Category Archives: Blog

Sobey’s to lead with Ocado

A Sobeys grocery store is seen in Halifax on Thursday, Sept. 11, 2014.


Sobeys Inc. is starting to feel a pinch from bigger rival Loblaw Cos. Ltd. handing out free $25 gift cards to customers to make amends for the giant grocer’s part in what it called an industry-wide conspiracy to fix the price of bread.

“If you don’t think that people giving away some free groceries for whatever reason with gift cards impacts everybody in the market – it does,” Michael Medline, chief executive officer of Sobeys and its parent Empire Co. Ltd., told an analyst conference call on Wednesday.

“To what extent – you can’t measure it. It would theoretically make sense. So there’s a little bit of noise right now.”

The “noise” was prompted late last year when Loblaw, the country’s largest grocer, admitted its part in what it called an industry-wide scheme to fix bread prices for about 14 years, pledging to make up for it by giving out free $25 gift cards to customers beginning in January and raising questions about the extent the promotion would hurt rivals such as Sobeys.

Mr. Medline said Wednesday, after Empire released better-than-expected third-quarter results, that he anticipated “increased pressure on sales” in Sobeys’s current fourth quarter “as those curious gift cards from our competitor… continue to hit the market.”

But, over the longer term, Sobeys doesn’t think the Competition Bureau’s price-fixing inquiry – or about 10 class-action lawsuits tied to it – will damage its business, the company said.

Loblaw and its parent George Weston Ltd., which owns bread maker Weston Bakeries, approached the bureau in early 2015 to confess their wrongdoing and what they say is the wrongdoing of five other companies, including Sobeys and the country’s other major bread producer, Canada Bread, according to court documents. In exchange, the bureau gave Loblaw and Weston immunity from criminal prosecution. The bureau continues to investigate the allegations against the companies, among them discount titan Walmart Canada Corp.

Sobeys has said that, based on the information available to date, it doesn’t believe that it or any of its employees have violated the Competition Act. Lawsuits seeking class-action status have been launched against the companies alleged to have participated in the conspiracy.

Sobeys’s parent Empire said in a filing Wednesday it doesn’t believe at this time the bureau investigation nor the lawsuits “will have a material adverse effect on the company’s business or financial condition.”

In December, Mr. Medline wrote to Galen G. Weston, CEO of Loblaw and George Weston, accusing him of taking “the opportunity to throw so many other retailers under the bus with you. … To state that there was an ‘industrywide price-fixing arrangement’ was unfair, unsubstantiated, and quite possibly defamatory.”

Amid the price-fixing controversy, Mr. Medline is racing to complete his three-year restructuring effort, which he calls Project Sunrise, to slash costs and turn around Sobeys’s fortunes after its disastrous takeover of Safeway Canada in Western Canada in late 2013.

Mr. Medline, former CEO of Canadian Tire Corp. Ltd. who took the helm at Sobeys in early 2017, has made progress in revitalizing the grocer, which is the country’s second top supermarket retailer.

“We will make every tough decision we need to in order to win,” Mr. Medline said. “We’re changing the culture of Sobeys. Our leaders are expected to deliver Sunrise results and strengthen our company to win in the future. No excuses.”

Investors seemed pleased. Empire’s Class A shares rose almost 6 per cent to $24.89 in early afternoon trading on the Toronto Stock Exchange.

Mr. Medline has announced Sobeys will expand its FreshCo discount grocer in Western Canada in about nine months, overhaul marketing and merchandising initiatives and build a $70-million robotic distribution centre for a centrally supplied grocery e-commerce operation in the Greater Toronto Area by 2020 in partnership with the British firm Ocado Group PLC.

As Michael Van Aelst, retail analyst at TD Securities Inc., said Wednesday: “Project Sunrise is still on track.”

But Mr. Van Aelst said parent Empire’s stronger-than-expected bottom line came mostly from higher real estate and asset sale gains rather than from meaningfully higher sales volumes.

