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May 21, 2019 - Blog Article
Supermarket Safeway to Discount Grocer FreshCo

Some grocery stores that have closed are quickly being replaced, many times by the same ownership. The largest grocer, Loblaw Companies Ltd., continues to report strong annual earnings, but what about the other retailers. How are they performing?

 

 

 

Many Canadians have witnessed the closing of Safeway stores in British Columbia last year; however, few are unaware that the grocer is reopening as a low-cost grocery store chain.  On one side, there appears to be more bad news than good, but in fact, many retailers are repositioning and rebranding their stores, purpose, and missions to meet the demand that is still there. The trend shows that shoppers desire convenience and fewer thrills in order to save money on fresh food.

 

Discount Grocer FreshCo – Who owns the brand?

 

Sobeys, the Nova Scotia-based grocer, is a 100% Canadian owned company established in 1907 and a subsidiary of Empire Co. Ltd. It operates over 1500 grocery stores across Canada. The retailer banner includes the newest FreshCo, Sobeys, Farm Boy, Thrifty Foods, IGA and Safeway.

 

Sobeys rolled out their first FreshCo branded grocery store in Western Canada. It opened April 24th in the Lower Mainland in Mission, and that store employs 100 people.

 

This is not Sobeys first low-cost grocery store as it operates about 95 stores in Ontario. The demand for low-cost food is strong and Sobeys plan to capitalize on it, and by the end of 2019, they plan to operate an additional 12 additional FreshCo stores in four western Canadian provinces.

 

From a consumer perspective

 

Each store closer, results in consumers searching for the next grocer to fill the gap. Until a new grocer with a different name, but same ownership, fills the vacant space. This leaves some to wonder if the store closings are really concerning profits and losses, versus favorable business dealings.

 

By way of example, the Richmond stores that were once occupied by Safeway store closed the summer 2018 following the uncertainty related to workers’ collective agreements. Now it’s less than a year later and the vacancies at Richmond’s Blundell and Broadmoor shopping centers are being filled by FreshCo, the same ownership as Safeway, so it’s only logical to assume that demand for food is not the issue. It’s the underline business operation that is aiding the closures of Safeway as the unionized worker collective agreements appeared to have played a major role in the closings of Safeway stores.

 

From a retail investor viewpoint

 

Demand, supply, and the return on investment are the focus. How you achieve it is unique and based on your goals. The Canadian retail market continues to perform very well in the big cites. There have been a lot of new retailers entering the market over the past few years and a lot of space is getting taken up.

 

In the major urban markets they are experiencing a very low retail vacancy of about 3.0%; however, Montreal, Toronto and Vancouver is dominating much of the growth. This is not surprising as most major markets around the world lead in growth and decline in their local areas, but the real key is the demand. Retailers rely on foot traffic to feed them, so keeping vacancy low especially in the local office and housing market is key to having a customer base for the retailer.

 

Summary

 

Retailers in booming urban areas of Canada are experiencing higher rents and property taxes during a time of lower retail sales. Instead of closing their doors for good, some are rebranding their offering and reopening in the same location. Consumer demand is still there, as consumers remain reliant on grocers for their food needs, there will continue to be demand to tap into.

 

If you need help searching for new retail investments in Alberta, Ontario or Saskatchewan, contact ReDev today!