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Co-op biting off just enough

Financially ready for grocery stores this time

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Doug Wiebe (left) and Gordon Machej in front of the Grant Park Safeway, one of four grocery stores to be taken over by the member-owned co-operative.

PHIL HOSSACK / WINNIPEG FREE PRESS Enlarge Image

Doug Wiebe (left) and Gordon Machej in front of the Grant Park Safeway, one of four grocery stores to be taken over by the member-owned co-operative. Photo Store

If at first you don't succeed, build up another division and give it another shot in 31 years.

Executives at Red River Co-op, soon to be running four new grocery stores, aren't worried about 1983 repeating itself.

That's when the Winnipeg-based co-operative sold off its food stores in the province to stave off bankruptcy. But that was then, and this is now.

Red River is much stronger financially today than it was three decades ago, inflation is much lower, interest rates are negligible and its current retailing system of gas bars, car washes and convenience stores has given back more than $200 million to its members over the last five years.

"It's a very different time for us," said Doug Wiebe, Red River's general manager.

It was that financial strength that allowed it to purchase four Canada Safeway stores -- at 1441 Main St., 77 Vermillion Rd., 850 Dakota St. and 1120 Grant Ave. -- from Sobeys Inc. this week.

'Food is a pretty significant part of the Co-op retailing system across Western Canada, and we saw this as a way to get back into the Winnipeg market in a significant way'

-- Red River Co-op General manager Doug Wiebe

If you want change, look no farther than the co-op's 240,000 members from its gas business, up from just 70,000 seven years ago. Gordon Machej, Red River's president, hopes that group will shift its grocery shopping patterns. He can even provide a little payback as Red River will offer the same loyalty model it does with its gas bars, with profits being funnelled to members through equity and cash back.

"We're certainly hoping we can encourage them to support their co-op in groceries. That's a really good base to start from," Machej said.

But lest anybody think they could strike it rich through grocery purchases, Wiebe was quick to temper expectations.

"We don't want to create any false aspirations. The fuel business is very different than food. The margins on food are lower, so it won't be as lucrative," he said.

Red River had been looking at ways of diversifying its business and the opportunity presented by Sobeys having to sell off some grocery stores after its $5.8-billion purchase of Canada Safeway last summer was too good to pass up, Wiebe said.

"Food is a pretty significant part of the co-op retailing system across Western Canada, and we saw this as a way to get back into the Winnipeg market in a significant way. To build one store at a time was probably not something that would work. To come in with four well-run stores with significant volume is what appealed to us," he said.

Red River will change the stores' signage over this spring, but it will still maintain the same elements Safeway customers have become accustomed to over the years, including fresh produce, a pharmacy, a floral shop and a deli counter. One thing that won't be making the move, however, is the Air Miles program. Safeway has the contract for that, but Wiebe said shoppers can continue to collect Air Miles until the changeover is official.

Wiebe said 450 employees at the four Safeway stores will soon join Red River's payroll.

"They're very solid people that we're happy to have join our team," he said.

Wiebe said Red River will position its grocery business as full service and customer-oriented, in line with what Safeway and Sobeys offer.

"We're not discount," he said.

Red River already owns 31 gas bars in Manitoba and northwestern Ontario. The 32nd is nearly built in Dryden.

Red River will assume a gas bar at the St. Vital Safeway, but the stores in Southdale and Crescentwood are already adjacent to gas stations and the property on Main Street is likely too small to construct a gas bar, Wiebe said.

None of the locations has been outfitted with an in-store Liquor Mart Express kiosk, but Red River's affiliates are familiar with the concept in Alberta and Saskatchewan.

"I think it would be an interest for us if it would work for us," Machej said.

The suitor for the fifth Winnipeg store being sold by Sobeys, the Price Chopper on Pembina Highway, is not part of Red River's plans.

"(The buyer) isn't us. We don't know who it is," Wiebe said.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition February 15, 2014 B1

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