Bill McEwan, President & CEO of Canadian retailer Sobeys, sees three main differentiators in retailing: cost control, product differentiation and customer focus. Based on this, retailers must distinguish themselves from competition. Sobeys translates this in high touch, high service, high dress: fulfilling hidden customer demands, exceeding expectations and earning loyalty .
Elsevier Food International, Vol. 5, Number 3, September 2002
Jan-Willem Grievink

Bill McEwan sees two important developments on the horizon for the North American supermarket industry: the ability to compete with global food retailers on cost-management and firmly establishing consumer trust, particularly with regard to food safety. "We have to concentrate on reinforcing with our customers the safety of our food markets", McEwan says. "A key element is uniform food safety standards. Today, there are different standards in different parts of the world. But the food supply chain is increasingly global. So we need to focus efforts and resources on uniform standards. But we all know that there will be a global environment in the food-supply-chain. In addition to food safety, we also see more interest in organic and biological foods. "
Duncan Reith, Sobeys' Chief Merchandising Officer, does not expect the growth of 'healthy foods' foods will lead to a separate product stream with its own system of tracking and tracing. "As a retailer, it's just good management to feel safe about everything you buy," he says. "Almost 90 per cent of the business creates little risk, if any. So don't spend time there - spend your time on the real issues. In the buying departments of fresh products, we see the need for more expertise in supply chain processes. We should cooperate with 2 or 3 suppliers in each assortment in order to create more control and scrutiny. In the coming years Category Management in Fresh will become totally different from dry grocery." McEwan says supply chain complexity will be increased by issues around food safety, organic foods, biological foods and non-GMO ingredients. "As an industry, we should not be competing on food-safety issues, but I suspect some supermarkets will advertise their ability to control and ensure the way some product-categories are processed as a competitive advantage. It's an indiscreet and inappropriate means of competition.
Today, we respect the consumer's right to know more about the food they purchase and eat. I don't think there will be a separate channel for GMO foods. It's an emerging segment and that's why it should be a normal part of a supermarket's offering."

Bill McEwan, President and CEO of Canadian retailer Sobeys since November 2000, started his management career in 1976 at Super Valu Supermarkets in merchandising and marketing jobs. In 1989 he went to Coca-Cola in Toronto and learned about brand-marketing. In 1993 he became vice-president for market Development of Coca-Cola Beverages in Canada. In May 1994 he went to A&P supermarkets as Senior Vice-President of Grocery and Non-Food Merchandising. In 1997, he became President and Chief Merchandising Officer of A&P Canada Ltd. He became responsible for the total supply chain re-engineering initiative development and in the beginning of 2000 he was promoted to President and CEO of A&P US Atlantic Region. Bill McEwan is member of the Board of Directors of the Food Marketing Institute and he has several positions in volunteer work. Duncan Reith joined Sobeys in January 2001 as Executive Vice President and Chief Merchandising Officer, assuming overall leadership and operating responsibility for the development and execution of national marketing, procurement, category management, and retail brands strategies. Duncan possesses more than 20 years of Canadian retail food experience and brings proven organizational and leadership ability to this vital role.

Cost efficient loyalty
According to McEwan, supermarket store concepts are brands in their own right. With his A-brand background (between 1989 and 1994 he worked for Coca-Cola) he knows it takes time to meet all the challenges around store-branding and to develop and nurture the organizational attitudes you need to act like a branded company. "Some of the aspects of branding will remain functional - but to be a brand you have to add emotional elements. It takes time to implement and communicate consistent values. The consumers have to trust you on that. As for us -we have to prove we first meet and then perhaps exceed their expectations, week after week and month after month. Execution in our stores must be consistent. We talk about three notions: High Touch, High Service and High Dress. It means that we want to fulfil the hidden consumer demands, we want to serve them better than they expect, and create a total offering that earns their loyalty. We have to further develop our stores and lead them to a properly branded position."
In order to realize that goal, McEwan comes back to ability to compete on cost management. He says Sobeys wants to reduce costs by as much as 10 per cent of total sales over the next decade. McEwan: "Supply-chain optimization is key to growth and profitability. Store operations, logistics, warehousing, buying, sourcing and the dynamic rate of turnover are major issues for Sobeys and other retailers. We have to improve, and consider the best practices of global food retailers. We should be competitive with these colleagues but execute our own strategy. Secondly, we must add relevant local products and services. We are a local-oriented company and we must demonstrate that we understand local requirements."
To realize these opportunities, McEwan says his company is investing in Information Technology to improve efficiency by allowing people to be more productive. Implemented correctly, this investment pays for itself.
Sobeys works with several different supermarket concepts. McEwan acknowledges there are benefits from concentrating on one branded store-name. But he sees a danger in being too single-brand focused in a retail environment where customer segments demand differentiation. "I don't think people will accept that all cities are populated with the same stores. We keep a clear multi-brand focus. We use different concepts to meet the unique demographic and cultural characteristics in each of our four business regions."

