State of the big chain grocery stores

[dt_toronto_geek]

I admire the store in an odd way. Everything is going against it: wacky customers, overcrowding etc, but they manage to keep it together. It's not anything special, but it's solid.

I agree, the Sherbourne store has gone through a complete turnaround this past winter. Better selection, considerably cleaner and a good part of the store was reorganized.

 

[dt_toronto_geek]

Hope for Loblaws

Loblaw's to invest in stores, hire 1,000

Company six to nine months behind in its restructuring plan, Weston says
Apr 30, 2008 08:12 AM
Dana Flavelle
BUSINESS REPORTER

Canada's largest supermarket chain says it plans to invest more money in its conventional food stores in Ontario, hire 1,000 new people to improve service, and assign more buyers to add local produce, instead of purchasing everything centrally from head office.

Loblaw Cos. Ltd. also said it is roughly "six to nine months" behind schedule on its three to five-year turnaround plan, which it now expects will take more like five years to complete, executive chairman Galen G. Weston said.

In his first conference call since becoming Loblaw's president last week, British retailing executive Allan Leighton, outlined "five key adjustments to our road map."

They include:

- Significant investments in "a great food program" in Ontario, where the company's attempts to transplant its successful western Canadian superstores concept have floundered.

- Refurbishing 25 Real Canadian SuperStores in western Canada, where competitor Wal-Mart Canada Corp. has begun opening stores that carry fresh food as well as general merchandise. Loblaw also plans to launch more No Frills stores in western Canada, a small discount format that has worked well for it Ontario.

- More local sourcing, with up to 15 per cent of products being purchased outside the central buying team based in Brampton.

- Upgrading its warehouse and distribution system.

- Investing in its President's Choice private label brand.

Many of the moves appear to be a reversal of its previous strategy of centralizing its opeartions, and opening more larger stores that carry both food and general merchandise.

"We think we're still on the right road," Leighton told analysts on a conference call today. However, the road map needs some "key adjustments" to make the company more successful.

Leighton, who helped turnaround British supermarket chain Asda before it was sold to Wal-mart, also said Loblaw needs to focus more on becoming a "selling machine."

"We feel we should be getting more sales growth," Leighton told analysts after the company reported what it described as disappointing results.

Profit at Canada's largest supermarket chain grew 14.8 per cent to $62 million, or 23 cents a share, mainly due to lower one-time charges for restructuring costs and stock-based compensation, the company said.

Excluding those one-time items, operating income was lower than the comparable year earlier period. while sales edged up 2.8 per cent to $6.5 billion, the company said.

Sales at stores open more than a year, a key measure of retail performance, grew 2.8 per cent, versus 2.4 per cent in the year earlier period, as the company opened fewer new stores.

One-time charges against earnings to pay for restructuring costs were $3 million, or one cent per share, in the first quarter this year, versus $89 million in the first quarter last year, the company said.

Charges related to stock-based compensation and equity forwards were $25 million, or 10 cents a share, versus $12 million a year ago.

Excluding those one-time charges, operating income was lower than a year ago, the company said.

"Performance in the first quarter was challenging," said Weston, 35, whose family are Loblaw's majority shareholders through their stake in parent company, George Weston Ltd."The company continues to make progress on its turnaround plan. However, over one year into our turnaround we are not where we need to be."

Weston said the company "lags behind as a effective selling organization" despite a newly centralized structure aimed at delivering the benefits of cost management, better buying and operational discipline.

"Last week, we took action to address this by changing the senior executive team," Weston added.

He was referring to the decision to name Leighton as president, replacing Mark Foote, who left the company. An executive vice-president in charge of food, Pietro Satriano, also left Loblaw last week.

"Our new structure will provide the clarity and focus that is required to execute the next phase of our strategy," Weston said.

The company is holding its annual general meeting at the Metro Convention Centre today.

 

[billonlogan]

I wish they can just stock their shelves. I went to the Loblaws on Broadview & Danforth this morning and the first three items on my shopping list were not in stock. I walked out and went to a competitor up the street.

 

[Mustapha]

I wish they can just stock their shelves. I went to the Loblaws on Broadview & Danforth this morning and the first three items on my shopping list were not in stock. I walked out and went to a competitor up the street.

At the Yonge/Yonge Blvd store, a recent renovation has torn OUT the Marchelino and the cute fake trees swiss ambiance that went with it.

Nothing is cheap at Loblaws either: $1.69 cans of Campbells Chicken Noodle last I looked. Boy Weston should just let Leighton do his job. At the end of the day old man Weston is really running the show.

As for Walmart, the one in Brampton that has fresh food ... took me right back to Knob Hill Farms. (This is a bad thing).

Dominion seems to be a happy medium.

