Why Sobeys had to dump Air Miles

Sobeys recently decided to dump Air Miles and start its own loyalty program. Empire, Sobeys parent company, is opting to join the Bank of Nova Scotia and Cineplex as co-owner of the Scene+ program. This latest move by Sobeys is no coincidence. As we brace for higher food prices and cope with a post-COVID workforce still trying to figure things out, loyalty will probably be the next major battle ground for Canadian grocers.

The Scene+ program at Sobeys will start in Atlantic Canada in a few months, and the cross-country rollout will end by early 2023. The partnership with Air Miles will officially end soon after. That’s fast. Most Sobeys-owned stores, including its online service Voilà will have the program. Given how the market is changing right now, this move was critical and perhaps long overdue.

Since March 2020, 26% of Canadians have switched the primary location where they purchase food on a regular basis, according to a recent poll by Angus Reid. Many have moved or have opted to change their grocery shopping location for one reason or another. Having more people working from home has also triggered behavioural changes where grocery shopping is concerned. And with food inflation at 10% these days, consumers are either trading down or changing food shopping habits almost weekly. With higher food prices, everything is negotiable. Where people buy food, and what they buy is constantly changing these days, and keeping customers engaged with brands and stores is going to be challenging over the next several years. Coupled with the fact younger consumers are rarely keen on being dedicated to any brands or stores these days, consumers need to be hardwired to become loyal, more than ever.

Sobeys quick rollout will serve the company well, as it needed a better loyalty program. PC Optimum is, by far, the most popular program where foods are involved. More than 63% of Canadians use the PC Optimum program, followed by Air Miles at only 18.3%, according to a recent survey by Caddle. Interestingly, the current Scene program is sixth on the list, at a measly 1.9%. The gap between PC Optimum and the rest of the field is enormous. What’s more important, while 58% of Canadians use loyalty programs at the grocery store every week, 73% of us are influenced by what kinds of benefits these programs can offer us.

With few promotions going on at the grocery store and higher prices, Canadians will seek any help they can get. And food prices aren’t about to drop anytime soon.

Air Miles is a versatile loyalty program used by many retailers. But for Sobeys, it became just an invisible advantage few really cared about. Sobeys never really had control over it. With the high number of miles you could collect, the program became confusing for both members and retailers, including Sobeys. But knowing that Metro, one of Sobeys’ main competitors in Eastern Canada, also had a deal with Air Miles was becoming increasingly awkward in an era in which getting customers back, and back again, will be challenging. The market is just not the same as it was in 2020 when the pandemic started. Consumers are now economically challenged in many ways and a strong loyalty program can allow Sobeys to empathize with a struggling public.

With higher prices and an acute focus on private labels, Loblaw, with its PC Optimum program, clearly has an advantage Sobeys wanted to address. While Sobeys is getting its “private label” act together, it also needs a program to push its own brands like Compliments and Panache. Loblaw’s private label strategy, with President’s Choice and No Name, has left the competition in the dust.

Only time will tell as to what the program will look like and how it will get consumers to buy more often at Sobeys. But seeing Empire/Sobeys, a Nova Scotia-based company partner with the Bank of Nova Scotia was anything but a surprise. Even if Scene doesn’t have the clout of a PC Optimum program, it has the potential to do well. Scene has 10 million members, but the awareness of the brand is frankly lacklustre and few use points. Sobeys’ network could change that. It also needs a unique name, a different one, to make it Sobeys’ own.

Regardless, for Sobeys, working with Air Miles was like rowing against the current. Sobeys was likely just waiting for its contractual obligations to end, so it could move on to bolster a program it can better control.