MOS 4410A Strategy 006

Raymond Leduc

Loblaw Companies Limited

By: Nikhil (Justin) Bansal, Zunnan (Leo) Liang, and Xue (Snow) Hua

Table of Contents

Scope ...... 1 Industry ...... 2 Competition...... 6 Company ...... 9 SWOT ...... 15 Competitive Advantage ...... 16 Value Chain ...... 17 Recommendations ...... 18 Exhibits ...... 20 Bibliography ...... 25

Scope

This report will focus on Limited and its strategy pertaining to the conventional stores. Loblaw operates under approximately 22 market segment banners but this report will focus on Loblaws in the Great Food division as well as Loblaw’s in-store brands. These in-store brands are at many of

Loblaw’s stores regardless of the banner. Also, the report will only discuss the segment and not the financial services segment of Loblaw Companies Limited. We will not be discussing the discount strategy which includes the hard discount division such as

No Frills.

Vision: Loblaw’s vision is to be ’s best food, health and home retailer by exceeding customer expectations through innovative products at great prices.1

Mission: Domestic food, health, and home retailer providing quality and affordable products.

Objectives for 20132:

 Exceeding customer expectations and achieving improved customer feedback

scores with the right assortment, improved customer in-store experience and

competitive prices;

 Offering customized assortment, compelling displays and delivering competitive

value across banners through ongoing development and implementation of strategic

category reviews;

 Capitalizing on its established control brands across food and general merchandise;

1 Loblaw 2012 Annual Report 2 Loblaw 2012 Annual Report 1

 Managing costs across the business with a focus on improved shrink, inventory

turns, labour and administrative expenses to drive efficient operations and provide

customers greater value;

 Investing to improve standards and in-store experience through renovations and

strategically investing in new square footage;

 Capital expenditures to be approximately $1 billion, unchanged from 2012, with

net new retail square footage growth of approximately 1%; and

 Maintain profit levels similar to those of 20123

Industry Porter’s Five Forces

 Rivalry

Rivalry among existing companies in Canada is high. The existence of several domestic competitors including Loblaw, and Metro, make up over half of the market share.

International companies including Wal-Mart, and Target also play a major role in this market. With many sizeable players in the Canadian grocery retail industry, each company faces strong competition.

 Threat of New Entrants

The threat of new entrants is low due to the number of resources needed to establish oneself as a retailer. Starting a retailer requires a large amount of capital and existing retailers have an established brand reputation.

 Bargaining Power of Buyers

Individually, the buyers have little bargaining power with grocery retailers due to two

3 http://www.ctvnews.ca/business/loblaw-lowers-profit-projection-for-2013-1.1541419 2

reasons. Firstly, most people do their grocery shopping at the most convenient location to them. They cannot bargain with the store but are obligated to pay for the price set by the store. Little incentive is shown for a bargain given that the price set by store is not too far off with the industry average. Second, each store provides a loyalty program to maintain their customer base. This creates a switching cost for customers who consider changing their grocery shopping location. Ultimately, staying with the same store becomes the most rationale option for most buyers.

 Bargaining Power of Suppliers

The bargaining power of suppliers is low because the food retailer industry is dominated by a few major players. These dominant players usually dictate the terms of the relationship with their supplier and can afford to switch suppliers fairly easily.

 Threat of Substitutes

There is a low threat of substitutes as people need to shop for their basic necessities such as food and water. These supermarkets provide a majority of the products that most households will require. People do have the option of going to restaurants but this creates two issues. Firstly, eating at restaurants daily is expensive and not sustainable for the family. Secondly, more and more consumers are becoming health conscious so fast-food options do not fit well with their healthy lifestyle.

Porter’s Five Forces demonstrate that the characteristics of this industry are attractive, especially due to a low threat of new entrants, little bargaining power of both buyers and sellers, and a low threat of substitutes.

3

Driving Forces

Demographic: The grocery demand is increasing due to increasing immigration in

Canada. According to Statistics Canada, immigration accounts for approximately 60.0% of Canada’s population growth in 2011.4 Also, because of the multicultural customers, it causes the grocery industry to carry a broader line of products. Moreover, the industry puts an emphasis on promotional expenditures to increase customers’ awareness and thus, purchase more volume.

Socio-cultural: In recent years people have shown an interest for healthier food options and the demand for organic food is increasing rapidly. Some grocery retailers have established a private label or store brand which can save them supplier costs and help build brand reputation.

