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We review Loblaw’s fourth quarter performance and the outlook for the year ahead.

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Loblaw has launched its new loyalty program, PC Optimum, combining its previous Shoppers Optimum and PC Plus loyalty programs.

A platform for cross-promotions and events across its assets

The new program is accessible through a single card or app, enabling members to earn and redeem loyalty points across Loblaw's network of stores and its ecommerce sites. This creates a more seamless experience for Loblaw’s customers as they move across its various physical formats and digital platforms, while providing the retailer with a platform to run promotions and events across all of these.

Source: IGD Research 

Ability to create personalised offers

The previous programs, PC Plus and Shoppers Optimum, had 8m and 11m members respectively, are were among the leading loyalty programs in Canada. The new PC Optimum program features elements of both, including weekly personalised offers, the ability to redeem points for almost any products, and points-earning and points redemption events. Personalised offers are an important element, providing Loblaw with the ability to create a customised experience for each shopper.

Builds on launch of PC Insiders program

The launch of PC Optimum builds on its new pilot program, PC Insiders. This is a fee-based subscription program which offers a range of perks to its most loyal customers. These include free online delivery for its non-food websites, free pickup for its grocery click and collect service and 20% back in PC points on family essentials including diapers, infant formula, and all PC Organics products. The digital, loyalty-based program is initially targeted towards PC Plus loyalty members who are also President's Choice Financial Mastercard cardholders. Following an initial launch in British Columbia and Ontario, the program is expected to be expanded out more widely this year to PC Optimum members.

Locking-in shopper loyalty across Loblaw’s ecosystem

Undoubtedly comparisons will be made with Amazon’s Prime membership program. 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. The benefit of a fee-based subscription program is that it helps to lock in shopper loyalty, and limit cross-shopping across other online services. This is likely to help drive higher spending at Loblaw among members of the program.

Learn more about Loblaw and the leading retail trends by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Loblaw. He is also responsible for shaping IGD's research program across North America. Contact Stewart at stewart.samuel@igd.com for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

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.

Learn more about the Canadian grocery marketplace and leading trends by signing up to our free newsletter here 

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.

Contact Stewart at stewart.samuel@igd.com to see how you can access our unique insights on the region's markets, channels and retailers. 

Loblaw is piloting a fee-based subscription program, PC Insiders, offering 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.

Targeting most loyal shoppers

PC Insiders has been developed to reward customers that shop across a range of the retailer’s brands, both in-store and online. The digital, loyalty-based program is initially targeted towards PC Plus loyalty members who are also President's Choice Financial Mastercard cardholders. Initially it is available in British Columbia and Ontario, although the program is expected to be expanded out more widely in 2018 to members of its new loyalty program, PC Optimum.

Offering broad range of benefits

For a $9.99 monthly fee, or $99 a year, members will receive the following benefits when using their PC Financial Mastercard:

  • 20% back in PC points on family essentials including diapers, infant formula, and all PC Organics products in-store and online
  • 20% back in PC points on all Joe Fresh products in-store and online at joefresh.com
  • 20x the PC points every day when customers shop online at beautyboutique.ca
  • Free Click & Collect pick-up service at nearly 200 locations
  • Free shipping on all beautyboutique.ca and joefresh.com purchase
  • $99 PC travel credit once a year when booking a trip on pctravel.ca

Optimising Loblaw’s ecosystem

Undoubtedly comparisons will be made with Amazon’s Prime membership program. 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. Offering a 20% discount off PC Organics products takes Loblaw into more direct, head-to-head, competition with Whole Foods Market’s 365 Everyday Value private brand range which Amazon has recently started to sell.

Building a leadership position at the intersection of loyalty and online

The benefit of a fee-based subscription program is that it helps to lock in shopper loyalty, and limit cross-shopping across other online services. This is likely to help drive higher spending at Loblaw among members of the program. This latest pilot follows on from recent announcements to launch a new loyalty program, PC Optimum, and to offer grocery home delivery in partnership with Instacart. The intersection of loyalty and online is an area where Loblaw is aiming to build a leadership position; expect to see more innovation from the retailer over the next 12 months as it positions the business against the backdrop of a fast-changing trading environment.

Learn more about Loblaw and its latest initiatives by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Loblaw. He is also responsible for shaping IGD's research program across North America. Contact Stewart at stewart.samuel@igd.com for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

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