As the Real Canadian Superstore expands eastward, changes are coming to the operation's bread-and- butter western markets.
About to make its entry into Ontario, with plans to also open outlets in Quebec, the discount general merchandise and grocery chain is in the process of restructuring staffing operations originally based in Alberta and British Columbia.
Citing a need to become more efficient and effective in a fast-changing retail environment, Superstore's immediate parent, Westfair Foods Ltd., is shifting its 125-person general merchandise department from Calgary to Brampton, Ont., as of next summer.
At the same time, Westfair's engineering and real-estate teams, about 50 people, will move from Vancouver to Calgary.
Westfair is a division of Loblaw Companies Ltd., Canada's largest food distributor. Loblaw is now expanding its non-food operations as it jockeys for market share with industry discount giant Wal-Mart.
Loblaw's most recent quarterly results, released in mid-November, show general merchandising, in addition to cost-cutting measures, helped it to report third-quarter basic net earnings per common share of 94 cents as compared to 79 cents in 2003, for an increase of 19 per cent.
"Loblaw has been reorganizing over the past few months and will shift the hub of its general merchandising operations from Calgary to the Toronto area - closer to our supplier base and to ground zero in price wars with other grocers and big-box stores," said Geoffrey Wilson, Loblaw's vice-president of industry and investor relations.
"Our decision certainly was not taken lightly," said Wilson, in regards to moving a significant number of people from Calgary to Brampton, where Loblaw's new head-office facility will open, and from Vancouver to Calgary.
"Whenever we look at an opportunity for relocation, we do an awful lot of work.
We certainly appreciate that there are family, schools and children involved. We do a lot of analysis." The company said it hopes all affected personnel will make the transition.
"While this restructuring is necessary for our business, we are extremely sensitive to the needs of our employees at this time and we are doing everything we can to assist them," Westfair spokesperson Lori Stene said.
Superstore's Ontario beachhead will be in Ajax, just east of Toronto, where the western-based banner is scheduled for a February opening.
Loblaw president John Lederer characterized the opening as "a giant step forward for this organization." The company's capital program across Canada for next year is expected to be similar to what it spent in 2004, in the $1.2- to $1.3-billion range.
While Calgary will remain the regional hub for its western business and the western head office, Wilson said the move allows Loblaw to align its general-merchandising operations in a similar fashion to its food- procurement group.
"Having both side by side with all the support infrastructure will make it much more effective and efficient.
"Secondly, this brings this group closer to the market where we see huge growth opportunities, namely Ontario and Quebec," said Wilson.
"I'm a bit surprised that they just would move en masse this way and not open a smaller satellite operation in Ontario, test it out and then move it there," said retail analyst Paul Messinger, director of the University of Alberta-based Canadian Institute of Retailing and Services.
"They're taking a somewhat more aggressive and risky strategy because they have an operation that functions here well. On the other hand, they feel the competition is such they have to take aggressive action." The tradeoff, said Messinger, is centralized efficiency and rapid response on one side as opposed to remaining close to all your markets.
"They're moving to the centralized response end of the continuum. Time will tell if there is any penalty to pay by moving away from the western market, though I'm not saying that is wrong," added Messinger.
Loblaw's banners include Fortinos, Loblaw, President's Choice, President's Choice Financial, Your Independent Grocer and Zehrs Markets, in addition to Superstore.
- With files from CP
