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Canada’s largest grocer is expanding its online marketplace beyond groceries. Third-party companies will be able to sell toys, baby items, pet products and furniture through the Loblaw website. (The Logic)

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Talking point: The company, which generated $46.7 billion in revenue last year, risks ceding ground to competitors that offer a menu of products and services. Amazon and Walmart are making headway among Canadian online grocery shoppers, according to a poll last year by NRG Research Group. The study found that 62 per cent of Canadians who buy their groceries online say they buy them on Amazon; 37 per cent via Walmart; and 23 per cent from Loblaws. Loblaw’s e-commerce sales last year topped $500 million after a major digital push that included a partnership with Instacart. It has also begun offering an Amazon Prime-style loyalty program, and this year expanded its online-grocery pickup to Toronto subway stations.

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The company’s net profits for the quarter ended October 5 were $353 million, up from $117 million for the same quarter in 2018. The jump was due in part to a tax-court ruling that resulted in a one-time charge of $367 million in last year’s third quarter. Revenues rose 2.3 per cent, from $14.3 billion to $14.7 billion. However, same-store sales, a key retail metric, increased just 0.1 per cent in its grocery stores. In its Shoppers Drug Marts, same-store sales grew 4.1 per cent, mainly driven by prescription sales. (The Logic)

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Talking point: Customers placed fewer, but bigger, orders, consistent with how retail is increasingly moving online. Loblaw has invested in technology to compete with the likes of Amazon, partnering with grocery-delivery app Instacart and offering same-day pickup for members of its new Amazon Prime-style PC Insiders program. The company cited investments in its digital strategy among reasons for its $7-million dip in earnings before income taxes. It’s banking on those investments eventually paying off, noting the potential “failure to execute the Company’s e-commerce initiatives” as a key risk to its financial results going forward.

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The federal watchdog determined that Loblaw failed to tell customers applying for the $25 vouchers that they could redact information like birth dates, driver’s licence numbers and photos of themselves. Loblaw initially collected that information, but stopped partway through. The privacy commissioner is not asking the company to do anything further to address the issue. (The Logic)

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Talking point: The grocer voluntarily offered the gift cards after it received immunity for cooperating in a Competition Bureau investigation of alleged collusion to raise bread prices. The antitrust agency has been criticized for its decisions on Loblaw and for the size of its fine of Volkswagen in the diesel-emissions case; in a recent interview with The Logic, competition commissioner Matthew Boswell noted it was not involved with the gift card program and is constrained by the legal limits on the monetary penalties it can issue. The privacy commissioner’s fining powers are similarly limited, though in May, the government proposed to expand them in a discussion paper on reforms to Canada’s consumer privacy law. But Loblaw isn’t entirely done with the issue—it still faces a $1-billion class-action lawsuit over the alleged bread price-fixing.

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The company posted net earnings of $286 million in the three months ending June 31, down slightly from $293 million for the same period in 2018. Same-store sales at its grocery chains increased by 0.6 per cent, compared to 0.8 per cent in 2018’s second quarter. Subsidiary Shoppers Drug Mart grew the same metric by four per cent, its best quarter in three years. (Canadian Press)

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Talking point: Loblaw president Sarah Davis said the flat profits were caused by “overzealous” application of algorithms designed to increase margins on the products it sells, which led to fewer items being discounted in promotional flyers. Customers did spend more, but there were fewer of them—the average bill rose, while traffic to the stores fell. Loblaw started using data analytics in its discount division in the third quarter of 2018. Loblaw has been an early adopter of data analytics in Canada’s grocery sector. The company launched an online version of its previous PC Plus points program in 2013, a year before Canadian Tire created an app for its Canadian Tire money. And, Loblaw is now using data from its current PC Optimum program to deliver targeted ads for members who opt in.

