With one large move, Nova Scotia-based supermarket chain Sobeys has gone from a small player in B.C.’s grocery store market to one of the province’s dominant players by buying Canada Safeway for $5.8 billion.
Consumers likely won’t see big changes, according to retail consultant David Ian Gray, because Empire Co., parent of the 106-year-old Sobeys grocery chain, won’t want to abandon the goodwill that Safeway has built up through its Air Miles and Club Card loyalty programs or alienate its existing customer base.
Gray, the principal of his firm DIG360 Consulting, said Sobeys would also be wary about surrendering Safeway’s brand value, because rebranding is an expensive proposition.
Of Safeway’s 223 Canadian stores, 75 are in B.C., with 40 in the Lower Mainland alone.
“This is a very big retail story,” Gray said, adding Sobeys is “very much in competitive fight mode” against U.S. giants Walmart and Target.
The food business is getting tougher and the divide is increasing between low-end stores such as Buy-Low and PriceSmart and the higher-end stores such as Overwaitea’s Urban Fare and Whole Foods, which sell freshness and service.
Sobeys bought 20 Thrifty Foods stores in 2007 for $260 million. Today it owns 31 Thrifty Food stores, and have continued to operate them under the Thrifty brand.
The purchase will put Sobeys solidly in second place in the national grocery market, with annual revenues of $24 billion and $1.8 billion in owned real estate.
Loblaws, which operates Superstores in B.C., has annual revenue of $31 billion, Gray said.
Safeway in Canada has spruced up their stores a bit, but nothing Earth-shattering. They’re not the low-cost provider, they’re not the freshest, they’re in the middle. But the one thing they do have is a lot of real estate.