Sobeys’ Michael Medline says it’s time to ‘innovate or die’

The CEO promised to more than double the number of products on Voila and expand the delivery service to Western Canada.
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Despite the uncertainty of the pandemic or whether recent changes to consumer shopping habits are here to stay, Michael Medline believes now is the time to embrace an “innovate or die” approach.

The Sobeys CEO was speaking at a virtual event hosted by the Empire Club of Canada on Wednesday. And while one of the more attention-grabbing elements of the talk was his suggestion that grocers should be regulated to avoid things like recent increases competitors like Walmart and Loblaw have made to supplier fees – something he called “hard to believe and repugnant” – he also touched on how its plans for Voila and private label were about to get more ambitious.

Medline says Sobeys wants to own ecommerce in Canadian grocery with Voila, a food delivery service that was first launched in the GTA this spring and will soon be expanding to Montreal.

The first fulfilment centre’s state-of-the-art technology, facilities and robotics took three years to develop, with costs coming to the tune of approximately $65 million for fiscal 2021 alone – costs that may continue, as Medline said the company has plans to open fulfillment centres in two undisclosed locations to bring Voila to Western Canada.

But Medline believes significant investments like this are required as “there’s no cheating the system,” and that the spending is not a gamble – when you have a better mousetrap, you tend to win.

“[The technology] is so much better than what else is available and customers get it intuitively,” he said. “Even without a pandemic, it would’ve shone through. Retail has become so technologically and innovation driven and if you are not savvy at that and don’t embrace it, you’re a Luddite and you’re gonna fail.”

Dr. Brynn Winegard, a retail analyst and marketing instructor at York University’s Schulich School of Business, previously told strategy that Voila’s value proposition of delivering food from a central warehouse instead of local store may have seemed out of place when consumers are more focused on all things local. But it also allowed Sobeys to deliver on the idea of “freshness,” which has been Sobeys’ legacy messaging, adding that a money back guarantee is both an effective enticement and risk mitigation tool.

True to that, Medline says consumers have come to appreciate the robot pickers, which rarely, if ever, make mistakes that have been a pain point for other delivery services. He adds that the consumer response to Voila is “the best he’s ever seen in his career in retail.”

Now that the freshness and convenience of the Voila system has been established, Medline’s vision is to add more product than what a typical grocery store would have on a delivery platform. While most services have only a selection of products available through delivery for logistical reasons, the investments Sobeys has made into its facilities means it plans to go from 16,000 SKUs currently to about 39,000.

Part of attracting new users is also by ramping up its private label, a major focus of the Project Horizon transformation plan.

Strategy asked Medline about its how it plans on taking on Loblaw’s more well-established President’s Choice and No Name products with its own offerings. Over the last year, he says, the Compliments brand has made great strides, complete with a rebranding, sample efforts on Voila and its first campaign. That has resulted in market share growth over the last 15 months, and is currently the fastest-growing private label brand in the industry, but it will continue to be an executive level focus for years to come.

“You ain’t seen nothing yet,” he said.

Medline did add, however, that private label needed to be offered when customers want it; sometimes, he concedes, they’d rather have national brands and it has been important to not push it down people’s throats. But in addition to private label, Sobey’s has also made some buzzy national brands exclusive to its stores: this week, plant-based phenom Impossible Foods made its burger available at the retail level in Canada for the first time, exclusively at Sobeys.

The other benefit Sobeys has seen lately is an uptick in shoppers, because those who would normally shop at four or five different grocers based on geography are reducing their shopping stops to one. But while there is opportunity there, Medline acknowledge that retention of this demo and entrenching their new habits would also be a challenge it is looking to address.