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Following the appointment of Jeremy Pee to the new role of Chief Digital & Data Officer at UK-based M&S, Herman Paek is to take the lead role at Loblaw Digital.

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As Loblaw reports its Q2 sales for 2018, we look at the ways in which the retailer is strengthening its business for the future.

Solid Q2 results

Total revenue fell by 1.4% to $10.9bn, however, retail sales grew by 1.0% during the quarter (excluding the impact of disposal of gas operations) to $10.6bn. Breaking this out further, food retail same-store sales grew by 0.8% and drug retail same-store sales by 1.7%. Within drug store sales, the pharmacy sales grew by 0.3%, with the front store sales growing by 3.0%. The impact of minimum wage increases and healthcare reforms continue to impact on margins, and are expected to negatively impact 2018 performance. However, Loblaw plans to invest $1.3bn in capital expenditure during the year, $1bn of which will be in the retail segment. This will help it to protect itself in the very competitive environment.

Embedding its strategic vision

Loblaw aims to use data driven insights to deliver the best for its customers in food, health and beauty, underpinning this with process and efficiency excellence. Less than six months after launching the new PC Optimum loyalty programme, it has 13.5 million members and continues to be expanded. In its Shoppers business, it is increasing the focus on service and has added enhanced food areas to 20 stores during the quarter, with 68 stores now having this offer. It aims to expand this to 100 stores by the year end. In stores with this offer, more than 25% of transactions now include a fresh item.

Digital progress

Loblaw has been focusing on reducing costs, improving processes and efficiency, as well as expanding its digital presence. It is investing in IT to help achieve its digital strategy and is seeing increased usage of its self checkouts, after investing in improving the software. Self checkouts were also added to 58 more Shopper stores during the quarter and are now available in more than 350 stores. Loblaw is also increasing its online operations, with a mass beauty proposition launched online for Shoppers Drug Mart in the last couple of weeks.  Click & Collect has been rolled out to more than 500 locations and it continues to rollout PC Express and expand the home delivery partnership with Instacart. As convenience continues to grow in importance for shoppers, these initiatives help to position the business well for the future.

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As we move firmly into the second half of the year, we round up the best retail/food-to-go fusion formats we’ve seen so far this year, and highlight a couple we are looking forward to seeing in H2.

Fresh the Good Food Market, Camden St, Dublin

This store lives and breathes food-to-go. The run of counters down one side of the store is a common feature in Fresh stores, and helps demonstrate the quality, breadth of range, the freshness and the customer service that underpin this model. In-store production is a key feature of the format, which majors on food-for-today missions, supported by an impressive off licence area. Rotating daily specials, themed around particular cuisines, are a great way to encourage repeat missions, while we’ve also been impressed at how they’ve brought local donut specialist Offbeat into this store, and fitted the offer neatly alongside their own barista and bakery offer.

Source: IGD research

Jumbo Foodmarkt, Leidsche Rijn, Utrecht

Marriages between retail and fooodservice concepts don’t always work, but this one, between Jumbo and the La Place business it recently acquired, feels one that is designed to go on to great things. The concept fuses foodservice and retail brilliantly, with an abundance of food-for-now counters covering burritos, burgers and poke, as well as many traditional favourites. The seating area sits nicely alongside the foodservice area, and contains within it a demonstration kitchen, helping Jumbo take their customers’ love of and appreciation for food a step further.

Source: IGD research

Loblaws, Maple Leaf Gardens, Toronto

Despite opening almost seven years ago, this remains one of the freshest and most relevant stores in Canada. The food hall remains the hub of the concept, offering an extensive range of prepared foods, developed in-house by executive chef, Mark Russell. Located on a mezzanine floor, its open to view kitchen is a hive of activity, crafting a range of unique products, including its own gelato. A new President's Choice demonstration kitchen is a recent addition, enabling the retailer to showcase the latest recipes and its private label credentials. We recently went back to the store and were impressed at how relevant and forward thinking it still looks. A must-see on any visit to Toronto.

Source: IGD research

Roche Bros, Boston

This is one of the best urban-focused supermarkets in the US. Incorporating a street-level food-to-go area, which brings to life time-of-day merchandising, the basement level supermarket has developed a range of prepared food options to capitalise on the high traffic its central location and direct transit links. This includes a custom salad bar and extensive grab-and-go ranges, alongside evening meal solutions. A new wine bar is a recent addition to this store, which like the Loblaws store, is well-established but retains its appeal as a source of inspiration for anyone interested in future formats.

Source: IGD research

Deli de Luca, Oslo

Operated as a division of Norway’s leading retailer Norgesgruppen, the Deli de Luca concept has long been a favourite of ours, thorough its focus on delivering a range of quality food-for-now solutions in high footfall locations. It’s been on a journey recently – literally – as the format has been rolled out to Esso forecourts across the country. Now the core format is getting a rebirth, with the central Oslo store on  Karl Johans Gata, among the first to get the new look and feel. This is high on our hit list for H2.

Source: Deli de Luca

Woolworths Metro, Pitt Street, Sydney

This store is another that has recently opened and looks to be significantly furthering the Australian retailer's credentials in food-to-go. It's an urban supermarket format, but led by coffee, with a barista counter complemented by a range of food options on entry to the store. There's an extensive hot food offer, as well as sushi and poke bars. Woolworths sees this store as potentially being used by customers up to three times per day, given the breadth of missions it serves.

Meinhardt Fine Foods, North Vancouver

First and foremost, these are great stores that do a fantastic job at showcasing fresh, whether it be in produce or in the extensive array of bakery and prepared food solutions. Its latest North Vancouver store promises to take this on a step further. A definite premium skew to the offer, with the retailer for example priding itself on its range of olive oils, and one to add to a collection of great retail / food to go fusion concepts on the West Coast of North America.

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By 2025, Loblaw is to spend $150m more each year with Canadian farmers, buying local fresh produce that otherwise would have been imported.

Extending the Canadian growing season

Given the relatively short growing season and climate conditions in Canada, many fresh produce products must be imported. As part of this program, Loblaw will work with local farmers to develop innovative growing techniques or plant non-traditional crops. This will help to extend the growing season and enable the retailer to use its “Grown in Canada” label for items which are typically imported.

Source: IGD Research

Growing multicultural products in Canada

Loblaw works with around 300 Canadian growers. This enables around half of all produce in its stores to be Canadian-grown in season. Over recent years it has worked with its famers to grow multicultural products such as bok choy, long eggplant, methi leaf, napa cabbage and okra. Previously these were imported from Mexico, Dominican Republic and Central America. The retailer is also working with Canadian indoor farmers and greenhouses to ensure the supply of fresh produce that would otherwise be out-of-season or imported from warmer climates for most of the year.

Improving freshness and shelf-life

These kinds of programs help to deliver several benefits. As a Canadian company, sourcing within country will resonate with shoppers, particularly given the strong demand for local products. Shoppers will also benefit from improved freshness and shelf-life, through shorter lead times. The initiative will also support Loblaw to reduce food waste and the carbon footprint generated by international shipments.

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Almost seven years after it first opened, we revisited the flagship Loblaws Maple Leaf Gardens in Toronto to see why this store remains a source of inspiration for global retailers.
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