For years, Safeway has been struggling to adapt to the rapidly changing retail food industry in the Lower Mainland.
Many of its stores have simply been the wrong size and prices have been too high in this increasingly segmented market. Safeway has also been slower than its competitors in serving Greater Vancouver's increasingly diverse customer base.
In some cases, Safeway has relied on Starbucks to provide in-store dining options when other chains, such as Whole Foods and Urban Fare, have developed their own unique offerings.
Moreover, Safeway finds itself up against newer players such as Costco and Walmart, old powerhouses within the Jim Pattison Group, an expanding Loblaws footprint in this region, and chains such as Fruiticana, IGA, Thrifty Foods, and Whole Foods.
Still, it came as a shock when the union representing Safeway workers revealed this morning that the chain's Canadian owner, Sobeys, is closing 10 Lower Mainland and Fraser Valley stores on the eve of contract negotiations.
The following locations are on the hit list, according to the union: Lougheed Mall, City Square, Sunwood Square, Point Grey, Royal Oak, Blundel, Broadmoor, Newton Town Centre, Strawberry Hills, and Mission. The news comes after last year's closure of the English Bay Safeway store in Vancouver's West End.
"This is an insult and an outrage,” Ivan Limpright, president of UFCW 1518, which represents about 4,500 Safeway employees, said in a news release. “First, Sobeys squandered Safeway’s market share and sullied a well-loved B.C. brand. Now they want to make our members pay for their mistakes? This isn’t about business: it’s about people’s lives.”
Five of the doomed Safeway locations could become FreshCo discount stores, which is another Sobeys grocery brand.
Many years ago, I worked in the grocery business. Back then, as today, this industry had razor-thin margins.
Success came from gaining greater market share. In this regard, I recall the Jim Pattison Group and H.Y. Louie being the kingpins, along with Safeway.
The Jim Pattison Group has maintained this strength through an amazingly strong vertical position.
The locally owned retailing giant has Buy-Low Foods to serve the discount market, PriceSmart Foods for those looking for low prices in a more modern environment, and Urban Fare for a more deluxe grocery-buying and dining experience in cities with lots of condo dwellers.
Meanwhile, the Jim Pattison-owned Save-On-Foods has adapted well by offering competitively priced groceries for families in the Vancouver suburbs and in communities around B.C. This is being done through larger and more modern outlets than most Safeways.
The Jim Pattison Group also has a strong wholesale division, which is a foundation for long-term success.
In addition, the B.C.-based conglomerate owns Everything Wine, Choices Markets, Nesters Markets, and Meinhardt Fine Foods. The corporation is providing consumers with a host of options in small stores, large stores, and specialty stores. It figured out long ago that the one-size-fits-all approach doesn't work anymore.
Safeway's problem has been compounded by some of its large stores being in areas with a growing number empty nesters and new Canadians. Outlets in Point Grey and at City Square aren't always as convenient as other grocery stores in their areas.
Other Safeways on the West Side of Vancouver—such in Marpole, at Oak Street and West King Edward Avenue, and at West Broadway and Macdonald Street—have been modernized and will remain open.
Jim Pattison Group stores are in a dog fight
But it's not as if Pattison has a monopoly. Not by any means.
Ontario-based Loblaw is presenting intense competition by going after a multitude of market segments with its own stores.
Real Canadian Superstore targets large families seeking a broad range of ethnic foods; T&T Supermarkets is aimed at those who love Asian groceries; recently, Loblaws City Market has arrived in this region for the high-end crowd; and No Frills goes for urban dwellers seeking bargains.
Loblaw also owns Shoppers Drug Mart, which has been redesigning its stores to sell more groceries at fairly high prices. It's almost like a modern-day equivalent of 7-Eleven, albeit in a nicer milieu but with a similar level of convenience.
It's worth noting that several Vancouver 7-Eleven stores have closed in recent years, another victim of the changing retail landscape.
Loblaw's expansion in the B.C. grocery business is creating new challenges for a B.C.-based retailing giant, H.Y. Louie Co., which owns the MarketPlace IGA chain.
Its sister company is London Drugs, which is an arch rival of Shoppers Drug Mart. So it shouldn't come as a surpise that London Drugs has also gotten more into the grocery game with more food offerings in its stores.
A couple of years ago, Canadian Grocer reported that H.Y. Louie was getting out of the wholesale business, choosing instead to be supplied by Overwaitea, which is a Jim Pattison Group company.
The Jim Pattison Group also bought three MarketPlace IGA stores, converting them to Save-On-Foods outlets.
Adding a new wrinkle to the grocery wars has been the admission by Loblaw that it was involved in an elaborate scheme to fix the price of packaged bread. It's offered customers $25 gift cards to make amends. Loblaw has purported that some of its unnamed competitors were also manipulating the bread market.
However, Save-On-Foods has issued a statement vehemently denying doing this.
"It is important for you to know that we at Save-On-Foods had no knowledge of, nor were we involved in, this illegal activity," it states.
Fruiticana wins over new Canadians
One of the more intriguing success stories in recent years has been Fruiticana. It targets a largely South Asian market but also attracts customers from other ethnic backgrounds. For proof, simply pay a visit to its Fraser Street location.
Founded by Tony Singh, Fruiticana replicates the experience of grocery shopping in India with brands that tug at the heart strings of new Canadians while offering some of the lowest produce prices in the region.
Meanwhile, U.S.-based Whole Foods Market has become a significant player in some high-income areas, including West Vancouver and the West Side of Vancouver.
In this competitive and segmented retail environment, it's been tough for Safeway to retain a strong market share. And without that, it's hard to remain in the grocery business.
In some cases, more money can be made by converting grocery store locations with large parking lots into residential or commercial real-estate projects.
So don't be surprised if the Safeway outlet on West 10th Avenue near UBC's Point Grey campus is eventually the subject of a rezoning application.
It's a raw deal for employees who've given their lives to the company. But unfortunately in an increasingly balkanized grocery industry, it's likely not going to be the last time that something like this happens in our region.More