 

[Urban Shocker]

A few weeks ago, there were enough jars of Dulce de leche on special in the Broadview and Danforth Loblaws to send all of Argentina into permanent sugar shock.

When people want a product they don't carry it, and when they finally carry it they either order too much or people have lost interest in buying it.

 

[Northern Light]

Loblaws renos

Just found out that the massive Loblaws re-org for Toronto begins later this month.

They will be investing a huge amount of money in store renos (over 7M at the Vic Park Market store).

Looks to be a big improvement over the way things are now.

I haven't seen all the details but I gather that general merchandise is being cut deeply, and more food selection is coming.

Also, more organics, more gourmet offerings, more meals-on-the-go type stuff and a few notable operations changes.

Apparently Loblaws is moving away from stocking its produce (in GTA stores) through its warehouse.

Beginning late this spring, produce will be direct to store from supplier.

Sounds really promising. Whether or not they can execute remains to be seen.

 

[billonlogan]

Just found out that the massive Loblaws re-org for Toronto begins later this month.

They will be investing a huge amount of money in store renos (over 7M at the Vic Park Market store).

That is a relatively new store, any news on the one at Lakeshore & Leslie? I heard rumours of a reno but nothing recently.

 

[Northern Light]

Leslie/Lakeshore

My source at Loblaws said that Queen's Quay and (believe it or not) Forest Hill are next.

Followed by Lakeshore/Leslie.

No timeline for that one yet, so probably later this year.

Also no word if there gonna fix the outside of that one ( I asked) God awful ugly store!

 

[CDL.TO]

Have they renovated the Danforth and Broadview location yet? Last time I was in there, about 2 years ago, it was a real flashback to the 80s. I seem to recall Ziggy's deli and Helvetica signage.

 

[doady]

No Frills are pretty universally gross, and Loblaws is much better. I'm sad as hell my local Loblaws is in the midst of becoming a No Frills. There goes the neighborhood.

I only went to that Loblaws for the muffins. There is a Loblaws at Heartland also but it is farther (not in walking distance) and they don't have chocolate muffins. Perhaps there is an actual bakery that I could go to, but honestly I don't know the neighbourhood very well.

 

[Jonny5]

I went to the little No Frills on Alberta Ave. on Wednesday night and it pulled through reasonably well. There were good sales on a lot of my staples and everything I wanted was actually in stock. Exciting times! There appeared to be more birds than ever in the store though. I noticed there has been major construction on the roof two weeks now, which is hopefully to fix this problem.

I wound up much more excited at the LCBO next door as they had my regular gin on sale.

 

[adma]

I wound up much more excited at the LCBO next door as they had my regular gin on sale.

Maybe that explains how you can hack that No Frills

 

[canrocks]

I'm kind of sad that I only stumbled upon this thread now, because I'm a bit of a grocery industry geek.

Has anyone else noticed an overall decline in quality, selection and service at the grocery stores in the city? Constantly unstocked shelves (especially for sale items), rude or incompetent staff, long checkout lines, dirty stores and terrible layouts are the norm, not the exception. Brand selections are also very limited, often with stores carrying only their house brand and one other. Sometimes the problems are specific to a department.

It's intersting that you started a thread about it, because I read an incredibly long and interesting article in the Globe about it a while back.

http://www.theglobeandmail.com/serv...ry/specialROBmagazine/home/?pageRequested=all
Here's the most interesting chunk:

Aspiring to operate as efficiently as Wal-Mart, Loblaw decided to consolidate its distribution centres between 2004 and late 2006, resulting in a net reduction from 32 facilities to 26. And, at the same time that it was shutting old warehouses and opening new ones, it was also preparing to centralize its entire head office staff in a new building in Brampton, Ontario.

That's when things went south. "What we tried to do was put [four divisions] into one over a two-year period," says Galen Weston Sr., 66, who has stepped down as Loblaw chairman but continues as chairman and president at the parent company, George Weston Ltd. "We badly underestimated the complexity of that, and we're paying the price today."

Some 2,000 employees moved to Brampton from a number of offices in Ontario and Alberta in the fall of 2005. But only about half of the 150 general merchandise buyers, who had been based in Calgary, made the move. The others quit.

Buyers have a key role at a retailer, representing a large part of its intellectual capital. The loss of so many experienced hands left a huge hole at Loblaw. Even the buyers who did make the move to Ontario were distracted as they put down roots, finding homes and settling their families. The result was often chaos. Many suppliers couldn't even figure out who was calling the shots. "The guy that was buying last week isn't buying this week and may not be buying next week," one vendor, who asked not to be named, said at the time. "It's been very difficult."

