Loblaw Companies LimitedBusiness History
Loblaw Companies Limited (Loblaw) is a food distributor and is a provider of drugstore, general merchandise, and financial products and services. The Company is a subsidiary of George Weston Limited (Weston). Through its portfolio of store formats, Loblaw provides its customers with a range of products and services to meet the everyday household demands of the customers. It offers Canada’s strongest control (private) label program, including the President’s Choice, no name and Joe Fresh brands. In addition, through its subsidiaries, the Company makes available to consumers President’s Choice Financial services and offers the PC points loyalty program.
History – The first Loblaw Groceterias store opened in Toronto in 1919. By 1928, there were 69 stores in Ontario and parts of the United States. In 1947, W. Garfield Weston the president of George Weston Limited, acquired 100,000 shares of Loblaw stock from company co-founder J. Milton Cork. George Weston Limited gained controlling interest in Loblaw by the early 1950’s. Loblaw Companies Limited was incorporated in 1956 and acquired Loblaw Groceterias in Ontario and Loblaw Inc. in the US. W. Galen Weston is appointed Chief Executive Officer in 1972. The No Name brand was introduced in 1978. The first Loblaw pharmacy opens in Winnipeg in 1981. In 1984, the President’s Choice brand is launched and in 1989 the President’s Choice G.R.E.E.N. brand is launched. In 1994, President’s Choice brand begins nutritional information labelling more than a decade before Health Canada’s mandate. PC Financial is launched in 1998 and the Provigo grocery chain in Quebec is acquired. PC Organics brand is created in 2001, with Organics baby food introduced in 2002. The PC home line of home accessories is launched in 2002. In 2005, the PC Blue Menu line is launched with over 80 healthy living products. Mobile phone and long distance services are introduced in 2005. The Joe Fresh Style line is added in 2006. The Presidentschoice.ca website is launched encouraging user contributed content with reviews on products used to improve and develop new products. Loblaw’s commitment to being environmentally responsible is demonstrated by the introduction of the PC G.R.E.E.N. reusable shopping bag in 2007, its environmental flagship Superstore in 2008 that reduces refrigeration discharge by 85%, and it installed its first wind turbine that produces one quarter of the annual electricity in the Porter’s Lake, Nova Scotia Atlantic Superstore.
Business Growth
Current Management
| Galen G. Weston | Executive Chairman of the Board |
| Vicente Trius | President |
| Sarah R. Davis | Chief Financial Officer |
| Peter K. McMahon | Chief Operating Officer, Executive Vice President |
| Judy McCrie | Executive Vice President – Human Resources and Labour Relations |
| Gordon A. M. Currie | Executive Vice President, Chief Legal Officer, Director |
| Roland Boudreau | Executive Vice President – Special Projects |
| Jocyanne Bourdreau | Executive Vice President – Maxi et Maxi et Cie |
| Mark Butler | Executive Vice President – Brands |
| Gordon Chem | Executive Vice President – Extra Food and Superstore, West and Ontario |
Production
Main products – Groceries, Joe Fresh Style (clothing), Financial services (banking, credit cards, mortgages), Pharmacy, Home wares
Main Market – In Canada, the grocery industry is an oligopoly with 3 businesses controlling over 65% of the market. However, it is a very competitive industry and prices are kept low by having each competitor carefully considering the reactions of the others. This has in the past led to price wars, which have resulted in financial losses.
Supply and Demand of one product – Food is a necessity of life, but where consumers purchase their food from can vary depending on the prevailing economic conditions. Loblaws is very well positioned by diversifying their product offering from low cost products (No Name), to higher quality low cost products (President’s Choice), to high quality higher priced national brands. However, due to the kinked demand curve of a non-collusive oligopoly, there is little room to increase prices. With the increasing transportation costs (fuel) this results in smaller profits unless significant reductions in other costs (wages, utilities, administrative, etc.) can be achieved. This will encourage capital investment in warehouse and IT systems that increase efficiencies company wide.
Significant fixed and variable costs – The main fixed costs are for their stores, warehouses and distribution centers, labour and transportation. Some of the variable costs include advertising, maintenance, utilities, and production costs for private label brands.
Competition
Strongest Competitors – Metro Inc., Empire Company Limited (Sobeys), Safeway Inc., Walmart, Costco
Competitive Advantage – Loblaws has built a distinct and recognizable brand and has diversified into products and services that are required by everyone such as financial services and clothing and offer them at low cost to consumers.
Summary
Despite being the largest entity in the oligopolistic retail grocery industry, Loblaws is experiencing stiff price competition from its competitors. It has succeeded to date due to its innovative products, responding to customer demands for low prices, good selection and quality. It also offers a range of products providing a one stop shopping experience. It will be interesting to see how the entry of Walmart into the Canadian grocery industry will affect the long term success and profitability of Loblaws.
Sources
Top Canadian Retailers Market Share graph:
Official Website
Business information
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