Economic: With increased economic stability, the income level for people is rising. This factor will lead more people to eat out rather than at home so there are less opportunities for grocery shopping. However, greater income could lead people to purchase more expensive products with higher quality.

Global: Some global grocery retailers such as Wal-Mart and Costco hold a large share of the market and their low prices influence consumers’ choices.

Key Success Factors

 Convenience location

Demographics indicate that it is preferable for a to choose a location near

a dense population. For example, superstores are usually located in a shopping plaza

4 http://www12.statcan.gc.ca/census-recensement/2011/as-sa/98-310-x/98-310-x2011003_1-eng.cfm 4

with ample parking space creating convenience and attraction for consumers.

 Localizing products for consumers

Retailers need to create and launch products specifically for their consumers. This can involve making changes to the store layout to appeal to certain consumer segments.

Furthermore, retailers need to be sensitive to different cultures by customizing their production or food preparation practices to mirror those of their consumers’ backgrounds.

 Efficient supply chains

Retailers need to move inventory rapidly especially when dealing with food.

Innovative equipment can be purchased to improve efficiencies along the supply chain.

 Same Store Sales

Expansion with new stores is good but successful companies have a proportion of sales growth from existing stores (open for a year or more). This is significant because new stores can cause the company to incur losses which in turn, hurt future sales growth.

 Sales per Square Foot

Successful companies are efficient with their store space so that they are able to generate as much sales volume as possible out of each square foot of store space.

An analysis of the industry today and in the future illustrates that Loblaw is in a sound position. The industry has attractive characteristics and the driving forces largely support

Loblaw because its broad product offering includes affordable choices, healthier choices, and ethnic offerings.

5

Competition

Wal-Mart

The global retail giant Wal-Mart entered into the Canadian market in 1994, causing panic to all Canadian domestic retailers including Loblaw who was leading in market share percentage. By definition, Wal-Mart is not the most direct competition of Loblaw. Wal-

Mart operates discount stores that offer a wide variety of goods with very competitive prices while Loblaw offers higher quality goods with relatively less competiveness on pricing. However, Wal-Mart’s competitive pricing has a strong ability to alter some consumers’ behavior because many customers see Wal-Mart as a very tempting substitute.

As a result, it becomes very hard for Loblaw to maintain customer loyalty while fighting a price war with Wal-Mart. As one of the largest competitors in the industry, Wal-Mart has equipped itself with 153 discount stores and 227 supercenters totaling 380 stores in

Canada.5 Wal-Mart’s relentless effort to achieve dominance has been very aggressive.

Most of the 227 Wal-Mart supercenters run for 24 hours a day and seven days a week, which gives them a competitive advantage in opening hours.6 This might not be the most economic approach for Wal-Mart, but by doing so, Wal-Mart will be able to attain more market share, a current focus of Wal-Mart. Furthermore, Wal-Mart has a greater advantage because it can afford to lose the price war.

Wal-Mart has much stronger negotiation power with the suppliers making it unrealistic for Loblaw to start cutting prices. It is never a good idea to compete on things that your competitor has always been good at. Loblaw is lucky to have the customer group

5 http://corporate.walmart.com/our-story/locations/canada 6 http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857 6

a bit distinguished from that of Wal-Mart. Customers who shop at Loblaw expect to enjoy the shopping experience itself. Having stylish store decorations and strict goods arrangement and display policy makes Loblaw the “fashion icon” in this general merchandise industry. At the same time, having quality products contributes to Loblaw’s sound reputation because one expects to be able to purchase products that have the best quality available within the country.

Metro

Montreal-based Metro is the third largest domestic grocery chain in Canada.7 There are 102 “Metro Plus” supermarkets throughout and with an average size of 33,000 square feet, while there are 70 Loblaws stores with an average size of more than

100,000 square feet.8 Due to the significantly smaller size, Metro is able to enter smaller local communities and gain control of grocery sales within that small region. This provides them with an advantage for its geographic proximity. While being convenient on a locational base, Metro stores runs 24 hours a day, seven days a week for all of their branches, making them fully accessible anytime and anywhere. Loblaw’s stores differ from

Metro in that it has much bigger stores and offers a wider range of choices on various products. Loblaw is better suited for customers who are looking to buy many products at once while they can drop in one of the Metro Stores to buy a small amount of goods or at a late time.

