‘We will not screw this up’
Sobeys parent Empire Co. tries to soothe concern over purchase of Farm Boy chain
TORONTO Sobeys Inc.’s parent company swears it won’t botch the customer experience at Farm Boy, the Ontario-based grocer it acquired Monday in an $800-million deal.
Industry players reacted positively to the deal, which comes midway through Nova Scotiabased Empire Co. Ltd.’s three-year plan to clean up the troubled integration of Safeway, the Western Canada- based chain it bought for $5.8 billion in 2013.
But Farm Boy customers worried what impact the new corporate ownership would have on the product quality and local feel that drew them to the stores — and their associated private-label brand — in the first place.
“I swear to god, Sobeys if you screw up Farm Boy, hometown or no, you will be dead to me,” Twitter user Shannon M. posted Monday, her sentiment echoed by dozens of concerned customers.
“I can assure you that we will not screw this up,” Empire and Sobeys chief executive Michael Medline said on a conference call with analysts Monday after quoting the tweet.
In an interview, Medline said these loyal customers are one of the reasons Sobeys was so interested in buying Farm Boy, with the goal of doubling its business within five years.
Farm Boy has 26 stores, sales of $500 million, and same-store sales growth of 5.3 per cent — well above the industry average of 1.3 per cent. It’s known for fresh products, premade food, smaller stores and private label products.
Given its financial metrics and passionate customers, Medline said Farm Boy is a “jewel of an asset” worth the premium valuation of 14.1 times estimated 2020 earnings before interest, taxes, depreciation and amortization.
Unlike the Safeway acquisition, there are no plans to integrate Farm Boy into Empire’s big grocery chains (Sobeys, IGA, Safeway) or discount chain Fresh. Its senior leadership will remain and buy a stake in the new company.
Integration is where the Safeway deal went awry, with the axing of the private-label brand and the loyalty program angering consumers.
“We do not want to ruin the magic of Farm Boy by trying to integrate them,” Medline told analysts.
Medline wasn’t part of the Safeway deal, as he joined Empire in 2017 from Canadian Tire, where he oversaw acquisitions of Mark’s Work Wearhouse and Sport Chek. Despite the problems, he said the Safeway deal was a great strategic move since it gave Empire national scope, larger scale and the best grocery retail locations in Western Canada. Still, he acknowledged Empire made too many changes, too fast, for customers. The economic turmoil in Alberta and Saskatchewan also stung.
But it appears Empire learned its lesson.
“We love what Farm Boy is doing. It has the best brand … we want to see it grow,” Medline said.
Farm Boy products will not be available in Empire’s other stores and vice versa. When Empire launches its e-commerce platform Ocado in the Greater Toronto Area in 2020, it will sell both brands, although Farm Boy will be in a separate site.
Farm Boy founder and co-CEO Jean-Louis Bellemare and coCEO Jeff York, along with other senior executives, will stay on in their roles and buy a 12 per cent stake in the new company. Pending regulatory approval, expected in early 2019, Empire will buy Farm Boy from private equity firm Berkshire Partners, which purchased it in 2012 and helped it develop its private label.
Empire first approached Farm Boy in May and made a formal offer at the end of August. Bellemare, who opened the first store with his then-girlfriend, now wife, in Cornwall, Ont. in 1981, said they were approached by several companies but chose Empire after meeting the Sobey family.