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Trius talks food in Shoppers Drug Mart stores

Loblaw, Sobeys and Metro presidents discuss business at analysts' conference

Merging Loblaw and Shoppers Drug Mart will take about five years but will create a massive and diverse retailer well positioned to cater to Canada’s growing number of city dwellers, seniors and even the online crowd.

That was the assertion of Vicente Trius, president of Loblaw Companies, on Tuesday.

Trius, as well as presidents of Metro and Sobeys, gave presentations to analysts during a conference hosted by ScotiaBank.

Trius said that Loblaw and Shoppers Drug Mart’s breadth of offerings–from food and pharmacy to banking and apparel–would make it unique in Canada. So too will its wide portfolio of store formats, which include supermarkets, drugstores, discount stores and wholesale club outlets across more than 2,350 stores.

READ: What happens when Canada's biggest retailer buys its best?

Loblaw-Shoppers will have “one-on-one” conversations with 15 million Canadians through both companies' loyalty programs, which he noted, represents one in every two Canadians.

Combined, Loblaw and Shoppers are well positioned to compete in the “omni channel,” the term used to describe the shopping experience across bricks and mortar, mobile, the web and all other media.

“I believe that it sets us apart in this marketplace,” he said.

Trius also gave a short outline of how the massive operations of the companies will be integrated, and the potential benefits.

In the near future, he said, Loblaw will announce a team that will lead the integration, including two positions that Trius referred to as the “executive vice-president of integration” and “executive vice-president of speed of change.”

In addition to bringing about an estimated $300 million in synergies between the two companies (which Trius said would take two to three years) the integration team would be responsible for combining the companies’ two cultures.

“This is the piece that usually takes longer,” he said.

Loblaw’s $12.4-billion acquisition of Shoppers Drug Mart was announced in July. It still requires approval by the Competition Bureau.

Trius pointed to Shoppers’ network of smaller stores nestled within urban environments as a key advantage of the deal.

Canadians, he said, are moving back to cities, and with a quarter of the population over 65 within 10 to 12 years, Shoppers’ mix of health and convenience is ideal to serve them.

READ: In quest for loyalty, retailers dig deep into data

But he also hinted at how Loblaw’s food offering might play well in Shoppers' stores.

“When we look at food, we believe that there’s room, and they believe that there’s room, because there are some out-there categories that they could downsize fairly quickly, like for example, photofinishing. That’s one that would allow us to have more room. As you do that, we believe, you can put a more comprehensive offer, leveraging the space in food. To us this means you can buy your breakfast, lunch and dinner when you go to Shoppers.”

Trius explained that a Shoppers Drug Mart customer today might buy one or two convenience food items, but a better food offer could be entice that person to buy three to five items.

Trius, who formerly held top positions for Walmart in Asia, pointed to Japan as a great example of a place where food is expertly merchandised in a convenience setting.

“If you go to Tokyo, being to my mind the best in the world at convenience stores, you’ll find in 150 square metres, (1,600 square feet) can put in as much as 3,000 to 4,000 SKUs.”

Food would also boost traffic to Shoppers stores, which would in turn increase sales in Shoppers’ core categories such as health and beauty.

Interestingly, both Trius and Sobeys CEO Marc Poulin used the same word to describe their recent acquisitions: “transformational.”

READ: Sobeys unveils its new brand positioning with Jamie Oliver

Poulin said Sobeys' June buyout of Canada Safeway is expected to close later this fall and that the integration program is well underway, with regular leadership meetings and very good co-operation of the Safeway team.

Once the deal is done, Sobeys will be become “a leading grocer in Western Canada” and “the leading grocer in the attractive high-growth market of Alberta.” More than 800 stores would fall under the company’s full-service format under banners Sobeys, Safeway, IGA, IGA extra and Thrifty Foods.

Poulin said this larger store base would create critical mass for Sobeys to develop new fresh food programs and become the clear leader in fresh food stores in Canada.

Along with the Safeway acquisition, the grocery chain has lately focused on making changes to the Sobeys banner. Poulin pointed to the just announced partnership with celebrity chef-food advocate Jamie Oliver and the new brand positioning for the Sobeys banner to help customers eat better.

With more 1,500 stores in Canada, we’re not a niche company; we can’t only focus on part of market that will pay a premium for better food, said Poulin. Instead, he said the retailer is committed to finding ways to offer better food at better prices. “Our purpose is to help Canadians eat better at an affordable price.”

Over the past month, Sobeys has been making changes to its offering in Sobeys banner stores across Canada. Later this fall, a new store concept will roll out, said Poulin. At present, Sobeys is working on stores in Western Canada and in Ontario that will showcase its commercial programs.

Montreal-based Metro has not made an acquisition this year, but its president, Eric La Flèche, noted that the retailer has the “financial strength to make” one.

In his presentation to analysts, La Flèche spoke about Metro’s investment in its distribution and store network.

A $50-million dairy and produce warehouse recently opened near Montreal and Metro has consistently invested in store renovations, including the recent opening of the company’s upscale Les 5 Saisons store in Montreal.

VIEW: Tour Les 5 Saisons in Montreal

Metro also recently launched a mobile app and a revamped website, and it struck a deal with Target to put Metro’s Brunet pharmacies into Target's Quebec stores starting next spring.

The company also recently announced plans to restructure its Ontario network, including the conversion of about six conventional Metro stores to the Food Basics banner.

La Flèche said Metro intends to “rejuvenate” the Food Basics banner soon. He did not provide specifics but suggested the company is looking at doing more marketing for the brand, including more store-level signage that emphasizes price.

None of the grocery executives quibbled about the current state of the industry, which they described as having zero price inflation and, in some cases, deflation.

Trius pointed to to high levels of consumer debt, slow economic growth and the growing amount of retail food square footage, which is outpacing population growth, as contributing factors.

He said the amount of food space within stores in Canada is rising at about 3% to 3.5 % now, which is double the rate of population growth.

Much of that growth is being driven by Target, which just this week opened 14 stores, including its first in Ottawa, Quebec and Nova Scotia.

Trius said he expects that square footage growth will start to level off to more normal levels of about 1.6% in the second half of 2014.

Competition in the current environment is tight but not mutually destructive, it seems.

When asked about the impact of a growing number of Walmart Supercentres in Quebec, La Flèche responded that it isn’t “a not-event” but it’s “modest.”

have not started price wars in the Quebec market,” he said. “They are in line with discount pricing.”

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