When Galen G. Weston took over his family's Loblaw Cos. Ltd. grocery chain in 2006, at the age of 33, he didn't just inherit an iconic Canadian retail institution. He also took on an obligation to re-engineer a failing growth strategy.
The plan that the iconic Canadian company had put into place a few years earlier to take on Wal-Mart, which included building more low-price Superstores, had gone awry and Loblaw had lost billions of dollars in market value.
Just as Wal-Mart was finally rolling out its first Super centres, featuring a full grocery lineup, the reins of its beleaguered Canadian rival were being passed to the scion of Canada's second-wealthiest family, the young son of billionaires Hilary and W. Galen Weston. Nearly half of the analysts who followed Loblaw were recommending that investors sell the stock.
The younger Mr. Weston embarked on a restructuring strategy that sought to scale back the company's lineup of non-food products, which it had introduced to combat Wal-Mart. "It will take up to three years to get ourselves back to where we need to be," he told analysts at the time.
Nearly seven years later, the restructuring is still nearing an end, analysts still want the company's core retail earnings improve, and Wal-Mart has been joined by the likes of Target in carving up the Canadian market. But Mr. Weston has begun putting in place a new strategy to enable Loblaw, and his family's legacy and fortune, to grow in the face of stiffer competition, and it's one that's winning over many in the business community.
"He took over at a time when Loblaw had lost its superior performance and had some structural issues," Royal Bank of Canada CEO Gord Nixon, who considers Mr. Weston a friend, said in an interview. "He's done a number of very transformational things, starting with reorganizing a lot of their distribution channels, then the REIT has surfaced tremendous value, the Shoppers deal, you've seen a couple of dividend increases over the last year. So to some degree he has transformed the company in a very logical, methodical way and as a CEO he deserves a lot of credit for some of the initiatives that he's taken."
Mr. Weston, known by many Canadians as the front man in commercials for Loblaw and its President`s Choice brand, has worked to find an avenue for growth within the confines of the Westons' desire for Loblaw to secure its future in Canada, not abroad.
His main objectives have been a greater assortment of foods to lure customers, an improved customer experience, and lower costs. Last year, the company cut 700 jobs, accounting for about 10 per cent of its head office and administrative staff, after spending more than $2-billion making its technology and supply chains more efficient since Mr. Weston took over.
But all the while Mr. Weston had his eye on a bigger transformation, and has talked about potential deals with investment bankers and potential partners. In December, the company created of one of Canada`s largest real estate investment trusts, putting about $7-billion worth of property into the new REIT to unlock funds that it could use for further expansion (Loblaw spun Choice Properties Real Estate Investment Trust off this month).
Now, Mr. Weston is acquiring retail behemoth Shoppers Drug Mart Corp. in a blockbuster $12.4-billion deal that will give the company a larger share of urban consumers looking for convenience.
He told analysts on a conference call early Monday morning that he has been working on this deal for a considerable time, looking at the idea and then holding on-again-off-again discussions with Shoppers about a potential transaction for three-and-a-half years.
"The timing of the transaction right now is optimal," Mr. Weston said. "It is optimal from a leadership perspective. It is optimal from a culture perspective. It is optimal from a regulatory perspective, and it is optimal from a fundamental sales and earnings trend perspective for both of these businesses."