Acquisition Safeway\'s Acquisition of Sobeys

Acquisition

Safeway's Acquisition of Sobeys

The global supermarket industry is highly competitive. Simultaneously, this sector is like many others in a state where mergers, acquisitions and a general pattern of consolidation have become increasingly commonplace. For firms engaged in these types of dynamic organizational transformation, there are myriad factors to be considered in terms of planning, implementing and maintaining this transformation in a manner that serves both entities most optimally. The discussion hereafter considers a hypothetical scenario in which the Safeway grocery store chain has acquired the Sobeys grocery chain and all its subsidiary brands with a focus on the dimensions of leadership, geography, branding, location and personnel orientation.

Make-Up of Executive Teams:

One of the major factors to account for during such a process is the composition of the corporation's leadership following acquisition. In this case, Safeway is the acquiring firm and will therefore experience a minimal shift in its leadership structure. Indeed, as a reflection on Safeway's recent corporate history demonstrates, the firm has been in a steady phase of merger and acquisition across the last decade or more. Safeway has completed, since 1998, the acquisition of Vons, Dominicks, Randalls, Carrs and Genuardis food retail chains. (Safeway, p. 32) Throughout, it has maintained relative consistency with respect to its core leadership orientation even as individual officers have departed or arrived. In the instance of some of the above noted acquisitions, a new member would be elected to the Safeway Board of Directors in concurrence with the addition of a new business outlet. Bill McEwan, President & Chief Executive Officer of Sobeys Inc., would likely be a good candidate for membership on the board.

Where Sobeys is concerned, it should anticipate some leadership turnover to the extent that some of its corporate structure would no longer be necessary. With Safeway serving as its central authority, Sobeys locations would experience a turnover of corporate personnel with Safeway implanting its own HR professionals, sustainability officers and certain managerial positions. Here, it is likely that Safeway would engage its own audit of Sobeys' executive personnel in order to identify redundancies, to eliminate positions, to reappoint members of Sobeys' leadership and to disseminate clearly the impact that its ownership of Sobeys will have on leadership functions and hierarchies at Sobeys. Clarification of the evolving chain of corporate command will be an absolute necessity.

Geographic Markets:

The most immediate and obvious impact that this would have on the geographic markets occupied by either firm would be to improve Safeway's reach in Canada. At present, Safeway identifies its permeation as being largely in the United States and Western Canada. Sobeys, by contrast, identifies itself "as one of only two national grocery retailers in Canada, Sobeys Inc. serves the food shopping needs of Canadians with more than 1,300 stores in 10 provinces." (Sobeys, p. 1)

This denotes that the acquisition of Sobeys would provide Safeway with a considerably greater visibility and presence throughout Canada. This serves as an opportunity to improve its versatility in the Canadian food retail market and to proliferate further its own distinct brands and identity.

Store Brands:

With respect to these brands, by entering into the Safeway fold, Sobeys would begin to carry certain brands associated with Safeway market initiatives. Among them, Safeway's "Ingredients for Life" branding campaign, begun in 2005, has had a major and positive impact on the company's image and sales. This includes not just a conscientious selection and featuring of health product options but also a remodeling of stores with gentler lighting and more tasteful presentation of foods. These 'lifestyle' stores "showcase Safeway's commitment to quality, particularly in the perishable foods departments. The stores are dramatically redesigned with earth-toned decor, subdued lighting, custom flooring, unique display fixtures and other special features to create a warm, inviting ambience that Safeway believes significantly enhances the shopping experience, At year end 2010, 1,439 stores, or 85% of the store base, were Lifestyle stores." (Safeway, p. 12)

This suggests that some Sobeys stores -- likely contingent upon the demographic nature of communities serves -- would be candidates for remodeling according to the 'Lifestyle' design. Additionally, all Sobeys stores would carry Safeway's 2008 initiating branding campaign for its line of organic foods called Better Living Brands, which included O. Organics and Eating Right. (p. 34)

In addition to taking on the brands that currently distinguish the Safeway shopping experience, Sobeys would bring its own line of brand names under the Safeway umbrella. According to its own informational website, Sobeys is the owner of not just Sobeys markets but also IGA, Foodland, FreshCo, Price Chopper and Thrifty Foods, all of them serving provinces and communities throughout Canada. By assuming ownership of Sobeys, Safeway would gain both its geographical reach, its brand name variation and the demographic variation that comes with it.

Distribution Network:

Sobeys sophisticated Distribution Network is one of the greatest assets acquired by the new parent company. Indeed, by virtue of the technology and processes in place in its newest warehousing facilities, Sobeys is one of the leading food retail businesses in this area. According to a video presented on its website (http://www.sobeyscorporate.com/en/video.aspx), Sobeys has recently constructed a warehouse facility in Vaughan, Ontrario that offers over 500,000 square feet of floor space, is over 65 feet high and relies primarily on a highly integrated and automated 'picking system' designed by a German partner and called Witron. Witron uses picking devices that respond to an Enterprise Resource Planning-driven Information Technology system, with inventory and shipping conducted immediately and according to computed demand.

This makes the Sobeys stores a cutting edge outlet for accessing distribution networks throughout Canada. That Safeways Ingredients for Life and Better Living Brands will be distributed through this outlet denotes a widely expanded opportunity in this market context. Moreover, the technology used to create the sophisticated distribution network for Sobeys could be explored as a possible way to improve business processes and efficiencies across Safeway as a whole. This is a future consideration to bear in mind as Safeway examines the assets that come with its acquisition of the Canadian retail chain.