Sobeys still needs to raise its sales significantly for the retailer to see a true recovery, Mr. Van Aelst said in a note. It has lost almost four percentage points of market share over the past five years “and it is difficult to gain that back at a time when it is slashing costs (restructuring), launching a discount banner in new geographies, and building a state-of-the art e-commerce distribution network.”

Mr. Medline said Sobeys has made great strides in its revamping, however “of course, we’re not out of the woods yet. We’re still in the riskiest phase of transformation.”

But he said he didn’t want his team “chasing market share” with heavy discounting at the expense of “getting Sunrise savings and being strong in the long term.”

He said Sobeys’s e-commerce investment and deal with Ocado will pay off in the long haul. “If you don’t believe in grocery e-commerce, this is not the deal for you … We will have the highest market share of any grocer and we will be competing with you-know-who.” He was referring to e-commerce powerhouse Inc., which last year acquired Whole Foods Market and is expected to beef up its online groceries in the coming years.

Sobeys also reiterated that higher minimum wages in Ontario and Alberta as well as drug-price reforms will reduce its earnings in the coming years by tens of millions of dollars but it is developing strategies to offset the hit.

Empire’s profit in its third quarter, which ended Feb. 3, almost doubled to $58.1-million or 21 cents a share from $30.5-million or 11 cents a share a year ago. Sales rose to $6.03-billion from $5.89-billion, while same-store sales excluding fuel increased 1.1 per cent. The company said its internal inflation rate of 1.6 per cent helped boost sales.

On an adjusted basis, Empire’s profit climbed to 33 cents a share from 13 cents a share, beating analysts outlook, on average, of 25 cents a share, according to Thomson Reuters.


Blockchain to save $$


Blockchain could “save logistics industry millions”

An industry consortium comprising AB InBev, Accenture, APL, Kuehne + Nagel and a European customs organisation has tested a blockchain solution which could “eliminate the need for printed shipping documents and save the freight and logistics industry hundreds of millions of dollars annually”.

In essence, blockchain is a shared, distributed ledger that can be used to record transactions and track assets in a tamper-evident, digital format. It allows multiple stakeholders to confidently and securely share access to the same information.

One of the key benefits of blockchain is that it can cut down on the huge amounts of duplicated documentation generated in a traditional supply chain.

In a statement sent to Post&Parcel today (15 March), Accenture explained: “An international shipment of goods for companies in areas such as the automotive, retail or consumer goods industries typically requires more than 20 different documents, many of which are often paper-based, to enable the goods to move from exporter to importer. Across these documents, up to 70% of the data can be replicated.  The document heavy approach limits data quality and real-time visibility to all parties involved in the trade and this can also delay the financial settlement on goods.”

According to Accenture, the new blockchain solution “can speed up the entire flow of transport documents, reduce the requirement for data entry by up to 80%, simplify data amendments across the shipping process, streamline the checks required for cargo and reduce the burden and risk of penalties for customs compliance levied on customers”.

Adriana Diener-Veinott, who leads Accenture’s Freight & Logistics industry practice, commented: “Our trials have proven the viability of a shipping process in which many documents can be replaced by secure and distributed data sharing with clear and defined ownership.

“This gives companies a significant opportunity to save time and money while improving their service to customers.”

The consortium members each typified a particular stakeholder in the shipping process: AB InBev represented a typical exporter; APL contributed its role as a shipping organisation; Kuehne + Nagel provided direction on the requirements for a freight forwarder and a European customs organisation replicated the regulatory requirements that cargo faces.

Accenture provided the technological and consulting expertise on the blockchain technology and developed the technical architecture required to support a blockchain solution.

