"We Sell for Less"
In 1919, Toronto grocers Theodore Pringle Loblaw and J. Milton Cork opened the first Loblaw Groceterias store modelled on a new and radically different retail concept, namely "self serve".[8] The traditional grocery store provided a high level of personal service but was a labour-intensive operation. Customers typically had to wait while a clerk fetched items from behind a counter. Other goods, such as sugar and flour, had to be individually weighed and the order was then tallied by hand and added to the customer’s account. Home delivery, by wagon, was usually included free of charge. Loblaw and Cork, friends from the days when both worked as young clerks in the Cork family grocery store, believed they could cut costs by introducing self service combined with cash and carry. While cash stores were not new, the idea of allowing customers to select their own merchandise was a new concept. The pair had heard of the Piggly Wiggly "self-serving store" in the United States and travelled to Memphis, Tennessee, to see it in operation first hand.[9] With customers allowed to browse freely, pick up their own goods and then pay cash at a central checkout counter, with no credit or home delivery, operating costs were reduced. The two came away convinced that a similar style of operation could work in Canada. But Loblaw was met with scepticism:
In the early days when I started the cash and carry business, I was told that it could not be done, but my contention was that the people of Toronto and Ontario would welcome the opportunity to carry their groceries home, providing I could offer them higher qualities at a much lower price than they were used to paying.[10]
The first Loblaw Groceterias Co. store opened at 2923 Dundas St. W., Toronto, in June 1919. Months later, a second location, at 528 College Street, followed. The ’groceterias’ name was apparently derived from cafeteria – a popular self serve restaurant format.[11] Along with the Loblaw name, the outlets featured big "We Sell For Less" signs across their storefronts. Inside, the stores were clean and well lit, with items neatly displayed and clearly marked:
From the entry, one passes through a turnstile which permits egress only. Just inside are piles of market baskets from which the customer helps himself and proceeds in his quest for food at lower prices. Out in front, the shelves are packed with bottled and canned goods, whose names are household words, all plainly tagged with price. Further back, one finds teas, coffee fancy biscuits and cheese, all wrapped ready to carry home .... The customer having selected her purchases, carries her basket to one of the counters near the point of exit. Here her purchases are quickly totaled on an adding machine and she receives her slip. While she pays the bill her groceries are neatly packed in a larger bag.."[12]
While produce was limited and fresh meats largely excluded from the early stores, sales proved strong. Within its first five months of operation, the chain's second location had expanded its sales room into that part of the store normally reserved for storage. In spite of the success of the new groceteria format, Cork did not feel that traditional, full-service grocery stores were in danger of going out of business since many customers still valued the extension of credit, individual serve and home delivery. A year later, another Toronto grocer, C.B. Shields, joined with Loblaw and Cork.[13] In addition to being a proponent of self serve, Loblaw was also a firm believer in "the fundamentally sound principle of the chain store system"[14] and its ability to deliver better price and superior quality to through its buying power. Three years after the opening of the first store, there were nine groceterias throughout Toronto.[15] The company had also expanded into the United States with Loblaw Groceterias Inc. outlets in Buffalo, New York.
In 1928, with 69 stores throughout Ontario, the company unveiled its new state-of-the-art head office and warehouse at Fleet and Bathurst streets, along today's Lake Shore Blvd, in Toronto. At a cost of CA$1.25 million, the Loblaw warehouse was likened to a "temple of commerce" and hailed as a model of efficiency.[16] One newspaper report described it as, "the most modern warehouse building of its kind in the dominion."[17] The warehouse, which served as a distribution centre and manufacturing depot, included an interior loading dock that could simultaneously accommodate eight railway freight cars and 23 large trucks. It featured its own electric tram railway, four giant ovens for baking a ton of cake and half a ton of cookies a day, huge drums for blending tea, 22 thousand feet of ammonia-filled pipes for refrigeration, and a system of pneumatic tubes for sending messages from department to department. A "punched card" tabulating system, forerunner to today's computer, would be installed for tracking inventory as the first of its kind in the Canadian grocery industry.[18] For Loblaw employees, the warehouse included amenities such as bowling lanes and a billiards room, along with an auditorium for putting on plays. That same year, the American company expanded beyond New York State with the opening of outlets in Chicago, Illinois.[16]
