- Canadian grocer Sobeys announced last week it has cut 800 corporate jobs, according to The Canadian Press. The move comes as part of the struggling company’s effort to streamline its five regional divisions into one national organization.
- Sobeys is contending with heightened industry competition, increasing minimum wages and the threat of Amazon-owned Whole Foods. In addition, Canada’s second-largest grocer has been struggling since its mishandled acquisition of Safeway Canada four years ago.
- As part of its turnaround plan, dubbed Project Sunrise, Sobeys hopes to save $500 million annually through efficiency measures. The grocer posted its first comp-store sales gain in the most recent financial quarter following 18 months of declines.
Sobey’s move comes as no surprise to those who have closely followed the struggling retailer. Michael Medline, CEO of Empire Cos., Sobeys’ parent company, said after he took the top role a year ago that the grocer’s corporate structure and operations were woefully inefficient, and that he intended to transition from a regional structure to a more streamlined national one.
The company’s restructuring program, Project Sunrise, seeks to achieve $500 million in annual cost savings by 2020. At the same time, Sobeys has elevated its marketing and brand-building efforts in order to improve its relationship with customers.
Medline’s plan to address inefficiencies and build brands is a solid formula for dealing with heightened industry competition — which Sobeys certainly is — with competitors Loblaws and Metro continuing to grow while Walmart Canada increases its market share. As in the U.S., Canadian grocers are closely watching Whole Foods, which operates more than a dozen stores in key markets, and could make significant moves under new parent company Amazon.
But Sobeys has a particularly tough task thanks to its mishandled integration of Safeway Canada four years ago. The move, which analysts at the time hailed as a crucial step towards increasing the grocer’s presence in Western Canada, quickly went awry after Sobeys imposed its own brands and operations on the formerly U.S.-based chain.
Following its acquisition, the Stellarton, Nova Scotia-based Sobeys got rid of a popular loyalty program at Safeway stores and also swapped out a beloved store brand in favor of Sobeys brand products. On the operational side, Sobeys instituted back-office software that proved very difficult to use for Safeway employees, and centralized its Western operations rather instead of relying on regional offices as Safeway had done.
The result: Empty shelves, angry customers and disgruntled employees.
Former CEO Marc Poulin left Empire Cos. last July, and the company hopes to make positive steps forward under Medline’s leadership. Doing so, however, means the company must achieve one of the most difficult goals in all of retail: Winning back customers.
In an era of increasing consolidation, grocers in the U.S., Canada and elsewhere could learn a lot by studying Sobeys' missteps. Chief among these is the company’s belief that its own systems and products were superior to those of the retailer it acquired. Although it made sense on paper to bring everything under one umbrella, the result was a greatly diminished shopping experience for customers.