Empire to acquire Safeway chain | It isn’t clear if the new owners will follow Safeway’s tradition of promoting Canadian beef
A proposed takeover of Safeway’s Canadian-based grocery store chain is unlikely to affect beef, pork and chicken producers, says an analyst who monitors Canadian livestock, meat and grocery markets.
Empire Co. Ltd., which owns the Canadian grocery chain Sobeys, announced last week that it is acquiring Safeway’s Canadian assets for $5.7 billion. The move that will nearly double Empire’s reach in Western Canada.
The takeover, which does not include Safeway’s U.S. assets, is subject to a review by Canada’s Competition Bureau.
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“In terms of agriculture, I can’t really see it impacting primary producers very much at all,” said Kevin Grier, a senior market analyst with the George Morris Centre in Guelph, Ont.
Processors that have supply agreements with Safeway could see changes in the way fresh meat is procured, he added, but the nature of those changes won’t be known for some time.
Safeway had a strong buying relationship with XL Foods, which it maintained with Brazil’s JBS after JBS acquired XL’s Lakeside packing plant in Brooks, Alta.
“That could change, but it’s really hard to speculate on that,” Grier said.
“Maybe JBS will end up with more Sobeys business, but those types of things would be speculative and will have to settle out.”
If the deal goes ahead, Empire will gain control of 213 full-service grocery stores in Canada, cementing its position as the country’s No. 2 grocer behind Loblaw Companies Ltd.
Safeway stores would likely be rebranded under Sobeys or some other Empire banner.
Safeway has traditionally been a strong promoter of Canadian beef.
“Whether or not there will be a Canadian beef focus at those (rebranded) stores will remain to be seen,” Grier said.
“I wouldn’t be surprised if there was less of a focus, but again, that will depend on what Sobeys sees as the best way to proceed.”
Empire already owns 1,500 stores in all Canadian provinces with retail banners that include Sobeys, IGA, Foodland, FreshCo, Price Chopper and Thrifty Foods.
Consolidation in the Canadian retail grocery sector comes as no surprise to those who monitor the industry, Grier said.
Sobeys has been increasing its presence in Canada for years, particularly in the West, which is generally viewed as being less competitive than grocery markets in other parts of Canada and the United States.
The Safeway takeover comes as Walmart significantly expands its retail grocery operations in Western Canada.
Target is also making inroads with its recent acquisition of Zellers.
Safeway’s Canadian arm generated sales of $6.7 billion and more than $500 million in adjusted earnings in the 12 months ended March 23.
The deal is expected to close later this year if it receives the green light from regulators.
In addition to the grocery stores, Empire would also acquire 200 in-store pharmacies, along with liquor stores, fuel stations and distribution centres.