Salvation Army Food Store

The Salvation Army Is Opening Cheap Grocery Stores in America’s Food Deserts


The group says a family of four should be able to eat “for under $10.” Photo: Salvation Army

America’s latest grocery disruptor? It’s the Salvation Army. Baltimore today got the country’s inaugural location of DMG Foods (after the nonprofit’s motto, “Doing the Most Good”). Called the first-ever national nonprofit grocery chain, the goal is to bring good food to low-income residents in the country’s food deserts, nutrition-poor areas where people have no or extremely limited access to low-cost, healthy food.

Their goal is a sustainable store rooted in the community that helps locals eat “healthier, smarter, cheaper, and all of that,” Salvation Army spokesperson Gene Hogg said in a release. People who can’t easily purchase nutritious food tend not to eat it, unsurprisingly; the U.S. is actually plagued by this terrible phenomenon, and it often occurs in neighborhoods brimming with food outlets — fast-food chains that arguably worsen the country’s obesity epidemic as much as help end hunger.

As part of Michelle Obama’s Let’s Move campaign years ago, the USDA built a Food Desert Locator that mapped America’s “low-access communities.” Per the government’s definition — urban areas where at least one-third of the population lives a mile or more from a grocery store — almost all of northeast Baltimore qualifies, which is why the Salvation Army set up the inaugural DMG Foods there. At 7,000 square feet, it’s much smaller than your standard Kroger or Safeway, but the diminutive size should mean less back stock, which should in theory reduce overhead costs and waste less food. This all helps the Salvation Army wade into food deserts, parts of towns that for-profit grocery chains avoid because operating stores there is financially untenable.

The nonprofit hasn’t outlined specific growth plans, but the early social-media response to the first location has been extremely positive:

Walmart Grocery Delivery

Walmart’s Key to Unlocking its Full Online Growth Potential

According to a Credit Suisse analyst, Walmart plans to hit a 40% US online growth target by 2019, and the company may have found a way to relieve its online growth concerns, as well as get it to its targets in the next two years.

As reported by Business Insider, Walmart plans to reach a 40% US online growth target by 2019.

With the recent announcement that it will roll out an online grocery delivery option in over 100 cities, the retailer may get to those targets after all, Seth Sigman, an analyst at Credit Suisse, wrote in a note to clients.

This rollout will be available to around 40% of US households by the end of the year.

Around 90% of Americans live within 10 miles of Walmart’s brick-and-mortar stores, giving the company a significant advantage over its competitors.

Due to its proximity to customers, Walmart could use its physical locations as a distribution hub to leverage its supply chain and provide faster deliveries.

Moreover, Walmart’s online grocery delivery rollout will supplement the retail giant’s ongoing expansion of grocery pick-up offerings, resulting in 2,200 stores that offer this service from 1,100 stores by this year.

Sigman has been optimistic about the company’s “click and collect” option – which allows customers to shop online through its website and pick up groceries at Walmart’s physical locations – seeing it as an opportunity to drive incremental sales growth.

Coupled together, this is where the retailer can shine, Sigman says, because online grocery still remains “largely an untapped market.”

“For Walmart, given how early it is, we think it can lead the growth, and attain [online grocery] share well above their online market share today in other categories.”

Yet he admits that online grocery delivery is getting more competitive. Amazon has been testing a two-hour grocery delivery service from Whole Foods in select cities while Target has acquired the delivery platform Shipt, to help it expand its same-day delivery offerings across the US.

Still, the retailer’s acquisition of and the launch of free two-day shipping for orders over $35 or more in January will only serve to boost its chances of hitting its targets, Sigman says.

While some investors and analysts have nearly written off Walmart after it reported a slowdown in online sales growth last quarter, Sigman believes the retailer can redeem itself through a golden opportunity in online groceries.

Zara Augmented Reality

Zara Deploys AR At 120 Stores

Zara Deploys AR At 120 Stores

Zara will introduce augmented reality (AR) displays with a linked purchasing function at 120 stores worldwide beginning April 18, according to Reuters. Customers pointing their smartphones at in-store sensors or designated shop windows will be able to see a model wearing an outfit, and then can click through to purchase the items.

