Sobeys Launches New Systems

JON SPRINGER

STELLARTON, Nova Scotia — Sobeys here said it has completed the installation of a new technology system to serve its stores in Ontario, an upgrade that comes as competition throughout the province reaches new levels of intensity, according to company officials.

Speaking in a conference call last week, Bill McEwan, president and chief executive officer of Sobeys, called completion of the systems initiative “a significant milestone for the organization” and “a cornerstone accomplishment as we go forward to compete in the increasingly competitive Ontario marketplace.”

The 18-month project replaced antiquated legacy systems in Ontario and, according to McEwan, will provide better tools to benefit nearly all aspects of Sobeys' business. Financial benefits of the new system will begin to appear in the coming months, he added. The new system went into effect last month and is currently being used for training purposes.

“It's distribution, it's logistics, it's workforce management, it's fresh-item management, it's information, it's responsiveness, it's revenue generation through merchandising and pricing — it's everything,” McEwan said. “It's a fully integrated system that connects all the dots across our entire network in Ontario.”

McEwan said the systems would eventually be integrated with similar programs in the Atlantic Provinces and then rolled out nationally.

Aggressive competition for price leadership, particularly among discount banners in Ontario, contributed to slight deflation in the province during Sobeys' fiscal second quarter, which ended Nov. 4. McEwan called the market “more aggressive than it has been in years.”

The competitive activity coincides with Wal-Mart's expansion into foods at three locations in Ontario. “Unfortunately, Sobeys is getting its systems-and-process foundation in place just as the market begins a pricing collapse stimulated by preparations for, and reactions to, the Wal-Mart Supercenters,” said Perry Caicco, an analyst for CIBC World Markets, Toronto, in a research note published last week. “That pricing battle might quickly eat up any material benefits that might appear from the [systems] project.”

Caicco estimated prices have begun to decline in Ontario by 2% to 6% as operators brace for the impact of Wal-Mart's expansion into food. The Bentonville, Ark.-based merchant began expanding some discount stores to supercenters last month.

McEwan said he felt Wal-Mart was only partly behind the uptick in competitive activity, however. “We saw real aggressive activity amongst our discounter competitors, and we quickly responded because of our obligation to the discount market.”

Sobeys operates a “half a dozen or so” Price Chopper outlets that are “weak assets” and may be closed or relocated, McEwan added. He acknowledged the company would focus on its full-service stores on a national basis but that “the Price Chopper banner remains an arrow in our quiver.”

Overall, Sobeys said sales improved by 2% to $2.82 billion U.S., with same-store sales increasing 2.4% in the quarter, compared with year-ago results. Profit margins increased slightly. Earnings of $40.9 million increased by 2.8%.

Through the first 26 weeks, the company said net income was up 3.3%, to $84 million, on a sales increase of 1.5%, to $5.67 billion.

Sobey Brothers Named To Canadian Hall of Fame

STELLARTON, Nova Scotia — David F. Sobey and Donald R. Sobey, who grew Sobeys into a national grocery brand, have been named to the Canadian Business Hall of Fame, the retailer here said last week.

David Sobey is chairman emeritus of Sobeys, and Donald Sobey is chairman emeritus of Empire Co., the parent of Sobeys. Their father, the late Frank Sobey, was inducted into the Hall of Fame in 1984.

“It is both a fitting and well-deserved honor that, as Sobeys prepares to celebrate 100 years of serving customers, the two men most responsible for the company's emergence onto a national stage are being honored by the Canadian business community,” Peter Godsoe, chairman of Sobeys' board, said in a statement.
— J.S.