The head-office confusion was matched in the field. One supplier shipped tens of thousands of dollars' worth of general merchandise to Loblaw's Calgary warehouse in the summer of 2005—only to have the shipment refused. The boxes sat for three or four months in containers in the warehouse's yard before making their way inside, the supplier says. Only then was he finally paid.

Another vendor sent $15,000 worth of seasonal merchandise to a Loblaw warehouse in September, 2005. The goods didn't make it to stores before December. "By then, the season was already gone," says the supplier. Result: markdown. The supplier says he had to wait 10 months before being paid, and is still short $5,000. Other seasonally sensitive merchandise, such as Christmas decorations, also had to be liquidated shortly after getting on the shelves that season.

By January of last year, president John Lederer acknowledged that he had mishandled the reorganization of the supply system, causing a significant hit to the bottom line. "It has to be said that probably we—I—went a little bit too fast. And, obviously, you learn from that." A few weeks later, Lederer went even further. "When you begin to take things for granted that you can just execute, you become a little bit careless. And so we are no longer careless."

But a snowball effect was taking hold. Because products weren't getting to the stores on time, Loblaw pared down its marketing. Fewer promotions meant fewer shoppers. And there were other, indirect costs. Stores scheduled crews to un*pack boxes that never arrived. Suppliers shipped straight to stores rather than to warehouses, racking up extra labour and transportation costs for Loblaw. One store manager describes his staff receiving new shipments from the company warehouse this way: "It's a little bit of a surprise sometimes when they open the trailers and find out what they're getting." While stores were sometimes short-shipped, warehouses in Western Canada were so jammed that Loblaw had to rent more space.

"A lost sale is one thing," says a vendor of Loblaw's disorganization. "But even in your transportation network, you're sending out trailers that are not full, which is not an efficient situation. You lose on both sides. You don't make your margins, and it's going to cost you money because the trailer is going in with 900 cases—that's not as good as a trailer going at capacity with 1,200 cases." And even while Loblaw was having trouble making its shipments on time last fall, it clamped down on suppliers, warning they would be fined $1,000 for each late delivery. "Loblaw would like to look at this not as a revenue producer, but it will turn out to be that," says a supplier.

Anyway, catching up with the thread, I have a few comments:

Loblaw Markets are too big-box-in-an-urban-setting, and Superstores are just.. .horrible.
At least Dominion and Sobeys have done a decent job adapting their urban stores to its surroundings.

That's actually a really good point. When contrasting our supermarkets with the industry in UK, pretty much all of the chains have made attempts at a small format downtown store, with great success. Now, granted, they obviously have many more dense settings than we do, but it's nonetheless an untapped opportunity for Loblaws. They don't seem to be building any more Valumarts, and as 299 said, they are seen as a bit dumpy. Meanwhile, Dominion and Sobeys own the pedestrian friendly downtown store market in Toronto. The closest chain grocery to where I live is the Dominion on Gould. Second is the Dominion at College Park. Third is the Sobeys Express on Yonge. Fourth? Dominion at Market Square. I absolutely hate and despise Dominion but I end up going all the time because It's literally 2 minutes away. I see it as a large, gourmet convenience store. Open 24 hours, with markup that never ceases to shock me. I suppose I wouldn't mind the prices if the store offered me something of value. Nope. And don't get me started on Equality and Master Choice - terrible. And it seems that they've made a conscious decision not to compete with Loblaws or Sobeys on organics. Shoppers Drug Mart has a better organics selection than Dominion.

Shopping at Loblaws has become so boring. There is nothing new and few interesting products. They totally lost sight of the food aspect of their operations, and they stopped differentiating themselves from their competitors.

It's interesting that you say that because I don't find their competition especially inspiring. Yes, the Big Carrot is somewhat interesting, but the store brands at Dominion are atrociously boring, much worse than President's Choice. But then, I suppose I'm fairly cheap, and I don't really shop for excitement.

The amusing thing is that often President's Choice, Compliments and Master Choice are made by the exact same company and are more often than not basically the same product. The same would apply to No Name, Compliments Vaue and Equality.

Yes, but none of these brands taste the same. Obviously, those controlling the brands have some say over what goes into their food. One example: frozen concentrated orange juice. It's one of the things that I consume in copious amounts. To my well developed tastes P) Master Choice is barely tolerable, but President's Choice is a fiesta of flavour, even better than Minute Maid.

The T&T is great - the one on Cherry street.

It certainly sounds interesting but I won't be shopping there. I biked by it recently and it struck me how suburban and inappropriate it was. How did it get zoning approval? This is not where a city of Toronto's stature puts it's food retail, one of the most vital functions of a city. How did this get approved?

Just found out that the massive Loblaws re-org for Toronto begins later this month.
...
Also, more organics, more gourmet offerings, more meals-on-the-go type stuff and a few notable operations changes.

