, but there are multiple communities that need to be served and all have different needs,” he said. “Our focus is going to be on trying to make sure that on a store-by-store basis, we meet the needs of whatever the particular ethnic community is in that market.”

Target Canada



Target chief financial officer, John Mulligan, tipped his hat to Canadian grocers at Thursday's event, describing them a "very, very strong operators." They're “stronger,” in fact, than grocery operators in the U.S.

Because of this "robust" competition, Mulligan said Target's team determined they needed to focus on “the things we do well,” as they planned their first international expansion. That meant focusing on their brand promise: Expect More, Pay Less.

According to the CFO, food has been critical to the company’s U.S. business “because it drives frequency.”

Here in Canada, grocery is important for those “convenience trips.” Which may be why they are “blowing out of milk” in Canadian stores.

In fact, picked-over shelves has become an issue for Canadian Target, with consumers taking to social media to express their frustrations.

Though Mulligan didn't directly address complaints about understocked stores, he noted that stores are so busy, "it's been like boxing day, all day. It's a great problem to have, having more customers than expected."

The CFO also discussed the $10 to $11 million spent per store on upgrades. He said he’s often asked how Target could have possibly spent all those millions on renovations.

His response: the company is gutting many of their stores, and renovating the facility’s exteriors to “make them feel like they are part of the communities in which they operate.”

Metro Inc.

Target hasn’t yet officially opened in Canada, but Metro says it can already feel the discount giant’s impact – and it’s not always bad.

President and CEO Eric La Fleche noted that a few of his stores located near Target outlets have “lost a bit of grocery sales,” since Target’s soft launch. But at other stores, sales have actually gone up.

La Fleche explained that, thanks to “Mr. Target’s” debut and Walmart’s Supercentre rollout, Metro is keenly focused on discount growth in the Canadian market. “It’s accelerated in the last year,” he said. So Metro will continue to open discount grocery stores in Quebec, and it’s looking at “selectively” adding a few Food Basics in Ontario.

La Fleche also said his company is focused on the “conventional store upgrade” trend. “We have to raise the game and be a better store,” he noted.

To that end, Metro will focus on customer experience, do some store renovations, and pick up their produce game. “Doing better in produce than we used to, and we have to keep improving.”

When it comes to health and wellness section, Metro’s La Fleche said it isn’t a trend, “it’s a fact," with the company is adding more and more organic to its stores, and ensuring its private label is focused on health.

Loblaw

In a wide ranging discussion, Loblaw Companies' chief financial officer, Sarah Davis, discussed the grocer's plans to renovate stores, complete it's long-running information technology upgrades, as well as grow sales in non-food categories like apparel and mobile.

Davis said Loblaw is "on track" with its SAP implementation. A pilot project was done in one store and distribution centre in December, with Davis saying that company executives were "modestly happy" with the results. Three stores are now on SAP and Loblaw aims to start a more extensive rollout of the program in April. The plan, she said, is to put 10 to 12 stores a week on SAP.

Loblaw expects to increase its retail square footage by about one per cent this year, primarily adding smaller stores this year than larger ones. "We're following demographics," Davis said, referring to plans to open stores in fast-growing areas such around Calgary.

The retailer's store renovation list, meanwhile, includes several Superstores in Western Canada, as well as some Loblaws and Provigo stores in Quebec.

Davis also touched on Loblaw's deal to sell its Joe Fresh clothing line in J.C. Penney stores in the United States, as well as the installation of mobile phone kiosks in its Canadian grocery stores.

The phone initiative started last year and is now in 165 stores. Davis said the scheme makes sense because it targets the typical 40-something mom shopper who isn't only looking for a phone plan for herself, but also for her tween and teenage children as well.

As for Joe Fresh, the line is now in 640 J.C. Penney stores, which Davis said has allowed Joe Fresh to doubled the volume of its ladies apparel business. "The sales are coming in stronger than we predicted," she said.

Like other retail executives appearing at the CIBC conference Thursday, Davis addressed the big red bull's-eye in the room: Target.

She said Loblaw has not been adversely affected byTarget stores yet. On the day Target's Milton, Ont. store opened in March (on a Tuesday) the nearby Loblaw-owned Real Canadian Superstore was as busy as it normally would have been on any given Tuesday, she pointed out.

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