Shifting trust
How will a successful retail store branding operation impact the positioning of manufacturer's A-brands? The stronger the retailers' store is branded, the less it needs manufacturer's brands.
"I don't see a future without manufacturer A-brands", says McEwan. "When I worked for a manufacturer I would concentrate on extending the brand values. A key-issue is the ability to build trust in the consumer's mind. The retailer is a new competitor in this battle for the consumer's trust. In branding store concepts, retailers focus on fresh assortments. These are critical categories because they are growing rapidly and because a fresh image differentiates the store as a brand. But there are hardly any branded goods suppliers with a strong brand in fresh foods categories. That's why we see a shift in consumer trust towards the retailer." Reith has mixed feelings about the popular practice of "preferred supplier" between leading manufactures and retailers. "If I were a manufacturer with a leading brand position in a product category, I would never concentrate on one or two well-performing supermarkets and try to become preferred supplier with only one of them", he says. "Also, too much focus on one retailer is dangerous for the manufacturer. As a retailer, we will never favour one supplier.
On the other hand, I see no problems with improving supply chain transparency. That will lead to efficiency. It's an illusion that you will be able to maintain secrets as a competitive advantage in the future."
Adds McEwan: "You can create consumer trends. Our job is to satisfy the demands of the customers. If you do so, you earn the right to set and create new ideas for them."

Learning PR
The State of the Art survey, carried out by Cap Gemini Ernst & Young, shows that globally four food-retail concepts will grow: hypermarkets, discount stores, superstores and convenience shops. How does Sobey's see these growth opportunities?
"I don't believe Canada will see significant growth of hypermarkets", McEwan says. "I believe in optimal sized super-food stores - the Tesco type. Discount will grow, I see a market share of 30-45 % for discount-oriented stores in certain markets. I see Wal-Mart as a discounter. Over time, it's possible discounting will be transferred to quality discounting. But I believe cost efficiency will remain the most important element of discount formats. Another growing development is convenience shops. It's only a niche - slowly increasing in relation to the total market. Convenience will be built around the customer's demand: 'I need it now'. And there will be differentiation among convenience concepts. You have to create a 'grab-and-go' service mindset and offering. That means that you can differentiate the concept in relation to a gas station environment or an office environment - or a railway, a city, a suburb or a holiday environment."
Parallel with becoming strong brands in the minds of consumers, supermarket chains must learn to perform better on the public platform, states McEwan. "The economy - and especially the food industry - is big news in the media. So are issues like business ethics and social responsibility. It means accountability has to be transparent. Retailers have to show that they act sensibly and reliably. They have to prove that they are responsible. As CEOs, we must present ourselves openly and honourably in such a public and accountable environment.
We will live more and more in glass cages. We must show social responsibilities and ethical behaviour. This also has implications for our people. Our staff represents our brand - Sobeys - and they have to act in accordance with our values. Our stores must connect locally in charitable or community issues. In fact, Sobeys already proudly operates this way."
Running a company in this environment demands a modern management style.
"Changes in food retailing are creating a new kind of leadership. No more dictatorship - a style that stimulates coaching in combination with an ability to articulate vision and sustain clear communication. These are becoming core capabilities for executive officers of retail companies."