Why Sobeys is grounding Air Miles

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This article was published 23/06/2022 (1277 days ago), so information in it may no longer be current.

Sobeys recently decided to dump Air Miles and start its own loyalty program. Empire Co. Ltd., Sobeys’ parent company, is joining the Bank of Nova Scotia and Cineplex as co-owners of the Scene+ program.

This move by Sobeys is no coincidence. As we brace for higher food prices and cope with a post-COVID-19 workforce still trying to figure things out, loyalty will probably be the next major battleground for Canadian grocers.

The Scene+ program at Sobeys will start in Atlantic Canada in a few months, and the cross-country rollout will be done by early 2023. The partnership with Air Miles will officially end soon after.

That’s fast.

Most Sobeys-owned stores, including its online service Voilà, will have the Scene+ program. Given how the market is changing, this move was critical and perhaps long overdue.

Since March 2020, 26 per cent of Canadians have switched the primary location where they regularly buy food, according to a recent poll by Angus Reid.

Having more people working from home has triggered behavioural changes in grocery shopping. With food inflation at 10 per cent, consumers are either trading down or changing shopping habits almost weekly. With higher food prices, everything is negotiable.

Where people buy food and what they buy is constantly changing. So keeping customers engaged with brands and stores is going to be challenging over the next several years. That’s coupled with the fact that younger people are rarely dedicated to brands or stores.

That means encouraging consumer loyalty is a bigger issue now than ever. Sobeys’ quick rollout will serve the company well, since it needed a better loyalty program.

PC Optimum is by far the most popular program in Canada related to food sales. More than 63 per cent of Canadians use the Loblaws program, followed by Air Miles at only 18.3 per cent, according to a recent survey by Caddle. The current Scene program is sixth on the list: just 1.9 per cent of Canadians use it.

The gap between PC Optimum and the rest of the field is enormous.

While 58 per cent of Canadians use loyalty programs at the grocery store every week, 73 per cent of us are influenced by what kinds of benefits these programs offer. With few promotions at the grocery store and prices rising, Canadians need any help they can get. Food prices aren’t about to drop any time soon.

Air Miles is a versatile loyalty program used by many retailers. But for Sobeys, it became an invisible advantage few really cared about. Sobeys never really had control over it. With the high number of miles you could collect, the program became confusing for members and retailers.

But the fact Metro, one of Sobeys’ main competitors in Eastern Canada, also had a deal with Air Miles was becoming increasingly awkward in an era in which getting customers back, and back again, is challenging. The market just isn’t the same as it was in 2020 when the pandemic started. Consumers are economically challenged in many ways, and a strong loyalty program can allow Sobeys to empathize with a struggling public.

With higher prices and an acute focus on private labels, Loblaws and its PC Optimum program clearly have an advantage Sobeys wanted to address. While Sobeys is getting its private-label act together, it also needs a program to push its brands such as Compliments and Panache. Loblaws’ private labelling strategy, along with President’s Choice and No Name, left the competition in the dust.

Only time will tell what the program will look like and how it will encourage consumers to shop more often at Sobeys. But seeing Empire/Sobeys, a Nova Scotia-based company, partner with the Bank of Nova Scotia was anything but a surprise.

Even if Scene doesn’t have the clout of PC Optimum, it has the potential to do well. Scene has 10 million members, but the brand’s awareness is lacklustre and few use the points. Sobeys’ network could change that. It also needs a unique name to make it Sobeys’.

For Sobeys, working with Air Miles was like rowing against the current. Sobeys was likely just waiting for its contractual obligations to end so it could adopt a program it can better control.

Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

— Troy Media