Sobeys parent company plans ahead for grocery war as competitors rush to market

Sobeys parent company plans ahead for grocery war as competitors rush to market
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As the grocery wars heat up with companies across the country ramping up their delivery and e-commerce efforts, Sobeys’ parent company is looking to play the long game.

Empire Co. Ltd. is waiting for the spring of 2020 to roll out its online grocery business that will be run in partnership with British firm Ocado, said CEO Michael Medline on an earnings call Wednesday.

“I’d rather be up and running with our system today, but I don’t want to put mediocre systems across the country when there’s much more modern ways to win over the customer.

“I see this as a marathon, and we’re in the first 100 meters.”

Empire’s chief financial officer Michael Vels further tempered expectations by saying “the e-commerce online offering will not be immediately profitable,” but that the company anticipates it will become a “growing and vibrant channel.”

The company’s e-commerce efforts will initially be concentrated on the Greater Toronto Area because Medline indicated “that’s a market we need to and will win,” but he acknowledged “there are three or four other markets in the country that we need to look at.”

He wouldn’t say how fast Empire will launch in other markets, but revealed that the company has secured its first customer fulfillment centre in Vaughan, Ont., a few hundred meters from its existing automated distribution centre.

The fulfillment centre will be kitted out with Ocado’s signature robotics, which U.K. reports say can put together an order of more than 50 items within five minutes.

“The issue for e-commerce in this country, in Canada, is that no one has given the customers a fantastic option,” said Medline.

“It makes sense for us by offering customers something that they just never have seen before. We will have the highest market share of any grocer and we’ll be competing with you know who.”

The company competes directly against Loblaw Companies Ltd., which launched its own home delivery service in December and who Medline mentioned is increasing pressure on sales with “curious” gift cards.

The rival chain began offering customers $25 gift cards after revealing its participation in an alleged bread price-fixing scandal.

On the effect such promotional offers are having on Empire, Medline said, “I don’t want to overplay it. It is not intense,” but acknowledged that the volume of competitor offers it saw in the last quarter was more than Ontario and the western provinces have seen in the last 12 months.

“We will stabilize margins, but we will remain competitive,” Medline said, stressing that Empire will put its focus on basket size, which it announced has been improving.

He also revealed that the company had better-than-expected results for its third quarter as its revenue and profits improved compared with a year ago.

It earned $58.1 million or 21 cents per diluted share for the quarter ended Feb. 3.

That was up from $30.5 million or 11 cents per diluted share in the same period a year ago.

 

Companies in this story: (TSX:EMP.A)

Tara Deschamps, The Canadian Press

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