Depression and war
By October 1929, Loblaw Groceterias' rapid expansion had attracted the attention of competitor Dominion Stores Limited, another Toronto-based food store chain. In a letter to its shareholders, Dominion management put forward a plan to purchase a controlling interest in Loblaw, funded by a preferred share offering.[19] Weeks later, though, stock markets around the world collapsed and the proposed acquisition never took place.[9] In spite of the onset of the Great Depression, Loblaw continued to expand, albeit at a slower pace. By 1930, the chain boasted of 97 "spotlessly clean Groceterias" in Ontario.[20] By 1936, that number had grown to 111, but press reports indicated the company had curtailed further expansion in order to increase the scope of its product offerings at the chain's existing outlets. Meanwhile, the company made a partial retreat from the U.S. market with the sale of its 77 Loblaw Groceterias Inc. stores in Chicago, Illinois, to the Jewel Tea Company. The stores had never shown a profit, although they had largely been turned around by the time of the sale. The company retained its 50 stores in Buffalo, New York, which were profitable operations.[21]
Post-war expansion
Store construction, halted during World War II, resumed in the late 1940s as Loblaw undertook a program of "expansion and modernization." Parking lots, a new phenomenon for the chain, became an important design component of the company's "supermarkets" in the post-war era. In particular, Loblaw promoted its new "rear entrance and exit stores," with checkout counters at the back that allowed shoppers, increasingly motorized and suburban, direct access to their cars. Other modernizations included "healthfully-cool refrigerated" air conditioning, introduced by Loblaw in 1949 – the first Canadian grocery chain to do so.[26] In spite of such innovations, the chain still hearkened back to its retail roots with references to the "self-serve" nature of its fruit, vegetable and meat departments.[27]
Garfield Weston
In 1947, a major shift in corporate ownership took place with the purchase of 100,000 Class B shares of Loblaw Groceterias Co. Limited by Canadian industrialist W. Garfield Weston.[28] Weston, president of George Weston Limited, whose interests included baking, grocery wholesaling, and paper manufacturing, acquired the block of voting stock from Loblaw co-founder J. Milton Cork. Although the share purchase did not represent majority control of Loblaw, Weston was able to have his old friend and colleague George C. Metcalf appointed to the board of directors, as well as named vice president and general manager. By 1953, though, Garfield Weston had secured majority control through parent company George Weston Limited[29] and Metcalf was appointed president of Loblaw Groceterias.[30] With Weston in control, a program of rapid expansion, particularly through acquisition, followed as the company extended its holdings beyond Ontario into other regions of Canada and into the United States.
Loblaw Companies Limited
In 1953, Loblaw Groceterias acquired majority control of Loblaw Inc., the former American branch of the company with stores in the State of New York, Pennsylvania, and Ohio, through a purchase of stock from George Weston Limited.[31] That same year, Loblaw also bought the Power Supermarkets chain of Toronto. More noteworthy, though, was its decision to take a 25 per cent stake in Chicago-based National Tea Co., a major supermarket chain with some 750 stores in twelve states, three years later. With an ever-increasing array of retail assets, Loblaw Companies Limited was incorporated in 1956 as holding company for Loblaw Groceterias and the recently acquired holdings south of the border. That same year, Loblaw also announced a major new thrust into Western Canada with 32 supermarkets slated for construction.[32] Other acquisitions followed, including Atlantic Wholesalers in the Maritimes with its associated retail outlets. At its height, Loblaw Companies Limited would represent the third largest grocery retailer in North America.
As large as Loblaw had grown, food retailing remained highly competitive and special promotions and customer loyalty programs were introduced as a way of attracting and retaining consumers. During the 1950s, car giveaways were a popular highlight of many grand openings of new Loblaws supermarkets. In 1959, the company entered the trading stamp wars with its own Lucky Green Stamps. Loblaw president George Metcalf brought store managers together for an early morning meeting in Toronto to make the surprise announcement, informing them that the stamps, redeemable for household gifts, had already been delivered to their stores. While at first quite popular, the program was finally concluded in 1967 as customers increasingly saw trading stamps as an expensive promotion that translated into higher prices at the checkout counter.
