Canada's Sobeys launching new discount format
by Tim Linen | May 20, 2010
VANCOUVER, BC — Canadian retailer Sobeys Inc. announced May 12 its
further entry into the discount arena with the launching of eight discount
supermarkets under the "FreshCo." banner in Ontario. Each of the stores was
converted from the "Price Chopper" banner, which is another Sobeys' format.
The company claims to have “significantly retooled, refreshed and redefined
discount food retailing” with this new offering. In a press conference via
telephone with the media, Sobeys President and Chief Executive Officer Bill
McEwan explained that the FreshCo. format represents new thinking and is
vastly different than what currently exists in the discount landscape.
“This is discount done right,” he said. “We know we are out in front of the
pack. We claim that ground proudly.”
In explaining the thinking behind the new format, Mr. McEwen said that a
team of Sobeys executives examined the discount format specifically in
Ontario and noted that while that segment has been gaining market share, it
has not changed in at least 20-25 years. Sobeys said that discount retailers
have grown to capture about 40 percent of the market with formats that are
The Sobeys team determined that “discount done right” would include
building a new format from the ground up by listening to consumers and
giving them exactly what they want. The research revealed that discount
shoppers want low prices with fewer compromises. Hence FreshCo., Mr.
McEwen said, has been built to deliver top quality at low prices.
During the news conference and question-and-answer period that followed,
neither he nor FreshCo. General Manager Rob Adams specifically addressed
how that would be done. But they did indicate that one strategy will be to
cater the offerings of each store to the exact demographic of its patrons,
which could result in savings by reduced inventories and reduced variety.
However, the firm’s press release promised that FreshCo. will offer customers
“a larger selection of quality products in a refreshingly different, modern and
clean environment that is not typical of discount grocery stores.”
“Customers have consistently told us that they are tired of having to make the
compromises normally associated with shopping at ordinary discount stores,”
Mr. Adams said. “FreshCo. is about not having to make those compromises.
We insist on the right product at a low price, meaning we won’t trade off
quality for price and our prices are as low or lower than our grocery
competitors. Our FreshCo. promise of 'Fresher. Cheaper.’ really says it all.”
Mr. McEwen said that FreshCo. has been specifically designed for Ontario,
and while he promised rapid expansion of the brand in that province, he said
that there are no current plans to expand into other Canadian marketing
regions. He noted that Ontario has the largest multi-cultural population and
that discounters have the greatest market share of any Canadian province. Dozens of Price Choppers will be converted over the coming months and
years, he said, and Sobeys will also look for opportunities to build new
FreshCo. outlets in Ontario.
Speaking specifically of produce, Mr. Adams said that each produce
department would feature a multi-cultural table display of ethnic produce
items customized to that specific store’s demographics.
During the press conference, both of the chain’s executives emphasized that
the new stores’ appearance is a key component of how the banner is
different from other discount operations.
“When entering a FreshCo. store, customers will immediately experience a
vastly different and improved discount food store,” according to a company
statement. “Customers will first enter the ‘Fresh Hall,’ where they are
surrounded by an abundance of fresh produce. From there, they move onto a
large assortment of local baked goods, which are baked daily for FreshCo.
from community bakeries. Customers are then introduced to an impressive
selection of Ontario cheeses and meats, before being led to a feature aisle
with special savings opportunities on everyday items.”
Mr. McEwen indicated that these fresh departments would be the driving
force behind the new format. He said that the store will not just be a place
that features good prices on bulk items in boxes but will specialize in selling
“triple-A meat and top-quality produce” at those same low prices. The
company claims that FreshCo. is devoting more store space to fresh product
than any of its discount competitors.
The company also said that it would source from local suppliers, including
those that supply fresh seasonal fruits and vegetables from Ontario.
Speaking at the Canadian Produce Marketing Association convention a day
after Sobeys made its announcement, Carman Allison, a numbers cruncher
with The Nielsen Co., said that the foray into this type of format makes
perfect sense for Sobeys.
He said that surveys of Canadian shoppers indicated that they are going to
continue to frequent discount outlets even as the economy improves. He said
that this trend started before the recession began and will last after it passes.
Mr. Allison indicated that the updated format with specific multi-cultural
products also speaks to changing demographics in Canada, as the country is
becoming much more culturally diverse. This trend is expected to continue
for at least the next couple of decades.
In addition, discount shoppers on average are becoming more affluent and
virtually all income segments are shopping that format in increasing