FreshCo – Sobeys New Direction in the Ontario Discount Battle

Today marked the opening of the first eight stores under the FreshCo banner – Sobeys response to the lagging performance of their Price Chopper banner in Ontario.

To be clear they needed to act. Both Metro and Loblaw have ramped up efforts behind Food Basics and No Frills respectively with remodels and cleaner stores. Price Chopper stores for the most part, are ex-IGA stores that were not big enough or structurally pleasing to fly the Sobeys banner. It shows. Shopping at a Price Chopper recently felt more like a Soviet supermarket than anything that could compete with Frills, Basics and of course, Walmart Supercentres.

My initial gut feel is that the FreshCo. banner has legs.

Today’s article in the Globe & Mail gives a pretty good overview of the concept. Most important is the focus on fresh ethnic food opportunities and a customized assortment by store. Discounters have played the ethnic game for a while but their fresh assortment has always been lacking despite its high importance to ethnic shoppers. This concept delivers and in a concept borrowed from SDMs Beauty Boutiques (and maybe IKEA) the shopper will be funneled into the fresh section immediately upon entering. It worked for Perfume, why not for Bok Choy?

The ability to change assortment by store is also important. The main ethnic supermarket in Canada, T&T Supermarkets (recently purchased by Loblaw) is a fabulous retailer, but growth has been limited by its mainly Chinese focus. The ability of FreshCo to tailor its offering to each of the various ethnic communities they serve (particularly in the GTA) will without dramatically increasing logistics costs will make it a success.

One can imagine an assortment for communities as diverse as Indian to Korean, Jamaican to Filipino.

FreshCo’s smaller footprint also allows it to be closer to the community it serves.

Keeping the discount format is crucial. Loblaw and T&T do a pretty good job in the high end and Discount is the biggest segment of the Ontario food market. FreshCo will be a hybrid retailer denoted by its slogan “Fresher. Cheaper”.

Finally, one can’t help but feel that some inspiration was drawn from Fresh & Easy – Tesco’s foray into grocery in the Southwest United States.

If these first few stores are successful then expect to see this concept roll-out far and fast across the Price Chopper network. With the pace of competition in Ontario, Sobeys can’t really afford to take a wait and see approach.


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