The technology will also let models “pop up” on the packaging of online purchases delivered to customers, giving the retailer an opportunity to show off alternative outfits.

Zara is rolling out the displays with the goal of drawing Millennials into its stores, but the program could resonate with Generation Z as well. Members of this up-and-coming generation are seeking a “physical and digital playground in which they can try, experiment with and enjoy the product,” said Brandon Rael, Founder of BR Advisory, in a discussion with the RetailWire Brain Trust.

The use of AR comes on the heels of other technology innovations at Zara, a division of Inditex. The retailer is deploying robots behind the scenes at 85 stores to ensure rapid delivery of selected merchandise. Customers will scan or enter a code at in-store collection points, while the robot searches for the correct package and delivers it to a drop box.

In January 2018, the retailer opened a pop-up store in London focused on ordering and collecting online purchases. The location, which Zara plans to keep open until May, includes a product recommendation system based on information screens embedded in mirrors.

Digital Retail

More Digital Time Spent On Amazon Than Next Nine Retailers Combined

At a time when the marketing world is thinking increasingly about the value of consumer time spent with media, and the brands that are represented on it, new data released today by comScore reveals just how dominant the leader is in the digital retail category.

“When comparing actual time spent at each retailer in minutes, Amazon’s 22.6 billion minutes is more than retailers ranked numbers 2 through 10 combined,” Ryan Williams, head of client insights-retail, travel and CPG at comScore, said while presenting the data as part of the measurement firm’s presentation on the “2018 State of the U.S. Online Retail Economy” today.

In fact, just looking at Amazon’s mobile minutes — which are still only a fraction of Amazon’s total digital minutes — Williams noted, “these exceed total digital traffic across eBay, Walmart, Wish, Kohl’s and Etsy combined.”

Keeping an eye on mobile time spent among retailers is especially, important, he said, because it is the fastest-growing platform for digital retailers, and it is accounting for an increasing share of purchases in a wide variety of categories.

Even so, Williams pointed out that there’s still a considerable lag between the amount of time spent with mobile vs. its share of dollars spent by consumers on retail sites. Currently, Williams estimates its about a 40% gap, but it’s closing as mobile commerce is growing at faster rates than desktop.

Amazon Top Grocer

The Whole Foods Market on Westlake Avenue near Amazon’s Seattle campus. (Whole Foods Photo)

If the Amazon acquisition of Whole Foods goes through, Amazon could become the top grocer in the U.S. by 2030, says Brittain Ladd, who worked on global expansion for the online retail giant’s grocery arm, AmazonFresh.

Combining the leading online retail company with a respected grocer is bad news for competitors such as Walmart, Kroger and Target. Ladd, who also worked on supply chain, logistics and delivery during his three years at Amazon and is now a strategy and supply chain consultant in the grocery industry, predicts Amazon will rapidly gain market share against these companies over the next few years.

Ladd predicts Amazon will pass Kroger to become the number two grocer in the U.S. by 2025, and surpass Walmart to claim the number one spot some time between 2027 and 2030. To get there, Amazon will have to figure out how to streamline Whole Foods’ operations, open new stores — both under the Whole Foods flag and its own — and grow its distribution footprint.

Brittain Ladd.

Amazon announced the $13.7 billion acquisition of Whole Foods, its biggest deal ever, last month. During his time at Amazon, Ladd said, he recommended the company acquire a grocer such as Whole Foods or HEB. Not only does the move dramatically expand Amazon’s physical retail footprint — Whole Foods operates 465 stores in North America and the United Kingdom — but even more important, Ladd tells GeekWire, Amazon is gaining a wealth of knowledge and dataabout the grocery industry, something it lacked as it tried to grow AmazonFresh.

With Whole Foods in its pocket, Amazon’s online grocery business is poised to take off. Ladd described how Whole Foods can help Amazon gain customer trust, and how that will help both its physical and online retail sides.