7 http://www.theglobeandmail.com/report-on-business/loblaw-warns-on-profit-for-2013-third-quarter- earnings-drop/article15409879/ 8 http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857 7

Sobeys

Nova Scotia based Sobeys has the second largest grocery chain in Canada.9 In recent years, Sobeys has acquired many different banners enlarging their business coverage. After being unsuccessful in one of their store banners, Price Chopper, Sobeys rebranded into Fresh Co., refreshing their market image.10 Sobeys has primarily been focused on cutting costs and improving sales to deal with increasing price competition within the industry.

Costco

There are 82 Costco Wholesale stores in Canada.11 Costco offers a very unique membership fee program so that customers will shop repeatedly at their locations to obtain a cheaper price.12 Customer loyalty at Costco is quite strong considering its relatively high switching cost (having paid for the membership fees upfront). Loblaw sells smaller quantities of goods compared to Costco, which attracts customers to make purchases more frequently. Also, the lack of a “members only” policy makes Loblaw more accessible to the general public.

Loblaw faces relatively small competition from Costco since Costco is a wholesale retailer while Loblaw offers grocery shopping in a more ordinary sense.

9 http://thechronicleherald.ca/business/1163738-taylor-lots-of-changes-in-the-bag-for-sobeys-chain 10 http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857 11 http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857 12 http://www.costco.ca/join-costco.html 8

Company

Uniqueness perceived by the customer Low-cost position

 Differentiation Overall Cost Leadership

Differentiation Focus Cost Focus

The chart above highlights that Loblaws is pursuing a broad differentiation strategy to overcome the five forces and achieve competitive advantage. Loblaws differentiates itself by developing a strong private label, also called store brand strategy. Its President’s

Choice (PC) brand is home to approximately 3,500 products including lawn and garden, beauty and general merchandise products.13 Loblaw’s PC products appeal to customers because they are high in quality and more affordable than national brands. This makes the

PC and private label brands the #1 and #2 consumer package brands in Canada.14

Promoting the quality of the product has allowed Loblaws to move these brands upmarket and create steady demand for them. For example, the Decadent Chocolate Chip Cookie is now the top selling cookie brand in Canada.15

Moreover, there are specialized product lines within the PC line of products in order to target different consumer groups (Exhibit 1). Apart from the main President’s Choice line of products, the brand features: environmentally responsible products, others that are third party certified to meet Canada’s organic standards, those for health-conscious individuals with less fat, less sodium, more fibre or Omega-3s plus, and pet specialty

13 http://www.presidentschoice.ca/en_CA/community/faqs.html 14http://www.raymondjames.ca/en_ca/equity_capital_markets/equity_research/sample_research/docs/Lobla w%20Companies%20Ltd.%20011612.pdf 15http://www.marketnews.ca/LatestNewsHeadlines/OBITUARY:President%E2%80%99sChoiceCreatorDa veNicholDiesat73.html 9

quality food.16 Loblaws positions itself as a one-stop shop where customers can satisfy all of their needs.

Furthermore, customers can be assured that the affordable prices do not come with substandard quality. Loblaws provides healthier alternatives recognizing that consumer preferences have been changing. During 2013, Loblaws will be meeting its target of having all President’s Choice products free of artificial colours and artificial flavours.17 By meeting this target Loblaws will effectively respond to the growing demand for natural products.

The PC family also includes the premium Black Label collection. These 200 unique products offer “an epicurean adventure for people who are passionate about food and seek the ultimate culinary inspiration and experiences, without paying specialty store prices.”18 Therefore, customers can save time and money by purchasing this premium food along with their regular grocery and avoid the trip to a gourmet food store.

Loblaw’s differentiation strategy also includes an offering of ethnic foods as well as the creation of a unique store experience. Loblaw executives understand that competing on price only is not a sustainable strategy. They began to identify new markets such as the ethnic consumer, for Loblaw to target. Loblaw has had these ethnic food offerings at its discount supermarkets over the past several years with a focus on fresh produce such as karela and okra.19 In 2009, Loblaw bought Canada’s biggest Asian food retailer,

T&T Inc., so that it could extend its offering to this growing customer

16 http://www.presidentschoice.ca/en_CA/familypage.html 17 http://www.canadiangrocer.com/top-stories/marketplace-calls-for-differentiation-loblaws-vicente-trius- 15707 18 http://www.newswire.ca/en/story/857809/loblaw-launches-the-president-s-choice-black-label-line-of- fine-food-products-sourced-the-world-over 19 http://www.theglobeandmail.com/globe-investor/loblaw-buys-asian-grocery-chain/article4389458/ 10

segment.20 This strategy makes sense because consumers want localized products. Loblaw is becoming sensitive to certain cultures and launching products specifically for the ethnic consumer. This strategic move will help them tap into a growing market of South Asian