Stagnation
During the 1960s, while Loblaw set record sales, corporate profits declined.[34] An era of aggressive expansion had paid off in terms of revenue growth but apparently at the expense of profitability. As shareholders complained about a lack of information from the company, frustrated analysts, unsure as to the corporate structure or holdings, became increasingly reluctant to recommend the stock. Loblaw annual meetings were better known for their distribution of cookies, cake and groceries than information on operating performance.[35] While George Metcalf remained head of Loblaw Companies Limited, chairman W. Garfield Weston began making changes to senior executive ranks, including the appointment of Leon Weinstein, former head and son of the founders of Power Supermarkets, as president of Loblaw Groceterias Co. Limited from 1968 to 1970.[36] Weinstein soon indicated his intent to "stop giving away baskets of groceries at annual shareholder meetings and try to raise dividends."[37] To find out what Loblaws shoppers thought about the chain, Weinstein introduced a questionnaire on his personal letterhead, "asking customers to check-off their complaints," and received 65,000 replies, or three times the number expected.[38]
Reinventing Loblaws
By the early 1970s, Loblaw was struggling under the weight of too much debt with millions of dollars of financial obligations coming due over the next few years. At the same time, its stores were badly in need of refurbishing and sales were in virtual free fall. Within a year, the company's share of the crucial Ontario market had been cut in half as a result of price wars among the major chains. South of the border, things looked somewhat better but only on the surface, with many of the company's supermarkets in large American inner cities in decline. A Canadian royal commission study years later noted "the company's failure to spend sufficient funds on the refurbishing of its existing supermarkets and the opening of new ones," in addition to a dividend policy that could not be justified on the basis of earnings.[40] Loblaw also found itself constrained by various financial arrangements. In particular, so-called "lease and leaseback" agreements effectively prevented it from closing many of its smaller, money-losing outlets. To make matters worse, senior management was often reluctant or intransigent when it came to making operational changes. Faced with the possible bankruptcy of Loblaws, Garfield Weston asked his youngest son, W. Galen Weston, a successful entrepreneur and retailer in his own right, to take a close look at the chain to see if it could be saved. In February 1972, Galen Weston was appointed chief executive officer of Loblaw Companies Limited. With financing secured through a family holding company that freed Loblaw from its leaseback agreements, Weston began rationalizing operations, shutting down dozens of unprofitable stores while remodelling those that remained. "As a 200 store chain, we didn't look very good. As a 100 store chain, we looked very good indeed."[42]
No Name and No Frills
Loblaw also moved to rejuvenate its own private label program by allocating millions of dollars to the development of in-store brands. In 1978, the company joined the "generics" movement with the introduction of 16 "No Name" items, marketed in simple black and yellow packaging. The new line was heavily promoted with advertised savings of between 10 and 40 percent.[46] At a time of high inflation and consumer complaints about ever increasing food prices, No Name proved popular, with sales exceeding the company's own projections, as noted by Loblaws president Dave Nichol:
Since Loblaws introduced its 16 no-name products, it has sold one million units with many repeat purchases. "The suppliers of a number of these products can't keep up with the demand. In several cases, we've sold in two and a half weeks what we originally estimated would be our annual requirements.[47]
When one competing food industry executive was critical of Nichol, noting the irony of heavily advertising No Name when generics typically went unadvertised to hold down costs, Nichol pointed out that Loblaw had not increased its promotional budget but simply redirected its advertising dollars towards the new line. A year later, the number of No Name products had increased to a hundred different items and represented five percent of Loblaws sales.[48]
President's Choice
While the original No Name line-up was promoted as basic, everyday items at considerable savings, Dave Nichol eventually began experimenting with the product line-up by adding more upscale items. Products such as Gourmet Barbecue Sauce, Escargot and imported jams began appearing in the familiar yellow and black generic packaging. When President’s Blend Gourmet Coffee was launched in time for Christmas 1983, it was soon outselling every other grocery item on Loblaws shelves. Nichol concluded that consumers wanted to go up-market and the decision was made to develop an entire line of upscale products under its own private label brand.[51]
Modelled on the Marks & Spencer St. Michael in-house brand, and touted as being equal to or better in quality than competing national brands at less money, President’s Choice was personally endorsed by Nichol as president of Loblaw Supermarkets.
The introduction of the premium line also coincided with the advent of an advertising flyer entitled "Dave Nichol’s Insider’s Report." Based on a California supermarket flyer called "Trader Joe’s Insider’s Report,"[52] and referred to as "a mix of Mad magazine and Consumer Reports, zaniness and food tips, wrapped up in a comic book format,"[53]
Superstore and Liquorstore
The 1980s saw further innovation with regard to store formats. In Western Canada, Westfair Foods, a Loblaw subsidiary, unveiled its first "superstore" in Saskatoon, Saskatchewan, in 1979. Opened under the SuperValu banner, it was later renamed the Real Canadian Superstore. Modelled after the European hypermarket, the "combination store" included a large selection of general merchandise, along with a full supermarket component.
Touted as a "one-stop shopping" destination, the new superstore carried some 30,000 SKUs (stock-keeping units), which expanded to 40,000 over the next decade. The new format not only provided economies of scale and permitted lower retail prices, but also meant that management could build stores on its own terms, rather than be dependent on shopping mall construction. Sudbury, Ontario saw the first Superstore format in 1981 coinciding with the opening of the Sudbury Supermall.
