Sobeys touts health in grocery wars
Partners with celebrity chef Jamie Oliver
TORONTO • Sobeys Inc. is aiming to carve out a more distinct image for itself in Canada’s relentless grocery war by touting a new healthy food platform and partnering with U.K. chef Jamie Oliver to market the initiative and develop food products for the No. 2 grocer.
But will it be enough to increase the chain’s flat sales in a market driven by low consumer prices, where average grocery square footage has been growing at more than twice the historical rate?
“Clearly the market is extremely competitive and everybody plays the promotional game on a weekly basis to try to get customers into the store and it translates into aggressive promotions and very fickle behaviour from the consumer — they are shopping in more places,” Marc Poulin, chief executive of Nova Scotia based Empire Co.’s grocery subsidiary, said in an interview.
“It has had an impact on our margins. But at the end of the day, we strongly believe that this company has more to deliver to the Canadian public than a weekly special.”
Sobeys has launched a new marketing campaign with the tag line “Better Food For All” with signature fresh products, certified “humane” chicken, pork and beef, goods highlighted with “Sobeys better ingredients” in the grocery department and a bigger section of products free from artificial flavours and preservatives.
The first ad spot features Mr. Oliver dashing through a suburban neighbourhood, tossing produce to residents and urging them to “not take out, cook in — it’s faster and it costs less.”
Sobeys’ drive comes in one of the toughest years yet for the Canadian grocery sector, as companies grapple with trying to maintain or boost sales in an environment of flat to deflating food prices and added square footage from Wal-Mart Canada Corp. and Costco Wholesale Corp.
Sobeys’ acquisition of Western Canada’s Safeway s t ores t his summer was aimed at shoring up its national footprint and buying
We are all facing the same growth challenge
power, but the pricing battle with discount players and rivals Loblaw Cos. and Metro Inc. has dragged on results.
Last month parent company Empire Co. reported earnings of $1.32 per share, sharply lower than analyst mean estimates $1.55.
“About 13¢ of the miss was due to lower-than-expected operating results at Sobeys,” analyst Peter Sklar of BMO wrote in a note to clients, noting the retailer had experienced two consecutive quarters of negative gross margins. And first-quarter same-store sales at Sobeys, an important industry benchmark, fell 0.1% after a flat prior fiscal year.
Sobeys has always maintained a core focus on food retailing compared with Loblaw, which has also marketed healthier food options to consumers over the years, including the Blue Menu and PC Organics food lines and its PC “free from” line of meats, using animals raised without the use of antibiotics and fed no animal byproducts.
According to Sobeys’ research, 76% of consumers say they want to feed their families healthier food, but they feel it is too difficult and time-consuming to prepare.
“Our current relationship with food needs to evolve, and there is no doubt we have issues as a country from a health perspective we need to address,” Mr. Poulin said, as does the industry as a whole. “We are all facing the same growth challenge at the end of the day. If we don’t bring solutions to Canadians, there is no growth for us, but there is no growth for the suppliers either.”
Jim Smerdon, director of retail and strategic planning at Colliers International in Vancouver, predicts more consolidation lies ahead for the grocery sector as a result of stiff retail competition.
“Flyers arrive weekly to households, and everyone can compare apples to apples literally,” he said.
“The problem is not so much the number of square feet expanding but the number of players now who are out there after the same consumer.
“But I think it will require a little bit more than going after a premium marketplace to help Sobeys out. Across the country we are seeing the rise of local, premium farmers’ markets, and those are not cheap. It is not necessarily all product or price driven — it is more experiential.”