The quick and easy criticism of the grocery industry is that the Big Three — Loblaw Cos. Ltd., Empire Co. Ltd. and Metro Inc. — tend to move in lockstep with one another. But Michael Medline blew that out of the water calling new supplier fees implemented by Loblaw and Walmart Canada to pay for their own infrastructure upgrades “repugnant” and “hard to believe.” He then became the first grocery exec to agree that a code of conduct between food sellers and suppliers was needed.

Medline, joined Empire after a long career at Canadian Tire Corp. Ltd. which gives Medline a different perspective on the grocery business, one that was likely needed when he arrived at Empire in January 2017, since it was still struggling mightily to digest its $5.8-billion acquisition of Canada Safeway Ltd. four years earlier. At the time, the decision to hire Medline was treated a bit skeptically, given his short stint as the boss at Canadian Tire and his lack of grocery experience. “… People always think that if you’re in automobiles, you should stay in automobiles. But 90 to 95% of retail is retail,” Medline says. “You can take learnings from different experiences and be able to apply them and do pretty well.”

Medline quickly got to work, shuffling management and cutting staff while launching an ambitious three-year, $500-million cost-cutting plan called Project Sunrise in May 2017. That November, 800 office jobs were eliminated. But aside from costs, Medline says the regions weren’t coordinating and weren’t taking advantage of the expertise on staff. “The bones of the company were really strong, in my opinion,” he says. “The biggest thing we had to do was become a national company. A company is aimless without a strategy. If everyone doesn’t know what you’re aiming at, you can’t make decisions, you can’t do things.”

Project Sunrise seems to have succeeded. Empire posted net earnings of $191.9 million on revenue of $7.35 billion in its first quarter of fiscal 2021, compared to $130.6 million and $6.74 billion a year earlier. Medline also launched a new three-year strategy, this one called Project Horizon, focusing on growth and accelerating the company’s e-commerce efforts, which began with the launch of its Voilà delivery platform in late spring, initially in the Greater Toronto Area.

E-commerce is a new battleground, says Stefan Read, vice-president, engagements and thought leadership, at consultant Jackman Reinvention Inc., one that Empire is very well-positioned to continue its growth. “Sobeys appear to have timed the launch of their delivery platform, Voilà, in the GTA perfectly,” he says.

Loblaw was ahead of both its major competitors in e-commerce, but Medline believes Empire’s $1-billion investment in infrastructure and 2018 deal to bring in U.K.-based Ocado Group’s full scope of online ordering, fulfilment automation and delivery services will pan out in its favour. Medline says having dedicated customer fulfilment centres — or, dark stores, as they’re called in the industry — for e-commerce works better than the store-pick model some other grocers use, though it is certainly a much bigger upfront investment. He doesn’t think the store-pick model is customer friendly and it’s hard to scale, which makes it harder to make money. Part of Project Horizon is to expand the Voilà service to other parts of the country, which means building other fulfilment centres.

Building such centres means taking a short-term hit on for longer-term gain, something Medline says also applies to new technologies. Empire is also testing smart carts, in-store vertical farming and other innovations. The store, he says, is more important than ever, despite the rise of e-commerce. “A lot of companies are so fixated on growing their e-commerce business and a few other things, even the marketing side, they forget that most of the customer experience is in the store,” he says. “And if you’re not careful, these stores can get aged very quickly and not be up to speed.”

One of the things Medline is most excited about is optimizing space productivity. “We’ve now got, seriously, literally billions of pieces of data. No human being could figure all the data on how people like to shop,” he says. “But now we have a team that’s able to look at all that data, and, as part of the big initiative, be able to lay out our stores better and build better stores based on that data analytics.”

Medline says the company’s brand scores with customers rose during the pandemic, but he still worries about the industry’s relationship with its suppliers. “The relationship between the retailers and the supplier partners is more adversarial than I think is necessary,” he says. “That still bothers me.”

Fixing the grocer-supplier relationship might end up requiring a code of conduct similar to the ones used in the United Kingdom or Australia. But Read at Jackman also sees challenges for the grocers in dealing with their customers, partly because they are more engaged than ever with their food. “That’s something the large grocers seem to be missing, because when we ask consumers where they turn to learn about food — from recipes to cooking skills to new ingredients — grocers aren’t even in the picture,” he says. “That’s a big miss, because it means that grocers like Sobeys are still seen as just a place to go to make a transaction, not as a brand that consumers actually feel some bigger connection to.”

Empire’s data analytics might not be able to figure out that human equation quite as readily as how many linear feet bagels should take up, but Medline says he also relies on the company’s smart merchants and operators. As an example, he says, a store operator in Edmonton during the early days of COVID-19 came up with the idea for a special hour for seniors to shop. Dubbed the Golden Shopping Hour, it was quickly implemented across the country. 

Buying the Farm Boy chain in southern Ontario for $800 million in September 2018 also brought in some new customer-facing skills, as well as expertise in private-label products and produce. Farm Boy customers naturally worried what impact the new corporate ownership would have on the quality of the food and local feel that had made the chain a winner. 

So far, so good, apparently, but Medline is all too aware that some new challenge will rise up soon enough. He says he and his teammates are ready, just as they were during the early days of the pandemic. “One of the key learnings during COVID, and I’ve always believed this, is that in business, you’ve got to move lightning fast, and you’ve got to move without 100% of the information a lot of the time,” he says. “If you wait for 100% of the information, you’re going to be waiting a long time.”

Source: Finanial Post