The recent acquisition of Safeway Canada by Sobeys sparked fears over job losses and store closures across Alberta.
But while some neighbouring grocers could close their doors in the future, the company may also look at an aggressive expansion to further secure its place in the western Canadian market, said Paul McElhone executive director at the University of Alberta School of Retailing.
“This now makes them the largest retailer in Alberta, but there is still lots of opportunity for them to expand,” he said.
“Within the province, within British Columbia, within Saskatchewan. Those are the best markets right now.”
Empire Co., parent company to the Sobeys grocery chain, recently bought Western Canada grocer Safeway for $5.8 billion. Safeway has 223 stores across Canada and 29,000 employees. The deal positions Sobeys as the leading grocer in Western Canada and the largest one in Alberta.
St. Albert has two Safeway and one Sobeys locations, as well as a Sobeys liquor store and a Safeway gas station. The local Sobeys and one of the Safeway locations are located across from each other on St. Albert Trail.
“They have a number of those situations where there is a Sobeys and a Safeway either in the same suburban mall or across the street from each other,” McElhone said.
“They will have to reassess their real estate and I think over time it might be an opportunity for them to sell off some of these holdings. They would obviously sell off the older ones, not the newer ones.”
Retail space for grocers in Western Canada is limited and while some non-food companies may be interested in locations that are 40,000 to 60,000 square feet in size, McElhone said there are few retailers that can absorb that kind of space.
Food stores from the United States are now looking to get a foot in the door in Western Canada and the market place is big enough to support them, he said. Much like Target sold former Zellers locations to competitor Walmart, Sobeys could make good profit from selling real estate to other grocers.
That shouldn’t worry employees. McElhone expects Sobeys will restructure senior management positions first to avoid duplication.
“You still need bodies to work in the store because you need people to fill the shelves,” he said. “You need people to unpack and to handle customer service. Those are the people that are making you money.”
Andrew Walker, spokesperson for Sobeys, said the company is now in a regulatory review period with the competition bureau. It was still too early in the process to speak to specific stores or groups of stores, he said.
“What I can say is that we made the acquisition last week because we want to keep as many stores as possible to serve the needs of our customers,” he said.
The United Food and Commercial Workers (UFCW) of Canada union has been in contact with Sobeys and Safeway ever since the takeover. Until Sobeys ends its review with the competition bureau they cannot foresee any changes though, said spokesman Paul Meinema.
“Both employers have recognized and made statements that they know what the employee’s terms and conditions are and that there are collective agreements in place,” he said.
“And they will honour and respect those collective agreements and the terms of conditions of our members.”
Meinema added they have no reason to doubt Sobeys commitment to these conditions.
The union represents about 24,000 Safeway members across Canada and northern Ontario. The majority of its 18,000 Sobeys members are located in Quebec and Eastern Canada, the former stronghold of the grocery chain.
He could not speak to the specifics of the collective agreements in place with employees as they differ for most stores and jurisdictions. But the union would represent them to the best of their abilities, he said.
“Ideally our members are well represented, workers are not impacted by the sale and it’s business as usual,” he said.
McElhone does not expect any changes taking place for at least six months to a year. Once they finish the review with the competition bureau the stores will still have to consider whether to run under one or two banners. If they continue with both banners they may not close many stores, he said.
Sobeys is recognized for its private labelling but Canada Safeway also has a production and packaging system that extends beyond the store’s sales.
“Safeway already does all the packaging and so on for Green Giant peas and corn. What is going to happen to that business?” he said.
Consumers may in fact benefit from the takeover, he added. Sobeys announced that it would save $200 million in expenses through the acquisition of the Safeway stores.
McElhone said these savings would enable them be more efficient and consumer driven, which may also affect food prices.
“If they are able to cut $200 million out of their expenses then it’s going to allow them to hit the market and see if they can be more competitive,” he said.
