Monday, October 21, 2013

Save on Foods Coming to Winnipeg?

Save on Foods in B.C and Alberta
The rumour mill has been going strong ever since the Sobey's announcement of taking over Safeway.

The story goes that the Harper government through the Competion Bureau is going to order Sobey's to sell off some Safeway locations before the government approves the sale. This is likely to include warehouses and manufacturing sites.

The government will not take kindly to a massive amount of people being laid off. Safeway and Sobey's practically square off across the street from one another and barring the Competition Bureau intervention, numerous duplicate locations would be shut down. Not only does such a shut down hurt employees but property owners can be left with large holes to fill. Left to its own ends, Sobey's might pay property taxes or rent on a closed store for some time after just to prevent a competitor from moving into the old spot.

The Empire Group which owns Sobey's knows full well how the Competition Bureau operates. Empire sold their movie theatres in part to fund their purchase of Safeway. The government expressed concern about some of the Ontario movie theatres going to Cineplex so Sobey's sought out a second buyer.

And so it goes. Competition is good so it seems unlikely that the closure of so many stores, warehouses and manufacturers is going to stand. And so this is where the rumours start.

As mentioned in this blog, Whole Foods has been sniffing around Winnipeg for locations. Even before the Sobey's purchase of Safeway, the American grocer had a strategy to spread out across Canada. The big problem for Whole Foods is logistics. At present, they use their established store locations to help supply new stores. To move into Winnipeg would create a very long supply chain. To mitigate this problem, the creation of two or three stores would go a long way to bring the costs down. You had better believe that Whole Foods has their eye on the prize which is grab some Safeway locations should they come available.

Sobey's would probably be comfortable selling some locations to Whole Foods and the organic seller caters to a slight different dynamic. However, there is no way Whole Foods will buy all the locations Sobey's will likely have to sell.

This means the likely buyers are Quebec-based Metro and B.C.-based Save on Foods.

Metro is a dominant force in the east but it is still digesting the large purchase of stores in Ontario that include Dominion and A&P. Could they make a play for stores in the west that Sobey's is forced to give up? Most certainly. Will they? It is possible as they will not get this chance again to grab choice locations all across western Canada.

In the case of Save On Foods, there is very little doubt they were moving eastward and the rumour has been for some time that Manitoba and Saskatchewan are on their radar. Just this week Save on Foods moves into the Calgary market for the first time in force. Four stores are planned over the next dozen months. The company already has stores across Alberta.

Save on Foods is owned by one of Canada's richest men Jimmy Pattison of Vancouver. In 1968, he took over the Overwaitea supermarket, a grocer for B.C. since 1915. In 1990, the Save On Foods concept was spun off from the namesake Overwaitea group. Since then, it has been the primary store concept of the company.

The availability of stores, distributions centres and possibly some manufacturing being put on the market by Sobey's would be hard for Save on Foods to ignore. In one fell swoop, they could get great locations and scare Metro out of the market and possibly get the share of consumers that doesn't care for Sobey's as much as they did for Safeway.

It would not be the first time that Jimmy Pattison has rode in to Manitoba to pick up assets in the last while. He has picked up some car dealerships and radio stations in the last year. In some cases, the Competition Bureau has ordered large mergers of radio stations to sell some of their assets and Pattison has been there to scoop them up.

It is likely that the decision on Sobey's takeover of Safeway comes in the next months, possibly the new year.

It could be very possible that Winnipeg sees a few Save on Foods in the 2014 year.

5 comments:

Anonymous said...

Like most Winnipeggers, I ran away to Vancouver when I was young. I always saw that "Overweightee's" store & laughed every time. What a stupid name.

Anonymous said...

If you are going to pretend to know what you are talking about, at least get the spelling right.

It's Overwaitea, not Overweighttea.

Ten seconds on Wikipedia too much for you?

Anonymous said...

I'D RATHER HAVE A SWISS CHALET

Bryan Scott said...

What are your thoughts on the Main Street location? Do you imagine there will be an interested buyer?

Janyce LaMirande said...

hello my name is Janice I am looking forward to a new store here in Winnipeg, with better prices and more meat variety would be nice.
I am hoping to work in your store, how do I apply? Welcome to Winnipeg :)