In 1985, with nine Real Canadian Superstores across Western Canada, Loblaw tried to duplicate their success in Eastern Canada with the opening of its first combination store at Pickering, Ontario. Eventually, 13 superstores, four times the size of a conventional supermarket with about a third of the space devoted to general merchandise, were opened in Ontario and the Maritimes. Sales, however, lagged. By 1988, with corporate profits almost cut in half, the company downsized eight of the operations, in some cases changing store banners and leasing out the redundant space to other retailers.[54] "Had Loblaw Companies not owned the real estate, the conversion and sub-leasing penalties might have proven prohibitive."[55]
Expansion
By the mid-1980s, Loblaw Companies Limited had become Canada's largest supermarket retailer. Much of that success could be attributed to the effectiveness of the company's "control label" or private label program. In the case of President's Choice, a key management strategy had been to create a line of products available nowhere else but Loblaw stores.
The company also began extending the brand's market beyond Canada, making international inroads and in particular into the highly competitive American market. By the early 1990s, not only were PC products increasingly available at select U.S. regional supermarket chains, Loblaw was supplying retail giant Wal-Mart, marketing President's Choice products under the brand Sam's American Choice, later shortened to Sam's Choice, named after company founder Sam Walton. All indications were that Loblaw's control label program was starting to pay off south of the border: President's Choice, the upscale private label at Loblaw's supermarkets, has been a resounding success in the United States – and has fired a rebellion of consumers and retailers against highly advertised, and therefore pricey, national brands. Its products have found their way into more than 1,200 stores in 34 states. The biggest deal is with Wal-Mart, which had $73 billion in sales in 1993. Dave Nichol, the man behind President's Choice, reports that Wal-Mart's volume on Sam's American Choice and Great Value lines, also developed by Loblaw's, was up 300 percent last year.[56]
Meantime, though, Wal-Mart had announced what media reports likened to an "invasion of Canada," namely the acquisition of 120 Woolco stores across the country.[56] Though Wal-mart was barred from selling the private-label line developed by Loblaw in Canada, the two retailers eventually parted company as they increasingly became competitors in the Canadian marketplace.
Management shakeup
After almost 25 years at the helm of Loblaw Companies Limited, Richard J. Currie retired as company president in November 2000. John Lederer, a veteran Loblaw executive, took over the top job.[63] As president, Lederer moved forward with a number of strategic initiatives. Administrative functions were consolidated as a new corporate headquarters was unveiled in Brampton, Ontario. Warehouse operations were streamlined with the opening of new distribution centres as the company updated facilities and information technology. And, once again, Loblaw made an effort to offer more general merchandise in its stores in the hope of becoming more of a 'one-stop' shopping destination for consumers – all moves presumably designed to combat the threat posed by a "looming Wal-Mart incursion"[64] as the retail giant announced the opening of more Supercentres in Canada. But as supply chain problems took root, customers began to complain of empty Loblaw shelves and out-of-stock items, while suppliers expressed their frustration coordinating deliveries to distribution centres. Unsold general merchandise began piling up in warehouses. Meantime, key staff, such as company buyers, had quit rather than relocate to the new corporate headquarters. Loblaw began losing money, quarter after quarter, and by the end of fiscal 2005, the company had recorded its first year-end loss in almost twenty years.[64] In September 2006, John Lederer resigned as president of Loblaw Companies Limited and W. Galen Weston stepped down as chairman of the board.
Joe Fresh
In 2006, Loblaw and Canadian fashion designer Joe Mimran teamed up to launch "Joe Fresh" a line of low-cost clothing from contracted suppliers in Asia. Promoted as chic but highly affordable clothing, the new line is sold in supermarket and superstore aisles. Joe Fresh sales soon exceeded the company's own projections and Loblaw began expanding into children's wear, shoes, lingerie, beauty and bath products. In 2010, the first standalone store opened in Vancouver and Loblaw announced plans for 20 outlets across Canada.
Loblaw unveiled a number of Joe Fresh permanent and pop-up stores in New York City and the surrounding region in what one Loblaw executive described as "very much a pilot project."[68] But Mimran, the former co-founder of Club Monaco, spoke less cautiously, envisioning 800 Joe Fresh stores across the United States within five years, with Asia and Europe the next logical international markets to take the brand.[69]
Environment
Under Weston, Loblaw refocused its efforts in the area of corporate social responsibility, and in particularly on the environment, in issuing annual CSR reports.[70] A line of more environmentally friendly GREEN products was launched (considered by many environmentalists and concerned consumers to be examples of greenwashing). Weston appeared in TV commercials to promote "Canada's greenest shopping bag," a reusable grocery bag made of 85 percent post-consumer recycled plastic, designed to reduce the number of disposable bags that ended up in landfill sites by one billion a year. Loblaw also unveiled one energy-efficient, low emissions environmental flagship store in Scarborough, Ontario, and became the first Canadian supermarket chain to install a wind turbine to supply renewable electricity to one of its stores.
