Reference no: EM132834586

Loblaw prepares for the post COVID19 consumer

Although grocery hoarding and stockpiling of goods is beginning to ease, grocery retailers admit there are new shopping behaviours starting to appear due to COVID19. COVID19 is the global virus that has been spreading across nations since January 2020. Concerns over safety are prompting stores to satisfy new customer expectations. For example, Loblaw is spending over $22 million per week to keep its stores safe for both its customers and employees. This includes the cost of extra cleaning, social distancing measures, temporary wage increases, and the installation of plexiglas shields at checkouts for cashier protection. i Loblaw is Canada's largest retailer with more than 1,050 grocery stores and 1,400 Shoppers Drug Mart and Pharmaprix locations.ii While Loblaw's primary business is a full grocery store (including a bakery and fish market), Loblaw also sells some general merchandise such as kitchen goods and its Joe Fresh clothing line. No Frills, a subsidiary grocery chain of Loblaw, sells only basic groceries, focusing on the more economic and price sensitive customer. Both of Loblaw's divisions have seen revenue increases. Loblaw's revenue for the first quarter of 2020 was $11.8 billion, compared with $10.7 billion last year.iii Due to COVID19 and related government restrictions, consumers are eating out less and spending more time at home, requiring the purchase of more groceries, causing some shortages. Consumers have also been stocking up on flour, sugar and other baking items as shoppers engage in baking activities and eating comfort foods. As a large institution, Loblaw had already been investing in online grocery-shopping, selfcheckouts, electronic shelf-labels and much more. While Loblaw is still trying to meet an increase in demand for online shopping, Loblaw had already started to make significant investments in its technology endeavors. Loblaw President Sarah Davis said artificial intelligence and automation has been beginning to change company offices, distribution centers and stores. She says the company is developing a future-ready workforce by making available online training programs in recent months and is planning to spend more than a quarter of a billion dollars over the next five years in an effort to make workers ready for upcoming changes. Davis says the company has created more than 1,000 roles in its digital business.iv Clearly, technology had already begun to play a role in its efforts to be more sustainable. In 2016, Loblaw announced its plan "to reduce its carbon footprint 20 per cent by 2020 and 30 per cent by 2030. The company, which ranks among Canada's top energy users by virtue of its extensive retail network and trucking fleet, [created] an action plan focused on energy-efficient stores and distribution centers, fuel-efficient transportation, and managing refrigerants and organic waste diversion." v Today, trust in the brand and adapting to changes in the competitive environment is critical for Loblaw to remain competitive with other grocery giants, such as Metro, Longos, and Sobeys. Last year, Loblaw had already announced it was launching a new online marketplace selling everything from toys to furniture to better compete with Amazon and Walmart in its online segment.vi "Through this expanded PC Express offering, we will provide (customers) with a curated, edited assortment of products that complement their current shop, from some exciting new vendors," Garry Senecal, Loblaw's chief customer officer, said in a statement. vii 4 | P a g e Loblaw is targeting better ways to meet evolving customer demands for convenience," Bloomberg analyst Diana Rosero-Pena wrote Nov. 15. "These include a click and collect program, home delivery service via Instacart and the addition of fresh groceries and more food items to urban Shoppers Drug locations." viii Today, Loblaw is watching closely for any government assistance that can help make it more competitive. For example, on April 29, 2020, the Ontario government announced it would provide free, emergency child care to essential services workers, including grocery store workers, to ensure essential services remain operating and to have the support they need.ix Both Federal and Provincial Governments have been concerned about the impact of COVID19 on the overall economy. This is an unprecedented time that no government has seen. By May 2020, over 30 million people in the U.S. had applied for unemployment benefits. Economists now predict that this could be the worst recession since the Great Depression of the 1930s.x In Canada, the Bank of Canada reduced its federal borrowing interest rate down to 0.25%, one of the lowest in years to encourage borrowing by both individuals and businesses and to help give the economy a boost.xi The U.S. news is also reporting a possible U.S. meat shortage due to plant closures due to COVID19 which may impact beef exports to Canada, its closest trade partner. Competition has been tough for many smaller grocers, fruit markets and farmers markets who do not sell their goods online. Yet, new competitors are starting to appear. Several Toronto restaurants are now selling basic groceries to reach out to their customer base and meet gaps in the marketplace.xii Loblaw will be watching closely on how these indirect competitors adapt their strategies in the months ahead.

Question:

1. Explain how the 7 external environment forces are impacting Loblaw and the grocery industry. Apply theory and case-specific examples to support your analysis. Ensure you include all examples in the case to provide a detailed and thorough analysis.

2. What management philosophy, classical or behavioural, do you think would best equip Loblaw to respond to the COVID19 crisis? Explain your answer with examples from the case.