Loblaw Companies - History - Expansion

Expansion

By the mid 1980s, Loblaw Companies Limited had become Canada’s largest supermarket retailer. Much of that success could be attributed to the effectiveness of the company's "control label" or private label program. In the case of President's Choice, a key management strategy had been to create a line of unique products at competitive prices, available nowhere else but Loblaw stores. The company also began extending the brand's market beyond Canada, making international inroads and in particular into the highly competitive American market. By the early 1990s, not only were PC products increasingly available at select U.S. regional supermarket chains, Loblaw was supplying retail giant Wal-mart, marketing President's Choice products under the brand Sam's American Choice, later shortened to Sam's Choice, named after company founder Sam Walton. All indications were that Loblaw's control label program was starting to pay off south of the border:

President's Choice, the upscale private label at Loblaw's supermarkets, has been a resounding success in the United States - and has fired a rebellion of consumers and retailers against highly advertised, and therefore pricey, national brands. Its products have found their way into more than 1,200 stores in 34 states. The biggest deal is with Wal-Mart, which had $73 billion in sales in 1993. Dave Nichol, the man behind President's Choice, reports that Wal-Marts volume on Sam's American Choice and Great Value lines, also developed by Loblaw's, was up 300 percent last year.

Meantime, though, Wal-Mart had announced what media reports likened to an "invasion of Canada," namely the acquisition of 120 Woolco stores across the country. Though Wal-mart was barred from selling the private-label line developed by Loblaw in Canada, the two retailers eventually parted company as they increasingly became competitors in the Canadian marketplace.

In November 1993, it was announced that Dave Nichol, who for the past decade had been so closely associated with President's Choice in terms of promotion and product development, was leaving his senior executive post to become a private label consultant. Initially, both he and Loblaw expressed the desire to continue working together, with Nichol remaining on in the role of PC spokesman. But as Nichol moved forward with plans to develop his own Dave Nichol brand of private label products with Cott Corporation of Toronto, presumably in competition with President's Choice, the relationship deteriorated. Nichol hosted a couple more issues of Dave Nichol's Insider's Report but then vanished from the cover. The November 1994 edition dropped his name to become simply The Insider's Report. While media coverage of the Nichol/Loblaw split had been extensive, it seemingly had little or no negative impact on brand equity. News reports later indicated that Loblaw, post-Nichol,was experiencing stronger-than-ever corporate earnings.

As Loblaw expanded operations in Canada under an array of regional and market segment store banners, by the mid 1990s it divested the last of its retail holdings south of the border with the sale of National supermarkets in St. Louis and New Orleans. At the time, Loblaw president Richard Currie reiterated the company’s objective to move strategically, which included exiting markets if capital could be better deployed elsewhere. He further stated the company’s intent to enter the Quebec market. In 1998, it did so with the purchase of Provigo, the Quebec-based supermarket chain with close to 250 outlets. In order to comply with Competition Bureau concerns, Loblaw sold 47 Loeb stores in Ontario, acquired through the Provigo deal, to Metro-Richelieu and agreed to divest stores in eight other markets. The Provigo acquisition meant that Loblaw had become the leading food retailer in Quebec, with Metro a close second. That same year, Loblaw also made another regional acquisition with the purchase of the 80 store Agora chain in Atlantic Canada. While other food chains, such as the Oshawa Group, struggled to turn a profit, Loblaw kept adding more stores and more square footage through acquisition and new construction:

Loblaw president Richard Currie laughs at the notion that Canada has too many grocery stores. There's a lot of floor space, he allows, but never enough in the large, modern, well-equipped, one-stop shopping supermarkets that Canadians so obviously like. The evidence bears him out. Loblaw keeps expanding its fleet of 900 stores, adding about 10 percent to its floor space and sales each year, while increasing its profit margin.

1998 also saw Loblaw become the first Canadian food retailer to extend its product mix into the realm of banking with the launch of President's Choice Financial. Promoted as a no-hassle, no-fee form of personal banking, conveniently located where you do your grocery shopping, PC Financial kiosks and automatic tellers began springing-up in supermarkets across the country. While Loblaw provided the branding, the service-end was made possible through a partnership with the Canadian Imperial Bank of Commerce, one of the country's biggest banks. Loblaw also promised a new loyalty program that would allow customers to redeem 'points' for free groceries - which later became "PC Points." Within a year, Loblaw would have more than a hundred President's Choice Financial kiosks and bank machines up and running.