Canadians that spend up to 23 per cent more on groceries than others in Canada.21

Part of the broad product offering includes bringing in food from other areas of the world. The Black Label collection aims to tell a story with each of its products in order to add that to the unique store experience. A majority of products in this premium line are sourced from around the world. For instance, “Black Label Cherry Shiraz jelly comes from a vineyard in Israel and No. 5 Umami paste was developed with British food writer Laura

Santtini.”22 These strategies help Loblaw work on improving its supply chain management so that the right food can come in to stores and meet growing demand. Efficient supply chains are the cornerstone of Loblaw’s strategy as none of the differentiation is possible without the right processes and distribution network to develop high appealing products.

Vincente Trius reports that Loblaw’s supply chain is “consistently delivering above 98.5 per cent of availability across all of [its] stores” and inventories reduced consistently.23

The store experience in Loblaws is created through an emphasis on fresh products, local products, and customer service. Loblaw’s strong private label strategy demonstrates the focus on new food experiences but the location of their products is also a key factor of new experiences. For instance, the Loblaws store at in downtown

Toronto (Exhibit 2) features unique elements: the Artisan oven, an 18-foot wall carrying

20 http://www.theglobeandmail.com/globe-investor/ethnic-consumer-the-goal-for-new-loblaw- president/article578346/ 21 http://www.theglobeandmail.com/globe-investor/loblaw-buys-asian-grocery-chain/article4389458/ 22 http://www.canadiangrocer.com/top-stories/loblaws-pc-black-label-11045 23 http://www.canadiangrocer.com/top-stories/marketplace-calls-for-differentiation-loblaws-vicente-trius- 15707 11

more than 400 varieties of cheese from around the world, an in-store sushi bar, as well as chef-made meals. 24 Loblaw has transformed a memorable venue into a great grocery store that meets demand with selection and quality. The store has received positive reviews with one resident saying “after all the hype I wanted to see what it was really like. I love it. What they’ve done here is make it an experience to shop.”25 The space also includes monuments to the Gardens’ history recognizing that many customers have a connection to those memories.26 This strategy targets people working downtown who may enjoy the experience and be motivated to shop at their local Loblaws. Nonetheless, the store will attract customers that live in the downtown area, cater to the growing condo market, as well as attract students looking for a quick hot meal.27

Moreover, the recent acquisition of by Loblaw for $12.4 billion serves to enhance this customer experience.28 Adding to the one-stop shop experience the acquisition will provide greater selection and allow Loblaw’s store brands to enter Shoppers stores. As location is a key performance indicator, the acquisition allows

Loblaw to tap into over 1000 stores in inner cities that host dense populations.29 Another concern for retailers is the cost of real estate but this deal brings Loblaw’s famous private label brands into small stores primely located in urban areas. Loblaw is less represented in city cores but “the Shoppers Drug Mart stores in English Canada and its Pharmaprix

24 http://www.canadiangrocer.com/top-stories/loblaws-maple-leaf-gardens-store-to-open-nov-30-10313 25http://www.thestar.com/business/2011/11/30/customers_lined_up_as_loblaw_opens_upscale_gardens_sto re.html 26http://www.huffingtonpost.ca/2011/11/30/loblaws-maple-leaf-gardens_n_1121081.html 27 http://www.theglobeandmail.com/globe-investor/loblaw-seeks-to-revive-claim-as-foodie- temple/article4179867/ 28 http://business.financialpost.com/2013/07/16/loblaw-walmart-target-cities/ 29 http://business.financialpost.com/2013/07/16/loblaw-walmart-target-cities/ 12

stores in Quebec have excellent penetration in Canada’s cities and other major urban areas.”30

Financial Performance

Implications of Financial Summary for Loblaw Companies Limited (Exhibit 3)

The compound annual growth rate (CAGR) for 2010-2012 for revenue is 1.24%.

The CAGR for net earnings is (1.87%). These results demonstrate that sales have been increasing but profit has declined and at a more rapid pace than the increase in sales. The market grew more competitive due to double-digit growth by Walmart and Costco forcing

Loblaw to cut prices on many of its products.31 As a result, consumers purchased a higher quantity of products, which increased revenue but the lower margin meant lower profits.

There had been some expenses incurred as a result of restructuring of head office and administrative positions. Loblaw had also invested in customer proposition at $55 million in order to stay committed to its strategy to build better value for its customers.32

Net earnings were also impacted negatively by investments in Loblaw’s information technology systems and supply chain.