Amazon can offer grocery customers a greater value proposition than stand-alone grocery retailers like Albertsons and Kroger and even Walmart. Amazon will leverage their physical stores to gain trust with consumers that Amazon can offer the freshest of fresh fruits, vegetables, meat, milk, eggs, dairy and baked goods. In turn, Amazon will prove to consumers that if they order groceries online for delivery, the quality and freshness will be the same. In addition, Amazon will educate and incentivize customers to turn to Amazon for all of their retail needs such as shoes, apparel, electronics, auto parts, furniture and even appliances. In essence, what Amazon can offer is an endless retail aisle capable of meeting the needs of all customers.

Ladd said Amazon should let Whole Foods operate independently for at least the next year or so. In that time, Amazon can learn more about the grocery business from Whole Foods and take a hard look at Whole Foods’ supply chain and operations. The grocer was struggling, and changes will need to be made.

One thing Ladd doesn’t expect to see is the implementation of the Amazon Go checkout-free technology as it exists today in Whole Foods stores because they are just too big. But the technology could come into play with the 365 by Whole Foods stores, a concept Amazon could look to expand.

“Once Amazon has a better understanding of current state operations, I anticipate that Amazon will develop and begin to implement the Whole Foods future state, which will include expanding 365 by Whole Foods to go after Walmart and Kroger shoppers as well as compete against Lidl and Aldi,” Ladd said. “365 by Whole Foods also allows Amazon to stock store shelves with some of their own private label products.”

365 by Whole Foods Market
The check stands at the 365 by Whole Foods Market before it opened in Bellevue, Wash., in September 2016. (Kurt Schlosser / GeekWire)

Ladd went on to describe how Amazon might grow its grocery operation in the future, and the challenges it will face. To reach the top of the grocery mountain, Amazon will have to expand its footprint, through new Whole Foods stores as well as building out more locations for its Amazon Go and AmazonFresh Pickupconcepts. Ladd believes Amazon will at some point rebrand Whole Foods to focus more on Amazon.

Amazon will also open additional stores throughout the United States in order to create an ecosystem of stores capable of meeting the needs of the majority of Americans. Instead of just building Whole Foods stores, Amazon will strategically use different formats to ensure they can serve the most customers. For example, Amazon Go, Amazon Fresh Pickup, and multi-format stores will all serve a role in the Amazon grocery ecosystem. Amazon will have to design and build additional distribution centers focused on consumables, especially fresh fruit, produce, meat, milk, eggs, and dairy. Finally, I believe at some point in the near future Amazon will rebrand Whole Foods to place the focus on the Amazon brand.

Turning to Amazon’s rivals in the grocery industry, Ladd suggested further consolidation is necessary if they want to compete with the Amazon-Whole Foods alliance. Ladd recommended a merger between Target and Kroger to shore up Target’s grocery operations. In such a situation he recommended a couple of different possibilities like building mini Targets into Kroger stores, or the two companies acquiring a company like Instacart for delivery.

Walmart has been going all out to compete with Amazon, acquiring for $3.3 billion, and then on the day of the Amazon-Whole Foods announcement, announcing a deal to scoop up clothing retailer Bonobos for $310 million. Ladd thinks Walmart should have acquired Whole Foods, if only to keep Amazon from doing so. With that possibility off the table, Ladd suggests Walmart needs to make a major move to compete with Amazon.

“From a strategy perspective, Walmart must do something dramatic to change the entire dynamic within retail,” Ladd said. “Therefore, based on my analysis and experience, I recommend that Walmart divest Sam’s Club and then acquire Costco. Walmart/Costco/Jet has an ability to challenge Amazon on a level never before seen.”

Ladd was recruited to work for Amazon in 2015 after making a case for the brick-and-mortar expansion of Amazon’s grocery arm in his previous role with management consulting firm Deloitte.