Tuesday, February 18, 2014

Red River Co-op Takes Over Four Safeways

A newer Co-Op in Alberta
Surprise, surprise.

After the Competition Bureau ordered Sobey's to dispose of 23 store locations before it would approve the takeover of Safeway grocery, I mused that Pattison-owned Save On Foods was the logical buyer. It was no secret that Save-On Food had been pushing eastward from their Vancouver roots and had their eye on locations in the west.

It seemed the only other contender was Metro from eastern Canada finally making a move west. I deemed that that problematic due to supply chain issue since the Competition Bureau allowed Sobey's to hold onto all the Safeway warehouses and manufacturing.

There was one option I thought was a longshot and that was Co-Op moving into grocery again in Manitoba. It was just over 30 years ago that Co-Op tottered on the edge of collapse, partly due to the grocery business.

Co-Op stores in Winnipeg were sold off in 1983 along with everything that was not fuel and gas related. The company hunkered down and licked wounds after for the better part of a decade or more. Slowly, every so slowly, the member owned company crawled back from the brink.

It is hard to say why Red River sank when Calgary Co-Op grocery continued to succeed in the same timeframe. Perhaps it was the resilience of the Alberta economy, better management, better locations...who knows?

The refrain of why we didn't have Co-Op grocery stores like Calgary did was heard more than once over the years.

And yet...was there even a viable way to do it after so many years out of the market? There was a competitive group of private stores already in place and no locations to choose from that were not already served well. It didn't seem to make sense to open one store at a time with tiny margins for profit.

The Sobey's takeover represented that once in a lifetime opportunity to get back in the market and it seems Co-Op ran with it.

And now the company had the strength to do it. Red River Co-Op's membership has soared 70,000 members in the last five years alone to 240,000 members. The multiple locations for the food, carwash and convenience stores has returned over $200 million to members at an average of $200 to $300 a person.

The takeover of the former Safeway locations at 1441 Main St., 77 Vermillion Rd., 850 Dakota St. and 1120 Grant Ave give the Co-Op a good base of already profitable stores in established neighbourhoods. It seems a good bet that Co-Op members will take advantage of buying there but more likely, it seems a whole new group of members will come in as a result of buying there.

It isn't all smooth sailing. The margins on food are so much lower than on fuel. It will be a straight up battle to maintain market share.

The Co-Op in Britain suffered their worst year in 150 years and they have cover grocery, pharmacy and the like. The good results for Red River Co-Op could go off the rails without careful management.

Still, it is hard not to see the positives of this move by Co-Op for the company and for the market.


Myrone said...

Who do you think purchased the Price Chopper store on Stafford?

Anonymous said...

There is a new CO-OP grocery store built in Swan River in 2011. It's a beautiful store. If they do a similar store here they should do well.