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The Canadian grocer will offer items reaching the end of their shelf life that customers can order and pick up from a Loblaw store via Flashfood’s e-commerce app. Flashfood keeps an undisclosed cut of the purchase for itself. Loblaw began piloting the project last summer. This spring, it was expanded to 139 Maxi and Provigo stores in Quebec and, last week, to 37 Real Canadian Superstores in Ontario. The national expansion, announced Wednesday, will see it roll out to more than 250 stores by the end of the summer. (Globe and Mail)

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Talking point: This is the latest move by Loblaw to leverage digital solutions to compete with tech companies increasingly getting in on the grocery space. Over the past year, the company launched an Amazon Prime-style loyalty program for $99 a year and a pilot project aimed at using consumer data for targeted advertising. This program is part of Loblaw’s efforts to cut its food waste in half by 2020. In B.C., Loblaw has partnered with Second Harvest in supporting the expansion of Ontario-founded FoodRescue.ca—a free online platform which connects food retailers who wish to donate food products directly with social services and non-profit organizations—to B.C. Loblaw’s stores have already seen real success in using the Flashfood e-commerce app: the company said 150,000 customers have signed up, and 76 per cent of them use the app weekly. And, of all the items Loblaw puts on Flashfood, 77 per cent of them are sold.

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The retailer will use the real-life purchase data of PC Optimum members who opt into the program to deliver targeted ads across the Internet. Customers will receive PC Optimum points for ads they watch. (Financial Post)

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Talking point: While Google and Facebook have long used browsing habits to deliver relevant ads, Loblaw’s entry into the online ad market shows how companies outside traditional tech can use their massive amounts of data to better tailor online marketing campaigns. Loblaw has an added advantage of being able to leverage real-world purchases to understand what its consumers are interested in. Bell is another company using user data to expand its ad business; in January 2019, the telecom announced an opt-in marketing program that uses consumer browsing history, streaming and calling patterns to deliver them more relevant ads.

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Canada’s biggest grocer saw adjusted gross profits rise 2.6 per cent in the last quarter to $3.25 billion. Same-store sales grew 1.7 per cent, with total revenue hitting $11.22 billion, up from $10.99 billion the previous quarter. Net profit for shareholders rose 59 cents per share, compared to the eight-cents-per-share increase over the same quarter a year earlier. (Reuters)

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Talking point: The results were better than analysts expected, and may bolster investors’  confidence in the food and drug retailer’s ability to compete with Amazon. To do that, Loblaw is focusing on home delivery in partnership with online grocery chain Instacart. And, in December 2018, it launched a Prime-style membership program. Loblaws isn’t just playing catch-up to Amazon: it’s been ahead of the e-retail giant in health and pharmaceuticals in Canada, with acquisitions of Shoppers Drug Mart in 2013 and health tech company QHR in 2016.

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Members of the grocery chain’s existing PC Optimum program will be able to make click-and-collect orders for free, and won’t pay shipping for online orders from Shoppers Drug Mart and Joe Fresh. Plus, they’ll get more points on store-brand products. (Financial Post)

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Talking point: PC Plus and Shoppers Optimum were both already among the highest enrollment loyalty programs in Canada when Loblaw bought the drug chain and integrated the two. Adding convenience features via this new offering—to be called PC Insiders—pits the company more clearly against Amazon, which has moved onto Loblaw’s traditional grocery turf via its acquisition of Whole Foods. The American e-commerce giant now offers packaged food and Whole Foods’ store-brand items online in Canada. One notable exclusion from PC Insiders: home delivery. Loblaw does that through a partnership with California-based app Instacart.

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The U.K.-based firm is issuing convertible bonds to pay for the warehouses, which other grocery companies plan to use for food delivery. (Financial Times)

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Talking point: In the past two years, Ocado has struck deals with major grocery chains in Sweden, France and the U.S. to build robot-fuelled warehouses powering online delivery. On Friday, the firm signed a deal with Japanese retailer Aeon to build warehouses designed to serve the entire country. In Canada, Ocado is building two warehouses for Sobeys: one designed to serve the Greater Toronto Area scheduled to open in early 2020, and another based in Montreal for 2021. For large grocery chains, it provides a technological alternative to Amazon, which uses robots extensively in its own warehouses. Sobeys’s reliance on Ocado offers a counterpoint to the direction Loblaws has taken recently: launching its own online marketplace, an Amazon Prime-style rewards program and, as outlined above, making a play for the lucrative meal kit market.