We look at the growth priorities for the four major grocery retailers in Canada over the next 12 months, as they focus on topline growth against a backdrop of increasing cost headwinds.
Loblaw: loyalty and digital initiatives
Loblaw’s activities in 2018, particularly in the first half of the year, will be shaped by the flurry of announcements which were made over the last two months. Its most significant initiative will be the launch of PC Optimum, its new loyalty program. This will go live on February 1, as it combines its existing grocery and drugstore loyalty programs, PC Plus and Shoppers Optimum. This will provide the retailer with the opportunity to further personalise and target its offers as it better understands shopper behaviour across all its physical formats and digital platforms.
The retailer has also recently started to pilot PC Insiders, a fee-based subscription program. This offers a range of perks to its most loyal customers, including free online delivery for its non-food websites and free pickup for its grocery click and collect service. This has been developed to reward customers that shop across a range of the retailer’s brands, both in-store and online, and will initially be available to its most loyal shoppers. Like Amazon Prime, PC Insiders aims to optimise the retailer’s ecosystem, offering benefits which incorporate its physical and online stores, financial services, travel services and private brands. This will be expanded over the next 12 months to additional customer groups.
The retailer has also recently launched a new grocery ecommerce delivery service in partnership with Instacart. This will be rolled-out to additional markets during 2018.
Source: IGD Research
Sobeys: securing the turnaround
Although it remains early days, Sobeys’ turnaround plan, Project Sunrise, is staring to deliver positive results. With the first phase complete, the retailer will focus on building on its early success, with work underway to improve its brand and customer understanding, with a view to making a more emotional connection with its shoppers.
Having undertaken a major restructuring of the business, which saw around 800 positions eliminated, Sobeys will also have to focus on embedding this new structure. New tools and processes have been introduced, and a significant amount of upskilling and retraining is underway. The scale of change underway undoubtedly carries with it some element of execution risk.
One of the most significant elements of this will be the launch of its discount format, FreshCo, in Western Canada. To launch the format this year, the business will start converting up to 25% of the its 255 Safeway and Sobeys full service format stores in Western Canada. It plans to start out slowly before aggressively ramping up, aiming to convert all the identified stores within four years of converting the first stores. Each conversion will cost around $4m, which will also include some element of downsizing to fit the smaller-format stores which are planned. Most of the conversions will be former Safeway stores, and will be operated on a franchised basis.
Metro: optimising acquisitions and investments
Metro delivered another solid performance in 2017. The retailer continues to be one of the most consistent performers in the sector in terms of delivering sales and profit growth. The main priority for the business will be completing the acquisition of Jean Coutu and delivering its integration plan.
The retailer announced plans to acquire the business in a $4.5bn deal last October. Following the closing of the transaction, Metro’s existing pharmacy distribution and franchising businesses will be combined with those of Jean Coutu. The combined business will have an overall network of more than 1,300 stores in Canada, including 677 drugstores. This deal deepens Metro’s presence in the healthcare sector, enabling it to capitalise on key demographics and lifestyle trends.
Metro will also be focusing on optimising its strategic investment in Miss Fresh, a leading meal kits company. Since taking a majority interest in the business last August, Metro has made its customers accessible to Miss Fresh, while customers can also pickup pre-ordered kits in the retailer’s stores. Several stores are also piloting the sale of the kits alongside the in-store prepared foods offer. As part of it broader ecommerce offer, Metro will also expand its online operations into Ontario this year.
Walmart: digital and physical developments
Ecommerce will also be a major area of focus for Walmart in Canada. It will continue to roll-out its grocery ecommerce pickup service to additional locations while also building out its recently launched online marketplace; the retailer has added products from over 30 trusted, third-party sellers to Walmart.ca. Categories covered include home, baby, apparel, toys and sporting goods. This has quadrupled the number of products available through the platform. Plans are in place to invite other sellers to join the site, including those currently selling through its Walmart US marketplace.
With limited plans to open new stores this year, the retailer will continue to invest in remodelling its existing stores. With over 400 stores across Canada, the opportunities for further network expansion through its current format are relatively limited. Following the development of a new concept Supercentre in 2016, it continues to refine the format as it is rolled-out to additional locations. This features enhanced fresh food ranges, a stronger price and value proposition and upgraded clothing, beauty and toys departments. This represents a bold, new proposition for the retailer, but one which will enable it to further differentiate as the market continues to polarise towards discount and fresh-led formats.
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Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on the market. He is also responsible for shaping IGD's research program across North America.
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