Why Sobeys is expanding its Farm Boy business

Stewart Samuel
Program Director - Canada
@RetailAnalysis

Date : 11 December 2019

As the retailer announces plans to open 10 additional stores in Ontario over the next two years, we look at what makes this a powerful format for the retailer.

Driving growth in urban locations

Sobeys acquired Farm Boy last December in a deal designed to help Sobeys drive its penetration in urban locations. At the time, Ottawa-based Farm Boy operated 26 stores. It was a great acquisition for Sobeys, aligning well with its food focused strategy. There are several factors driving Farm Boy’s growth under Sobeys’ ownership including its ability to bring something different to the market, win new shopping occasions and support the growth of its ecommerce business.

Source: IGD Research

Winning new customers

Although Sobeys operates its own urban formats, including Urban Fresh, there is nothing quite like Farm Boy in the retailer’s portfolio. Described as a hybrid of Trader Joe’s and Whole Foods Market, it has carved out a niche positioning in the Canadian market, building a compelling brand which has resonated with consumers. Stores are around 25-30,000 sq ft, smaller than most conventional supermarkets in Canada.

Around 70% of the store space at Farm Boy is dedicated to fresh and prepared foods, with an emphasis on natural, organics, speciality and healthier products. This approach, and the contrast with the existing portfolio, enables Sobeys to attract new customer groups.

Capturing new meal occasions

A key point of difference for Farm Boy is its prepared foods offer. Operated as the Farm Boy Kitchen, this typically offers hot food counters, fresh salad bars, sushi and pizza. This enables the retailer to capture consumers on food-to-go and food-for now missions. The offer is much broader than that most conventional supermarket operators, although this is the direction that several are heading in.

Source: IGD Research

Aligning with its format-driven growth strategy

At the time of the acquisition, Sobeys announced its intention to double the size of the Farm Boy business. Expansion over the next two years will take it closer to achieving this goal, with 37 stores expected to be trading by then end of 2020. Five of the new stores will be in the Toronto market, an area Sobeys is aiming to win in through the Farm Boy format. This fits into Sobeys’ broader format-driven growth strategy. Alongside Farm Boy, it is expanding its FreshCo discount format in western Canada and getting ready to launch its ecommerce service in Ontario.

Source: IGD Research

Supporting Sobeys’ ecommerce launch

The Farm Boy brand is expected to play a major role in the launch of this ecommerce operation next spring. The retailer has partnered with Ocado to launch its Voilà by Sobeys service. Farm Boy, where around 60% of the range is private label, has developed a unique product offer which is expected to be made available through the online service. This will help increase its appeal, especially in catchments where the Farm Boy brand is already established.

 

Source: IGD Research

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