Winnipeg Free Press - PRINT EDITION

Sobey clan to alter city market

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The Sobeys grocery store on Taylor Avenue.

JOE BRYKSA / WINNIPEG FREE PRESS ARCHIVES Enlarge Image

The Sobeys grocery store on Taylor Avenue. Photo Store

Winnipeg shoppers are likely to see subtle, gradual changes as their Safeway stores become Sobeys stores. Through their Empire Company Limited corporate umbrella, the Sobeys last week bought the Canadian assets of Safeway Inc. for $5.8 billion to become the top grocer in Western Canada.

The Sobey family distinguishes different market segments among grocery shoppers -- convenience, fresh-food, full-service, discount and others -- and brands its stores accordingly. Like Safeway, Empire relies on tight central direction, plenty of staff training, abundant digital data from loyalty programs to detect opportunities. Unlike Safeway, Empire differentiates the discount market, the high-end market, the freshness market, and the convenience market and the ethnic market. Safeway stores may gradually be re-branded to cater to the different types of shoppers the new owner discovers in the consumer data.

The Sobey family has been a player in the grocery market of Manitoba, Saskatchewan, Alberta and B.C. for many years. Through its Sobeys, IGA, FreshCo, Foodland, Thrifty Foods, Needs and Lawtons Drugs brands, it already had 32 stores in Manitoba, 15 in Saskatchewan, 141 in Alberta and 32 in B.C.

Now, in one stroke, the family has picked up another 23 stores in Winnipeg -- making it the boss grocer in this market -- and 213 in all of Canada along with central administration, dairies, bakeries and a warehousing and distribution network heavily weighted to Western Canada. Empire reported sales of $16.2 billion in 2012. With the addition of Canada Safeway's $6.7 billion in annual sales, Empire should now be a $23-billion company.

Even though Empire is a publicly traded company, the Sobey family is clearly in charge. Paul D. Sobey, president and chief executive officer, is backed by a board of directors that also includes David F. Sobey, Frank C. Sobey (the firms's real estate chief), John R. Sobey, Karl R. Sobey and Robert G.C. Sobey. Non-voting Class A shares trade in the market. The family holds the Class B voting shares. Family members can sell Class B shares within the family without offering equivalent terms to holders of Class A shares. Robert P. Dexter, a leading Halifax lawyer, is chairman of the board. As long as the Sobey family agree among themselves, the firm will enjoy unity of purpose at the top.

The firm last year offered its distribution network to the Target chain, whose entry into the Canadian retail market has alarmed apparel and grocery merchants across the country. Other chains may be victims of Target -- Empire will be its supplier. Empire may now be in a position to offer the Safeway warehouses and trucks in B.C. and the Prairies to supply Target grocery departments.

The firm aims to use technology to keep abreast of consumer tastes and preferences. The firm announced last year a plan to provide digital data, including the fishing captain's logbook, along with the fish it sells so that consumers can see for themselves when and where the fish was landed and whether it was caught through sustainable methods.

The grocery business never grows much but it grows most of the time. Families don't need a new car or a new flat-screen TV every year but they need vegetables and cleaning products every week in pretty predictable quantities. From 2001 to 2010, by Statistics Canada's estimate of July 2012, sales of all Canada's grocery stores rose at an annual rate of 4.1 per cent. Grocers' costs outstripped their prices in those years, however, so that net revenues of all the country's grocers shrank to $1.9 billion in 2010 from $2.8 billion in 2001. Grocery chains improved their market share to 57.3 per cent of the market in 2010 from 54.8 per cent in 2001.

The share available to non-chain grocers shrank accordingly, but the surviving independents still give the chains stiff competition in price and service.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition June 19, 2013 A8

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Updated on Wednesday, June 19, 2013 at 7:15 AM CDT: fixes headline, replaces photo

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