As Sobeys Inc.’s competitors ramp up their e-commerce efforts amid a growing grocery delivery war, the grocer’s parent company said Wednesday it’s resisting pressure to rush into the market, instead preferring to focus on the long game.
“I see this as a marathon, and we’re in the first 100 meters,” Empire Co. Ltd. CEO Michael Medline told analysts on a conference call to discuss its better-than-expected third-quarter results.
“I’d rather be up and running with our system today, but I don’t want to put mediocre systems across the country when there’s much more modern ways to win over the customer.”
Empire is waiting for the spring of 2020 to roll out its online grocery business that will be run in partnership with British firm Ocado, even as its Canadian peers and multinational giants that are snapping up Canadian market share, such as Walmart and Costco, race to launch convenient click-and-deliver grocery options in order to fight off online behemoth Amazon.com.
Walmart announced Wednesday it is expanding its same-day online grocery delivery service to more than 40 per cent of U.S. households, or 100 metro areas, by year-end. In Canada, Walmart Canada currently offers grocery pick-up services in five major markets and plans to double the number of locations this year. It is also experimenting with online grocery delivery in some Greater Toronto Area locations with plans to launch a delivery service in Vancouver this summer.
And Costco is exploring ways to deliver groceries to Canadian consumers after introducing a similar service to U.S. customers last October, according to a report in the Financial Post.
Rival Loblaw Companies Ltd. has launched home delivery in Toronto and Vancouver, and Metro Inc., which offers delivery in the big Quebec markets, said it is looking to expand its online grocery offerings to Ontario this year.
But Empire’s chief financial officer Michael Vels kept expectations tempered by saying “the e-commerce online offering will not be immediately profitable,” adding the company anticipates it will become a “growing and vibrant channel.”
Medline indicated the company’s e-commerce efforts will initially be concentrated on the Greater Toronto Area because “that’s a market we need to and will win,” but he acknowledged “there are three or four other markets in the country that we need to look at.”
He wouldn’t say how fast Empire will launch in other markets, but revealed that the company has secured its first customer fulfillment centre in Vaughan, Ont., a few hundred meters from its existing automated distribution centre.
The fulfillment centre will be kitted out with Ocado’s signature robotics, which U.K. reports say can put together an order of more than 50 items within five minutes.
“The issue for e-commerce in this country, in Canada, is that no one has given the customers a fantastic option,” said Medline.
“It makes sense for us by offering customers something that they just never have seen before. We will have the highest market share of any grocer.”
Medline’s more immediate concern was the increased pressure on sales from competitor Loblaw’s “curious” $25 gift cards offered to consumers after revealing its participation in an alleged bread price-fixing scandal, in which it implicated Sobey’s.
The company had better-than-expected results for its third quarter as its revenue and profits improved compared with a year ago.
It earned $58.1 million, up from $30.5 million or 11 cents per diluted share in the same period a year ago.
Sales totalled $6.03 billion, up from $5.89 billion, while same-store sales excluding fuel increased 1.1 per cent.
On an adjusted basis, Empire says it earned 33 cents per diluted share. Analysts on average had expected Empire to report an adjusted profit of 25 cents per diluted share, according to Thomson Reuters.
Companies in this story: (TSX:EMP.A)