Implications for Loblaw’s Consolidated Statement of Earnings (Exhibit 4)

Loblaw’s Consolidated Statement of Compound Annual Growth Rate

Earnings, 2011-2012

Revenue 1.13%

30 http://www.chaindrugreview.com/inside-this-issue/news/08-05-2013/loblawsdm-aims-to-enhance- customer-experience 31 http://www.canadiangrocer.com/top-stories/competition-consumers-hurt-grocery-store-sales-last-year- 21729 32 http://www.loblaw.ca/English/Media-Centre/news-releases/news-release-details/2013/Loblaw- Companies-Limited-Reports-2012-Fourth-Quarter-and-Fiscal-Year-Ended-December-29-2012- Results1/default.aspx 13

Cost of Merchandise Inventories Sold 1.22%

Selling, General and Administrative 4.20%

Expenses

Operating Income (13.58%)

Net Earnings (15.47%)

Selling, General, and Administrative expenses are growing close to four times faster than sales meaning that there are activities being carried out inefficiently.

Furthermore, operating income and net earnings are both declining at a rapid rate of

13.58% and 15.47%, respectively. Stiff competition caused Loblaw to increase marketing efforts to attract more consumers and maintain their competitive position in the market.

Moreover, the restructuring of head office and administrative positions resulted in a $61 million charge.33

Implications for Loblaw’s Consolidated Balance Sheets (Exhibit 5)

Loblaw’s Consolidated Balance Sheets, Compound Annual Growth Rate

2011-2012

Long term debt due within one year 672.41%

Long term debt due within one year poses a huge concern for Loblaw with a growth rate of over 600% for the year. Cash must be saved in order for long term debt repayment which can be achieved through saving more or taking on additional debt. It would be

33 Loblaw 2012 Annual Report 14

important for Loblaw to hold back on expansion projects and consider focusing on its same store sales growth.

Implications for Loblaw’s Financial Highlights (Exhibit 6)

We observed a (0.2%) decline in same store sales for 2012 and saw a compound annual growth rate of 0.79% for retail square footage. The launching of new stores had little negative impact on the same store sales.

SWOT

Strengths

Loblaw Companies Ltd. is the largest Canadian-based grocery store with a consistent brand image. It contains 576 corporate and 451 franchise stores under 22 banners with wide geographic coverage.34 It is known for innovations which relentlessly improve the value and quality of its products. For example, Loblaw recently announced their commitment to only sell sustainable seafood.35 This will add value to Loblaw’s social image demonstrating that Loblaw cares about more than just making profit. Furthermore, their hard discount division supermarkets such as No Frills create affordable options to meet customers’ needs.

Loblaw’s model of private brand positioning is also a significant strength. For instance, Loblaw had $8.2 billion in private label sales in 2010, which represented 26.9% of Loblaw’s sales and 67% of Canadian private label sales.36

34 Loblaw 2012 Annual Report 35http://www.cbc.ca/news/canada/newfoundland-labrador/loblaws-commits-to-sustainable-seafood- 1.1874301 36http://www.raymondjames.ca/en_ca/equity_capital_markets/equity_research/sample_research/docs/Lobla w%20Companies%20Ltd.%20011612.pdf

15

Weaknesses

Loblaw has too many management layers and there is also a high cost of restructuring. Loblaw is only serving a narrow market and has less locations than Wal-

Mart, a major competitor in this market.

Opportunities

There is opportunities for steady expansion through the opening of more stores or geographically. Loblaw already operates under a broad differentiation strategy. It may be able to add a broad geographic appeal by operating internationally.

Threats

Loblaw’s biggest competitor Wal-Mart offers “fresh” food with low prices. This is a major concern as food prices continue to increase. Another threat is that if Loblaw remains as a domestic superstore, there may be high competition from other potential national grocers.

Competitive Advantage Overall, Loblaw is facing stiff competition in this market but it is in a sound position due to its reputable brand image. We believe that Loblaw’s brand image is a strength that is sustainable and a competitive advantage. Loblaw, as the leading grocery chain in Canada, provides high quality food options and caters to the needs of consumers.

The brand image is hard to copy as Loblaw has developed a strong loyal base. Moreover, its brand is very durable. For example, the President’s Choice brand was founded over 30

16

years ago and has become “an institution.”37 The brand image matters to customers because Loblaw has evidently shown concern for their needs. Loblaw executives have worked to develop strong brand collections with variety and even healthier food choices.

