SOBEYS PUSHES WEST

ELLIOT ZWIEBACH

STELLARTON, Nova Scotia -- Sobeys here plans to continue to move beyond its core markets in Atlantic Canada with further store expansions into Ontario and Quebec.

But rather than concentrating on small, rural locations in eastern Canada -- as has been its past practice -- it now plans to move for the first time into several medium-sized cities in suburban areas, Douglas Stewart, president and chief operating officer of the 120-unit chain, told SN Global.

Sobeys anticipates opening one to three stores a year in Ontario and one to three in Quebec over the next few years, Stewart said.

"We have little interest in going into overstored areas, or in putting in large numbers of stores just for the numbers'

sake," Stewart said. "We'd much rather build on our own terms by expanding in areas with growth possibilities." To that end, he said, Sobeys plans to open a 60,000-square-foot store in Ancaster, Ontario, adjacent to a Price Club outlet, late next year and a 43,000-square-foot store in St. George de Beauce, in southeastern Quebec near the U.S. border, earlier in the year.

Ancaster has a population of 350,000, while St. George de Beauce has a population of about 50,000, which is typical of the markets Sobeys serves in Atlantic Canada, Stewart said.

Nearly 100 of Sobeys' 120 stores are located in Atlantic Canada -- an area comprised of Newfoundland and the three Maritime Provinces (Nova Scotia, New Brunswick and Prince Edward Island).

In the last few years, Sobeys has moved outside its core area to open 10 stores in Quebec and 12 in Ontario, mostly in smaller cities.

The 10 Sobeys stores in Quebec are in the Gaspe area, "but now we're looking further west, to some larger population centers, where we expect to be well accepted and where we feel we can grow the business," Stewart said.

"We've been in Quebec for quite a few years, but we've only recently decided to commit ourselves to expanding more rapidly and developing our business there further because we've had good consumer acceptance." As it moves into larger markets, it expects its stores there to become larger, Stewart said. "Of late, most of our stores in eastern Canada have been approaching the size of our stores in Atlantic Canada," he noted.

"We had been opening stores in the range of 40,000 square feet due to the size of the markets we were in. But as we move into bigger markets, we need to build bigger stores."

Sobeys, a division of Empire Co. here, operates full-line supermarkets offering everyday low prices, with a strong emphasis on perishables but fairly limited general merchandise sections and very few pharmacies.

Stores average 30,000 square feet to 35,000 square feet, though newer stores include 10 units with more than 50,000 square feet and two with more than 60,000.

Of its 12 stores in Ontario, seven operate under the Sobeys name and five under name Calbeck's, a company Sobeys acquired five years ago.

The chain already has replaced two former Calbeck's with Sobeys outlets, and Stewart expects to replace the remaining five Calbeck's with Sobeys stores in the next couple of years.

Besides Sobeys, the company operates 15 stores in Atlantic Canada called Lofood, a limited-assortment warehouse store. "We will expand that format where it makes sense," Stewart said, "but we're not committed to a huge expansion -- maybe one or two more in 1995."

Sales for the fiscal year ended last May were approximately $1.7 billion U.S., including volume at the retail stores and a wholesale food company. Stewart declined to indicate what percentage of sales were accounted for by the stores alone.

Atlantic Canada occupies an area about as large as England and West Germany combined, Stewart indicated, but with a population base of only 2.5 million, compared with 120 million for the two European countries.

The Sobeys-Lofood combination is the dominant player there, with a market share of 36%, compared with 22% for Loblaw Cos. and 10% for Oshawa's IGA stores.

Stewart said Sobeys has been able to achieve the No. 1 market position in Atlantic Canada over the past 15 years "by operating in the area in which we are based and remaining close to the marketplace."

The company hopes to achieve the same results by operating on a decentralized basis in other parts of Canada, he added.

Although Loblaw has been a presence in Atlantic Canada for several years, it has become more aggressive in its local expansion in the last few years, Stewart noted, resulting not so much in added pricing pressure for Sobeys but in pressure to invest in newer facilities, Stewart acknowledged.

"We're taking an aggressive look at our stores and spending a lot of money making sure the existing facilities are up to snuff," he said. "We're enlarging where we can or where it makes sense, and in some cases we're replacing older stores with new units."

Sobeys plans to open four new stores in Atlantic Canada in 1995 and to continue its aggressive remodeling program there, with three replacement stores and five expansions, Stewart said.

Most of the Sobeys stores are self-supplied. However, a company-owned wholesaler, called TRA Newfoundland, based in St. John's, Newfoundland, is used to service stores there, and Provigo services stores in Quebec. (Sobeys owns a 24% stake in Provigo.)

With a strong commitment to new technologies, Sobeys has been active in efforts involving Efficient Consumer Response, Stewart said. "Any supermarket company that wants to be competitive has to spend time, energy and capital on technology because the world is moving so quickly." "So we're moving ahead on some ECR programs, including Electronic Data Interchange, category management and continuous replenishment."

One technologically oriented program that Sobeys offers consumers is Club Sobeys, a frequent-shopper program introduced at 18 stores in Monckton, New Brunswick and Halifax/Dartmouth, Nova Scotia, last year. The program will be added to 25 more locations -- in Ontario and Nova Scotia -- before the end of the calendar year, Stewart said.

"It's helped us to understand our customer base better and given us the potential to relate better to that base," he pointed out. However, he declined to pinpoint what merchandising changes might result.

Sobeys introduced a debit card program at five stores last year in Monckton, New Brunswick, that will be rolled out chainwide later this year. It was a pilot program to gain experience in the technology, he said, although it didn't have a switch system to encompass a network of banks.

With the switch in place, Sobeys has introduced the debit program in Quebec, "and it's been quite successful. It's appealing to customers and to us as well because it's efficient and effective and doesn't add much additional cost."