There will be no easy or quick road back to profitability for Sobeys — and, therefore, for its Sobey-family-owned parent, Empire Company Ltd. In fact, Empire’s results for the first quarter of this year continued last year’s downward unravel: sales down another one per cent, profit off 40 per cent. In September, Empire’s long-time board chair, Halifax lawyer and businessman Rob Dexter, surprised attendees at the company’s annual general meeting in New Glasgow’s Empire Theatre with the news he was stepping down after 12 years. He explained simply that “the timing is right,” but it would be hard for outside observers not to read more into this latest changing of the corporate guard.
The reality that Sobeys has weathered storms in the past is no guarantee it can do so again. “It’s a very different situation today than it was in 2000 when Bill McEwan took over,” Sylvain Charlebois tells me.
The grocery marketplace has changed, is changing, and will continue to change… faster and faster.
For the first eight decades of its first century in business, Sobeys was a member in good standing of a genteel gentlemen’s club of grocery retailers who had divvied up the country into a series of never-the-twain-shall-meet regional empires. Sobeys owned the Maritimes and Newfoundland while Metro carved out Quebec, Loblaws and A&P divided Ontario and Safeway patrolled the western provinces. That changed in the 1990s when an aggressive Loblaws pushed into the Maritimes, gobbling up Sobeys’ smaller rival, Boland’s-IGA, and challenging Sobeys, then acquired Provigo in Quebec, upsetting Metro’s apple cart.
That touched off a frantic round of buying and merging, but largely within the Big Five, which became four with Metro’s acquisition of A&P in 2005, and three after Sobeys takeover of Safeway in 2013. While that multi-player chess games was playing itself out, however, new and even more powerful general-retail players began nosing into the grocery trough, turning multi-player into multi-layer. While Target Corporation’s entry into the Canadian market was an abortive disaster, Walmart Canada and Costco have been growing their grocery business at what Kevin Grier of Grier Market Analysis and Consulting calls an “astounding” rate. During the first three months of 2016, in fact, sales of food at so-called general merchandisers jumped by 11 per cent while sales at traditional grocers, by comparison, increased by just two per cent.
How will Sobeys find its place in this new and crazy-making world?
Sobeys, of course, remains a very significant player. It is, after all, still the second largest grocery retailer in the country, with 1,500 owned or franchised stores operating in every province, nearly 400 retail gas locations, 78 Lawtons pharmacies and a national network of 26 distribution centres. It employs 125,000 people and racked up revenues of $24.6 billion in fiscal 2016.
The first challenge for Sobeys new permanent president and CEO will be to “salvage the relationship” between Sobeys and Safeway, Charlebois says. “Right now, it’s not working, and it needs to work if the company is to get back on track.” Once the corporate pieces are working in sync, again, the company will need to focus on its ongoing big-picture problem.
That problem, Charlebois suggests, is that Sobeys projects a “confused brand. Loblaws has its President’s Choice, which is part of its specific vision. Metro has its focus on its own region. Sobeys…” He lets the lack of a specific core strategy or vision speak for itself.
Despite everything, however, no one is writing Sobeys off. Charlebois, for his part, remains optimistic, in large part because of the board’s tough decision to “recognize that something was wrong and make a change in leadership.”
Sobeys hasn’t survived for close to 110 years by standing pat. As former president Bill McEwan signed off his I-can’t-comment email response to me: “They will figure things out and will overcome one way or the other… as they have over so many decades. I hold all that is Sobeys in high regard.”