Woohoo! Organics + mainstream = awesome. One of the happiest moments I ever had in a grocery store was when I picked up a bag of PC nachos at the St. Jamestown No Frills and saw the word organic on the bag in small print. The meals-to-go selection must be an attempt to neutralize Sobeys before they get too big in Ontario.

You know, I have to retract my earlier statement. My wife and I needed some groceries this morning after dropping off the kids at Winchester Public School, and she said let's go to No Frills. Turns out she shops there all the time. So, I went in, and was very pleased with the super clean and polished floors, quality of produce and products and overall cleanliness. So, there you have it, the Admiral was wrong....yes...again, I know.

Yeah, No Frills is an incredibly interesting place. It's a multicultural collage of bargain seekers. Especially the Cabbagetown one! Where Ryerson students, Cabbagetown snobs, and hardworking families from Regent Park come to get their PC Decadent cookies. I usually have the choice between the St. Jamestown store and the Cabbagetown one, and I usually go for the former because of the larger selection, shorter lines, and the smaller chance that things will be out of stock.
But I've definitely seen my share of No Frills in the short time I've been shopping for myself.

Casselman - The store that introduced me to the concept of No Frills; situated at the heart of a stagnant small town in Eastern Ontario, housed in a building built long before No Frills came to town. I can tell because it's very sensitive to the small-town main-street setting.

Picton - Gigantic Superstore-sized No Frills outside the edge of town, built recently on literally a greenfield. Absolutely crammed with people when I went, and will certainly have a detrimental effect on Picton's beautiful smalltown core.

Guelph - Harvard & Gordon - Large, car oriented, strip mall, with its back turned to arguably it's largest customer base - 3500+ students in residence at the University of Guelph, all of which travel to No Frills on foot, either by taking the long way and navigating the cars in the parking lot, or by rappelling down a grass slope and sneaking through a small alley beside the loading docks. The store itself is large, bright, and carries more organics than usual to serve Guelph's hippie population.

Guelph - Willow West Mall - Along with Zellers, anchoring a dead mall. The store itself is bustling as usual, but outside of that, crickets. There was a one point a price war between two of the dollar stores in the mall; one of them down to 95 cents. Most of the time I was using the store, it was under construction, and someone allowed the frozen juices to melt and refreeze. Sold at full price. I didn't mind.

Toronto -

Dundas W and Landsdowne - A big corrugated steel box with an even bigger parking lot. Easily the biggest, airiest No Frills I've ever been to. Gigantic selection, clean, and huge. It has quite a bit of prime storefront on Landsdowne, but chooses to put a blank wall there, forcing it's pedestrians to walk through a shady alleyway.

Sherbourne at St. Jamestown - My current haunt, fairly good, roomy, but it isn't unusual to have things out of stock.

Cabbagetown on Parliament - Small, crowded, angry staff, poor selection, but still an interesting experience. A model of supermarket design as far as street orientation goes.

Carlaw and Gerrard - Big and Airy, similar to Landsdowne, but absolutely not appropriate. To get there you have to mount a literal desert of asphalt.

Ottawa - It's interesting that there are no No Frills in Ottawa. Perhaps they decided not to go up against Giant Tiger? Food Basics seems to be trying, but Giant Tiger is king, and they're expanding westward. They've got a store in Scarborough. Anyone been there?

For the uninitiated, Giant Tiger is kind of cross between Walmart and a dollar store. It's mostly an Eastern Ontario thing, but they've got big dreams. It was a big part of my childhood.

 

[urbandreamer]

Very interesting canrocks! Even though I shop at No Frills most of the time (closest and cheapest store around), I love food so I look forward to my weekly trip to see the multiculti mix that is bargain shopping in Toronto.

Giant Tiger? There's some scattered throughout small town Mid-Western Ontario; including at least one in Kitchener-Waterloo. I went there once or twice--a very "off brand" dirt cheap experience. Cheap t-shirts though (for work.)

Yeah, the Loblaw's experience, as related in the article you posted, reminds me of my old job--and what happened there? Oh right, the place was so pathetic and disorganized they just shut it down. Maybe that's what Loblaw's deserves?

 

[ShonTron]

Interesting post, canrocks!

Giant Tiger seems to be filling the gap left by BiWay. I didn't know they sold much in the way of food, besided a bit of canned and boxed stuff - I have been to a few of these stores.

I have a choice of Dominion and a smaller semi-ethnic small-chain grocery store, and I end up going to that store more and more often as the produce is better, and sales there are better now than Dominion! Then I go to No Frills with a car occasionally (there's a few around) as I love the PC frozen and packaged foods and stock up on that.

Shoppers Drug Mart's new concept stores have better prices on their limited grocery selections than most of the big grocery stores.

The sales at Dominion seem to be poorer and less frequent.