TUESDAY DEC 10 @ 730 AM: Empire wants to crack the Toronto grocery market and Farm Boy is its secret weapon
BURLINGTON, Ont. • Jean-Louis Bellemare, the founder of Farm Boy, was standing by the butcher case in his newest store, talking about the way certain light bulbs can pull a bright shade of red from a steak.
“If you go to cool white, everything turns to grey,” Bellemare said, at the store in a suburb west of Toronto, the 29th in his growing network of boutique grocery stores.
“We’re talking about meat art now,” added Jeff York, Bellemare’s co-CEO since 2009. “The lighting hits it all perfectly.”
Bellemare started Farm Boy in 1981 in Cornwall, Ont., about an hour southeast of Ottawa. In the early years, he would wander other stores, looking at butcher departments and squinting at the little numbers on the light bulb when he liked the colour of the meat.
Bellemare doesn’t spend the same kind of time opening stores now. Three years ago, he would have spent 180 hours opening a store like this, he said.
Instead, he and York are focused on an ambitious project, tasked with succeeding in a market where parent company, Sobeys owner Empire Co. Ltd., has struggled: Toronto.
On Tuesday, Farm Boy announced the latest stage of the chain’s expansion in the Greater Toronto Area, with plans to add seven new stores there by 2021.
“Just remember, you’re not going to find toilet paper,” York told the crowd assembled outside for the Burlington store opening last week. “The Shoppers Drug Mart is over there,” he said, pointing across the plaza parking lot.
Farm Boy – York defines it as “Whole Foods but 25 per cent cheaper” though it’s more a cross between Whole Foods and the U.S. chain Trader Joe’s — has steadily gained popularity among urban shoppers, mostly for its private label products, produce and prepared meals.
When Empire’s chief executive Michael Medline acquired Farm Boy last year for $800 million last year, he said he wanted to double the chain’s 26 stores within five years. The plan, he once said, was to “blanket Toronto with Farm Boy.”
Sobeys, Empire’s main banner based in Stellarton, N.S., has historically had trouble in Toronto, Medline said. So breaking into that market was one of the main pillars for his Project Sunrise — the three-year turnaround plan he put in place after taking the helm following the company’s disastrous acquisition of the Calgary-based grocery chain Safeway for $5.8 billion in 2013.
In that move, Empire angered longtime Safeway customers by getting rid of the chain’s popular private label products and replacing them with Sobeys private label. Within three years of the deal, Empire posted a $2.13 billion net loss for its 2016 fiscal year and CEO Marc Poulin departed.
“When you look at most retailers, they’re almost always stronger where they grew up,” Medline said in an interview, in addressing Sobeys’ struggles in Toronto. Farm Boy, with its loyal following in Eastern Ontario, hasn’t had that problem in its expansion south.
“I have everyone and their brothers and sisters asking me to put a Farm Boy near their house,” Medline said of enthusiasm for the brand in Toronto.
The seven new GTA stores – five in Toronto, one in Newmarket, and the Burlington store that opened last week — will bring Farm Boy’s store count to 37 by 2021, 15 away from Medline’s goal.
Bellemare, who stayed on as co-CEO with York after the acquisition, said the goal is to grow the Farm Boy chain by eight to 10 stores a year. The expansion into the GTA will coincide with a new store in St. Catharines, another in Ottawa, and a major overhaul of its flagship Ottawa store into a 38,000-sq.-ft. location.
“But if we feel, in any way, that we’re disappointing the customers … we’re going to slow down,” he said. “You can tell. When you’ve been in the business for 38 years, trust me you can tell when you walk through a store.”
Empty shelves are an easy-to-spot sign, York added. “Apathy in the staff,” he said. “You see complacency.”
A year after the deal, Medline said his most important move with the Farm Boy banner has been barely touching it at all – in stark contrast to the Safeway deal.
Farm Boy operates as a separate company within Empire, with York and Bellemare reporting to Medline.
“They report to me. When I say report, it’s a partnership,” he said. “That’s what I’m proudest of. We made a promise.”
The promise was to not “screw up” the business.
“I should probably not have used the word,” Medline recalled last week, of a storied conference call with analysts to discuss the Farm Boy acquisition.
I swear to god, Sobeys if you screw up Farm Boy, hometown or no, you will be dead to me
Farm Boy devotee, Shannon, in a tweet
It was September 2018 and he was sitting in a board room, with York and Bellemare, minutes from the start of the call. York reached over and showed Medline his phone. It was a tweet from a woman named Shannon in Nova Scotia, where Sobeys is based: “I swear to god, Sobeys if you screw up Farm Boy, hometown or no, you will be dead to me.”
Medline turned to his vice-president of communications. He wanted to mention the tweet. They scribbled on the script.
“I’m happy I made that promise,” Medline said. “It’s held our feet to the fire.”
And while initially Medline foresaw an opportunity for synergies between Farm Boy and Empire’s other banners, he said that in the past year he has kept a firm barrier between the two.
“We have to be careful. We’re a such big company and we have a lot of people that want to help Farm Boy,” he said. “We want to keep them separate because we don’t want to overwhelm them.”
Medline’s message to the Farm Boy executives, he said, has been to come to him when they need something.
What Farm Boy needed was real estate. Before Sobeys became its “big brother,” Farm Boy didn’t get opportunities to go into prime sites. Two Farm Boy stores in the Toronto expansion, both slated for next year — at Front Street and Bathurst, and Yonge and Eglinton — would never have been offered to Farm Boy.
“They go to Loblaws, they go to Empire, they go to Metro,” York said. “We were taking the sites that everybody said ‘No’ to. We were going into B and C sites. Now we’re going into A sites.”
I’m happy I made that promise. It’s held my feet to the fire
Empire CEO Michael Medline
And Empire is betting they’ll succeed downtown because the Farm Boy format is more geared to an urban shopper. The stores are typically smaller, focused mostly on fresh produce, meat and a private label. The stores also have an in-store restaurant, with a hot table and salad bar, along with prepared take-home meals, all aimed at the urban shopping habits.
“In an urban market the customer wants to shop four times a week,” Bellemare said. “We’re that store.”
The mix is decidedly not big box, said Robert Carter, a grocery industry analyst with Straton Hunter. That’s the appeal for urban shoppers. “It’s almost like an alternative grocery store,” he said. “The mass grocery is just changing so dramatically. The consumer shopping behaviour is moving from that turn-key mass grocery to the niche stores.”
In fact, Empire has been particularly interested in learning from Farm Boy on its prepared meals and private-label products. The Sobeys team, for instance, has asked Farm Boy about its line of cauliflower crust pizzas, Bellemare said.
In the Burlington store, Bellemare was impressed with height of the aisles. The tops of the shelves weren’t used to stash boxes of overstock. You could see over them. “You’re less claustrophobic,” Bellemare said, pointing at the big windows at the front of the store. “Daylight’s coming in.”