Ocado is coming to Alberta
As the COVID-19 pandemic continues to affect Canadians’ food-buying habits, Sobeys owner Empire Co. Ltd. is planning to accelerate the expansion of its e-commerce business.
The Stellarton, N.S.-based retailer announced on Thursday that it will move up construction of a third order-fulfilment centre in Calgary for its online grocery service Voilà. The company launched the service in the Greater Toronto Area this past summer, with plans to launch Voilà under its IGA banner in Quebec and in Ottawa in early 2022. Now, Empire says that it will launch online ordering for store pick-up under the Voilà brand in Alberta next year, and will launch home delivery from the new fulfilment centre in 2023.
Empire had already planned to build four fulfilment centres for the Voilà service across Canada, but is speeding up the expansion to Alberta as demand for online grocery shopping has swelled during the pandemic.
Before launching Voilà, Empire already had e-commerce services in Quebec and B.C. through its IGA and Thrifty Foods banners. The newer service, through a partnership with British online grocer Ocado Group PLC, operates out of vast warehouses that use robotic technology to fill orders to be packed and shipped to customers’ homes. Empire’s e-commerce sales more than tripled in its second quarter, growing 241 per cent.
Empire chief executive officer Michael Medline touted the high customer satisfaction rates for the new e-commerce service on Thursday, taking a shot at online grocery competitors. Voilà is winning customers over “because people do not have access to a reliable service that treats the customer with respect,” he said.
“We are giving Canadians an e-commerce solution they can trust, will show up when expected, and will deliver the products they ordered.”
On Thursday, Empire reported sales of nearly $7-billion in the 13 weeks ended Oct. 31, up 8.4 per cent compared with the same period last year. All of Canada’s largest grocers have seen sales gains this year as people stayed home to curb the spread of COVID-19, and cooked for themselves more often. While people are shopping less often, they stock up on more items during each trip. Empire said that its grocery stores also gained market share in the second quarter.
Empire reported that same-store sales – an important metric that tracks sales growth not affected by new store openings – rose 8.7 per cent in the second quarter, not including fuel sales at its gas stations.
Empire is preparing for a winter during which safety measures related to COVID-19 will continue, including limits on the number of shoppers in stores. The company is planning to install outdoor heaters and shelters at some locations to make customers more comfortable while they wait in lineups. It is also working on ways for shoppers to register in a “virtual queue” so that they can wait in the warmth of their cars until it is their turn to enter a store. Competitor Metro Inc. also signaled in its earnings call last month that it was preparing for outdoor lineups and may need to build shelters.
The company is trying to gain further market share from competitors by improving the productivity of its stores, expanding e-commerce, increasing sales of private label products such as those under its revamped Compliments brand, by opening more Farm Boy stores in Ontario, and by continuing to expand its discount Freshco banner in Western Canada. The company has 255 Safeway and Sobeys locations in the West, about one-quarter of which will be converted to Freshco.
The company reported $14-million in pandemic-related costs in the quarter ended Oct. 31, and said it expects $15-million to $20-million a quarter in additional costs attributable to COVID-19. Last month, the company announced that it would reinstate temporary pay bonuses for some front-line workers in regions where governments have mandated a new round of pandemic lockdowns, beginning with Manitoba and parts of Ontario. Based on current lockdowns, Empire estimates the bonuses will cost roughly $5-million a quarter.
Grocers across the industry are facing “material cost pressures” on some of the items they sell, such as lettuce and poultry, as farmers and suppliers cope with increased costs and supply chain challenges. “These are real, significant commodity increases which are being felt at the store,” Mr. Medline said. Aside from that, the company is “pushing back on price increases,” he added.
Empire reported second-quarter net earnings of $161.4-million or 60 cents a share, compared with $154.6-million or 57 cents a share in the same quarter last year. Empire’s net earnings from food retailing – which does not include investments and other operations, largely in real estate – rose 27.3 per cent to $162.8-million.
NEW: Ocado is coming to Alberta with @VoilabySobeys: our 3rd Canadian CFC! With Empire reporting +241% ecommerce sales growth compared to Q2 last year, we’re more excited than ever to continue powering their online operations with the Ocado Smart Platform! https://t.co/61MC11DzlX
— Luke Jensen (@LukeJensenOcado) December 10, 2020
Amazon has an emerging challenger. Ocado, a British firm, is using AI and automation technology to disrupt the online grocery-delivery industryhttps://t.co/mS6NlwDMNW pic.twitter.com/mQBDdfHhot
— The Economist (@TheEconomist) December 10, 2020
Link to Empire Company Second Quarter Summary (Excerpt Below) >
Voilà
On June 22, 2020, the Company introduced the future of online grocery home delivery to the GTA through the Company’s newest e-commerce platform, Voilà by Sobeys. Voilà is powered by Ocado Group plc’s (“Ocado”) industry-leading technology and fills orders through its automated CFC in Vaughan, Ontario. Robots assemble orders efficiently and safely, resulting in minimal product handling, while Voilà teammates safely deliver orders directly to the customer’s home.
The Vaughan CFC has recently extended its service area to include Barrie and Guelph, already servicing the GTA and Hamilton area. Customers currently choose from a selection of approximately 16,500 products and the Company continues to add products daily. The business is operating to expectations, with strong on time delivery, fulfilment, and customer satisfaction and retention results. Sales are consistently increasing every week since the launch. Construction of Voilà’s second CFC in Montreal was delayed due to a temporary shutdown of non-essential construction in Quebec due to COVID-19.
Construction has resumed and the CFC is expected to be ready to deliver to customers in early 2022. This second CFC will support the launch of Voilà par IGA which will serve major cities in Quebec and Ottawa, Ontario. 115 King Street • Stellarton, NS • B0K 1S0 8
The Company is accelerating its plans for the remaining two Voilà e-commerce CFCs – for a total of four CFCs across Canada. The third CFC will be located in Calgary, Alberta which will service the majority of Alberta. It is expected to deliver to customers in 2023. With only four CFCs, the Company will be able to serve approximately 75% of Canadian households representing approximately 90% of Canadians’ spend.
On September 15, 2020, the Company launched Voilà Curbside Pickup service at three store locations in Nova Scotia and plans to expand to hundreds of stores across the country over the next few years. The store pick solution is powered by Ocado’s technology. Responding to the growth in Canada’s online grocery market, the Company accelerated its e-commerce strategy to be able to reach even more Canadians sooner. The store pick solution will serve customers in areas where future CFCs will not deliver or are not yet built.
Voilà had a $0.05 and $0.10 dilutive impact after tax on earnings per share in the second quarter and year-todate, respectively (2020 – $0.01 and $0.02) and is expected to have a dilutive effect of approximately $0.20 after tax for all of fiscal 2021 (2020 – $0.04).
