Two Views On The Sobeys Store Sale To Overwaitea And FCL

  • In February, Sobeys announced a deal in which it will sell 30 of its stores in Western Canada to the Overwaitea Group and Federated Co-op (FCL) for approximately $430 million.  Total combined annual sales for the 30 stores are approximately $690 million.

    Sobeys was required to sell 23 stores as a result of an agreement with the Competition Bureau for its purchase of Safeway Canada last year.

    According to Sobeys, an additional 7 stores were sold under the agreement “to create a divestiture package that meets the needs of both Sobeys and Overwaitea.”  The stores include five Safeway and two Thrifty Food stores, all in British Columbia.

    Sobeys has also signed a deal to sell its Price Chopper store in Winnipeg to an unidentified buyer.  The sale of this store is still subject to approval from the Competition Bureau.

    Overwaitea Grooming Save On Foods For Sale or Growth?

    Overwaitea Food Group has agreed to acquire 15 locations and FCL has agreed to acquire 14 locations.

    Twelve of the Overwaitea locations are in British Columbia, with the remaining 3 in Alberta.

    Overwaitea operates more than 120 stores under the Save-On-Foods, Overwaitea Foods, Urban Fare, Cooper’s Foods, PriceSmart Foods and Bulkley Valley Wholesale banners in British Columbia and Alberta.

    Darrell Jones, president of Overwaitea, says his company plans to rebrand 14 of the stores it purchased to its Save-On-Foods banner. Another store will be converted to the Cooper’s Foods banner.

    Jones added the company plans on tailoring the 15 stores to the market they’re in.  He emphasized Overwaitea doesn’t have “the cookie cutter approach of big corporate chains.”

    Jones said “There are lots of cultural similarities between the team members and the stores we’re purchasing and us, so it’s a natural fit.”  Over 1,500 Safeway employees will be joining the Overwaitea team.

    After the deal, Overwaitea will operate 144 stores in B.C. and Alberta.

    This is an important deal for Overwaitea and Jones acknowledges that the deal will add to the company’s bottom line.  “They’re all in markets we’re very familiar with. For us to be able to pick up 15 quality stores with quality people, it’s a rare opportunity in the food business, and we’re delighted.”

    OWFG is clearly consolidating its efforts behind the Save On Foods banner with its newest stores in Calgary, Rebranding Price Smart stores to Save On Foods and now adding an additional 15 stores to the chain gives it a great presence.

    With mergers and consolidation prevalent in the Canadian market, could this be the renovation and addition that Save On Foods needed in order to garner the steep price that Jim Pattison has been allegedly asking from suitors. Retailers such as Metro could still be looking for the next growth driver and Save On Foods could even be an attractive footprint for an international retailer with an eye on entering the Canadian market.

    Co-op To Replicate Calgary Success in Winnipeg?

    FCL has agreed to purchase stores in Edmonton (4), Winnipeg (4), and one each in Regina, Saskatoon, Taber, Leduc, Wetaskiwin and Fort Saskatchewan.

    Twelve stores will operate as local retail Co-ops and The Grocery People (TGP), a wholly-owned subsidiary of FCL, will operate two.

    Currently, there are approximately 225 locally owned retail co-ops across Western Canada.  These co-ops operate in more than 500 communities serving approximately 1.6 million active members.  Total retail sales are in excess of $8.8 billion.  Warehouse facilities are in Calgary, Edmonton, Saskatoon, Regina, and Winnipeg.

    Red River Co-op, based in Manitoba, operates 34 Co-op locations in but its footprint was almost zero in the urban Winnipeg market.  This new deal will give Co-op four stores located in Winnipeg, three of which are relatively large and renovated stores.

    Will FCL attempt to recreate Calgary Co-op’s successful format in the Winnipeg market, using these initial four stores as a foothold to something bigger? Red River Co-op has a great mentor in Deane Collinson and the Calgary Co-op team.

    FCL & OWFG Can’t Stand Still

    Federated Co-op and Overwaitea are acquiring desirable locations within the areas they serve with the groundwork already laid.  They can take advantage of using the current employees and infrastructure already employed.

    Now that competition is heating up with online grocery capabilities, grocery available in Target stores, more Wal-Mart stores, Loblaw and other food retailers, Overwaitea and FCL cannot afford to stand still and have chosen to be active participants in Canada’s rapidly changing grocery landscape.

    The deal is expected to close this spring.

     

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