VANCOUVER, CA - Canadian grocer Sobeys is making plans to take its company in a new direction by expanding its network of discount grocery stores under its FreshCo banner. The retailer will open the first of twelve FreshCo locations in Mission, B.C., in an effort to grow market share and keep up with the competition.
“Sobeys is far behind our competitors in terms of having a presence in discount,” said Mike Venton, General Manager of the discount format at Sobeys, a subsidiary of Empire Co., according to news source Lethbridge Herald.
Sobeys plans to open all 12 of its discount stores by the end of 2019; two Winnipeg locations are set to open in early May, and two Richmond, B.C., stores will follow that month. The retailer plans to choose regions with two or more full-service locations and convert one of the locations to the FreshCo brand.
The retailer operates more than 1,500 retail stores under a number of different banners, reports Lethbridge Herald. 87 percent of those stores are full-service, like Sobeys, Farm Boy, and IGA, leaving only 95 stores in the discount category. One of the retailer’s largest competitors, Loblaw, operates 488 discount format stores by the end of its 2018 financial year. Another competitor, Metro, operates 228 discount stores, mostly in Ontario and Quebec. Compared to its competitors, Sobeys is behind the times with the growth of its discount banners.
“If you look at Western Canada, we have zero presence,” Venton said.
Growing its discount market share in Western Canada will be one of the company’s strategic priorities for its 2019 financial year. The retailer initially announced plans to convert up to one quarter of its existing Sobeys and Safeway stores in Western Canada to the FreshCo banner in 2017, according to Lethbridge Herald.
The 12 planned FreshCo stores will strategically shift the retailer’s ratio of full-service to discount stores, though Venton said, “it will be a long time before we move that number significantly.” Still, Sobeys is betting big that changing the ratio will pay off in the long run.
“The key to us is to make a big splash when we go in and then compete and grow market share,” said Michael Medline, CEO of Sobeys' parent company Empire, during the company’s most recent quarterly call with analysts.
This discount banner expansion plan comes on the heels of a major misstep following its acquisition of Safeway in 2013 for $5.8 billion. Safeway customers became upset with Empire after it cancelled a popular loyalty program and caused several issues, including failing to keep items in stock. As a result, Empire launched its three-year transformation plan, Project Sunrise, to turn things around for the company.
With consumers craving value more and more, Sobeys knows that the continued growth of its discount brands is essential. And despite its slip-ups following the Safeway acquisition, Sobeys is confident it will see success as it expands into Western Canada.
“We have a tried and tested model that we’re very successful within Ontario,” said Venton.
Will this discount banner expansion pay off for Sobeys and carve out a place in the market? AndNowUKnow will keep you updated.