In November 2008, Greenpeace alleged that Loblaw was selling 14 out of 15 fish species on that organization's "redlist" of those considered to be the most destructively farmed, and staged protests at some Toronto-area locations.[71] The company denied the allegations,[72] while the accuracy of the redlist itself has been challenged by U.S. government regulators and by the fish industry.[73]
T&T and Black Label
In July 2009, Loblaw extended its presence in the ethnic retail market with its announced purchase of T&T Supermarket Inc., Canada's largest chain of Asian food stores, for some CA$225 million – 191 million in cash and the rest in preferred shares. Founded in 1993, the 17-store chain, with outlets in British Columbia, Alberta and Ontario, recorded more than $500 million in annual sales. T&T CEO Cindy Lee noted that some of the supermarket's customers already referred to it as the "Asian Loblaws."[76]
Loblaw rented a Toronto avant garde art gallery as backdrop to the launch of its new "Black Label" line of gourmet food products. The luxury grocery items, marketed under the President's Choice brand, were showcased via a celebrity chef by-invitation-only dinner party.[77] Promoted as "affordable indulgences," the products range in price from $1.99 to $24.99. "From the smoky bacon marmalade, to the crumbly eight year old cheddar, to the cherry shiraz fruit jelly," the eclectic line-up is designed to compete with specialty stores. Though dubbed "PC Black Label," the brand name does not actually appear on any of the items, with its largely black and white packaging and photography the primary clue to the product line's identity:
"It goes back to our first successful controlled brand product in a yellow and black package with No Name on it. It wasn’t until six years later that we actually put "No Name" on the packaging," Ian Gordon, vice president at Loblaw Brands Limited, explained.
Loblaw has published its own book of recipes. "The Epicurean's Companion" lists an eclectic assortment of dishes prepared using Black Label products including Cheddar Bacon Marmalade Toast and Porcini Glazed Mushrooms with Pancetta.
Maple Leaf Gardens
In 2004, Loblaw Companies purchased Maple Leaf Gardens, a former hockey arena in Toronto. In 2009, the company announced a CA$60 million project, in which it would partner with Ryerson University to construct a flagship Loblaws store at its ground level, as well as a multi-purpose athletics complex (the Mattamy Athletic Centre) for Ryerson in its upper levels, featuring volleyball and basketball courts, and a full-sized hockey rink. These plans had been delayed due to financial concerns, criticism over the purchase by residents, and conditions imposed by MLSE forbidding the purchaser from unduly using the building as a competing sports venue.[79]
The location, Loblaws at Maple Leaf Gardens, opened on November 30, 2011; the 85,000 square-foot store features many historical and architectural features of the old Gardens, including the spot where centre ice once stood. It also features artwork honouring notable events and concerts held at the arena, including murals and a blue maple leaf sculpture (in honour of the Toronto Maple Leafs) constructed from its seating. The store also includes an LCBO location, and a Joe Fresh store.[80][81][82]
Choice Properties
In December 2012, Loblaw announced that it would spin off most of its real estate properties into a new publicly listed real estate investment trust.[84] The move would allow Loblaw to monetize the value of its real estate holdings, invest in its grocery business, by reducing taxes through tax advantages of the REIT structure. Loblaw shares increased 24% on the news.[84] On July 5, 2013, the new REIT, Choice Properties REIT, held a CA$400 million IPO.[85] Loblaw retained majority ownership in the new company.
In February 2018, Choice announced that it would acquire Canadian Real Estate Investment Trust (CREIT), a diversified commercial REIT, for CA$3.9 billion.[86]
Shoppers Drug Mart and Pharmaprix
On July 15, 2013, Loblaw announced that it would acquire Canada's largest pharmacy chain, Shoppers Drug Mart (branded "Pharmaprix" in the Province of Quebec), for CA$12.4 billion in a cash and stock deal. Galen G. Weston indicated the possibility for store brands from the two chains to appear in each other's stores following the merger, and that the merger would give Loblaw greater buying power for health and wellness products. The merger received approval by both shareholders and the Competition Bureau, allowing Loblaw to close the deal on March 28, 2014. Shoppers Drug Mart and its administration will continue to work as a separate operating division of Loblaw Companies Limited.[87]
Following the purchase, the Shoppers Drug Mart loyalty program Optimum was merged with Loblaw's PC Plus program to form PC Optimum.[88]