Lastly, the brand image is exploitable. Loblaw can leverage the good reputation of high quality products to further extend product lines or garner support for new brands.

Value Chain After constructing the value chain for Loblaw (Exhibit 7), we were able to get a better understanding of Loblaw’s efficiencies and inefficiencies. Loblaw’s inbound logistics involve relationships with its suppliers and its dominance allows it to dictate terms and ultimately, have a reliable supply of goods. Next, the operations management at

Loblaw has greatly improved with huge investments toward management systems such as

Manhattan’s Supply Chain Process Platform.38 Loblaw’s outbound logistics are fairly integrated with the rest of its value chain due to standardized processes and the establishment of four regional planning centres.39 Marketing and sales has focused on improving Loblaw’s loyalty program, PC Plus.40 Lastly, all these elements of Loblaw’s value chain come together in producing excellent service for its customers at each of its retail locations.

This is a great value chain that allows Loblaw to continually achieve a competitive advantage in the grocery retail industry. Loblaw’s executives continue to innovate which

37 http://www.marketnews.ca/LatestNewsHeadlines/OBITUARY:President%E2%80%99sChoiceCreatorDave NicholDiesat73.html 38 http://www.manh.com/resources/press-releases/2012/01/17/loblaw-wins-top-supply-chain-award- progressive-grocer 39 http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Loblaw-Achieve-High- Performance-Supply-Chain-Transformation.pdf 40 http://www.newswire.ca/en/story/1157859/media-advisory-and-photo-call-loblaw-launches-the-pc- plustm-loyalty-program 17

improve infrastructure and make management systems more efficient. With a centralized distribution centre, up-to-date IT systems, and unique in-store experiences, Loblaw’s customers are always satisfied.

Recommendations Although the company objectives are specific, achievable, relevant, and timed, we found that Loblaw needs to make them more measurable. By making the objectives measurable the company can know when they have met their targets.

It is essential for Loblaw to differentiate itself from Wal-Mart and it would be beneficial if they keep going in this same direction. Meanwhile, price competition raises the bar for Loblaw’s store experience requirement; as a result, the implementation of high- standards of store services and quality monitoring should be in place.

Loblaw should increase their local exposure and constantly monitor the competitors’ sales and promotions in order to update its current strategy. It is necessary for

Loblaw to inform the public that it is the ultimate “one-stop” shopping terminal for grocery so that customers will be willing to travel further and purchase more products at once. In addition, choosing convenient locations for the construction of new stores can fight off competition from smaller-sized local stores.

While cutting costs and increasing sales are essential to all retail businesses, it is significantly important for Loblaw to not lose its brand image during the price war. Loblaw ought to remain steady in their long-term strategy by being competitive in cost control without damaging their product quality and store services. Nevertheless, reputation is what keeps Loblaw ahead in the market.

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Despite different target markets, Loblaw needs to monitor and control the price spread between retail and wholesale because having too large of a spread would change customers’ purchasing patterns. For instance, one might be encouraged to switch to wholesale shopping given the considerably large price difference.

Loblaw should allocate sufficient time toward training and development so that its human capital can be most effective. Roles should be refined and performance of individual departments should be tracked against the company’s objectives. Financially,

Loblaw will have to hold back on big scale investments until they have sufficient cash flow. A majority of their cash will be put towards the long term debt due within one year.

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Exhibits

Exhibit 1 – PC Brand Collection

Source: http://www.presidentschoice.ca/content/pc/en_CA/familypage.html

Exhibit 2 - The Loblaws store at Maple Leaf Gardens in downtown Toronto

Source: http://www.newswire.ca/en/story/887001/loblaws-at-maple-leaf-gardens-opens-today

20

Exhibit 3 – Financial Summary for Loblaw Companies Limited, 2010-2012 (in millions, except per share amounts)

Source: Loblaw 2012 Annual Report

Exhibit 4 Loblaw’s Consolidated Statements of Earnings, 2011-2012 (in millions, except per share amounts)

Source: Loblaw 2012 Annual Report

21

Exhibit 5 Loblaw’s Consolidated Balance Sheets, 2011-2012 (in millions, except per share amounts)

Source: Loblaw 2012 Annual Report

22

Exhibit 6 Loblaw’s Financial Highlights, 2010-2012 (in millions, except where otherwise indicated)

Source: Loblaw 2012 Annual Report

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Exhibit 7 – Value Chain for Loblaw

Inbound Operations Outbound Marketing Services Logistics Management Logistics and Sales

24

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