Dave Nichol surveys his local Loblaw store and is dismayed. For years, Nichol pitched Loblaw Cos. Ltd.'s wildly popular President's Choice products, with his trusty French bulldog, Georgie Girl, at his side. Today he sees little left from the golden era at Canada's largest retailer. He laments the paucity of new ideas in the PC kitchens-those people have no idea how to create a buzz, Nichol says. Then there's the surfeit of non-food items on the shelves, everything from DVD players to sofas. A lot of it is downright "junky," he says. "They have to start from zero again."
Maybe not quite from zero. Square one will do. After more than two decades as an icon of excellence in the grocery world, 1,100-store-strong Loblaw has subjected shoppers to empty shelves, wilted lettuce and unkempt aisles. As the nightmare-rooted in a seriously flawed reorganization of distribution lines-deepened over the past couple of years, the company's shareholders watched the value of their holdings plummet by billions of dollars.
And that was the fix. Anticipating Wal-Mart's invasion of the Canadian grocery market, Loblaw executives tried to transform their store into something different, going down-market and adding slews of general merchandise. In the process, Loblaw lost the essence of what it's all about.
Now for the fix to the fix. Loblaw's controlling owner, the Weston family, has parted company with president John Lederer and installed a scion at the helm. With the help of a pair of recently hired executives, 34-year-old Galen Weston Jr. wants to refocus Loblaw on food in general and private labels like President's Choice in particular. He'll slim down the rest. While some improvements have already been made, "there is still a tremendous amount of work to do," Galen Jr. says. Trouble is, in the meantime, Wal-Mart has arrived in Canada's grocery aisle. And Sam Walton's baby didn't get to be the biggest retailer in the world by playing nice.
It's not the first time that Loblaw has been in trouble. The disarray of the early 1970s was worse than today's. Then, Loblaw was swimming in red ink, overpowered by Dominion Stores in Ontario and burdened by a complex corporate structure and weak management.
The Weston family, whom two generations of success had elevated to an upper-crust life in the United Kingdom, arrived at a solution that bears a strong resemblance to the one being put forward today. The head of the family, Garfield Weston, called on his son, Galen. The younger man, just in his early 30s, was still green in the family business. But Garfield asked him to look into Loblaw and see whether it could be salvaged-or should be sold. In 1972, Galen moved with his wife, Hilary, and two-month-old daughter, Alannah, to Toronto, and took the reins at Loblaw.
It didn't take long for Galen to put together his team. As his lieutenants, he hired his former college roommate, Nichol, and Richard Currie, whom Nichol had met while both were working at management consulting firm McKinsey & Co. With each man taking a distinct role-Nichol, the marketing genius; Currie, the strategic mastermind; and Galen Sr., the patient owner-they created a powerhouse.
Loblaw got rid of money-losing stores and underperforming employees-the standard stuff. But Galen Sr. also took steps that would be taken for granted in today's marketing-driven world, but which were revolutionary at the time. He tapped design expert Don Watt to put pizzazz into Loblaw. He moved the higher-margin fresh produce to the front of the store. He hung posters on the walls with tempting pictures of food. And he developed distinctive yellow packaging for the new, higher-margin No Name private labels.
By the 1980s, Nichol had put his stamp on the chain by developing the now-ubiquitous President's Choice private label. In-house brands were not new in Canada: Grocers had long hired suppliers to make cheap versions of their own brands. Making the products high-quality, and charging accordingly-effectively stealing market share from suppliers-certainly was new. Nichol flogged PC merchandise on television and in the company's chatty Insider's Report flyers. Soon Loblaw was flourishing. Its stores became a model for supermarket operators around the world. The private labels gave it a distinctive, and seemingly permanent, edge over its rivals. A mere supermarket was bringing gourmet tastes to the masses.
But that was all before a bigfoot called Wal-Mart came along. The discounter arrived in Canada in 1994, but carried few groceries. Fast-forward to 2007, and Wal-Mart, having felled many of its Canadian competitors in general merchandise, boasts more than 270 stores from coast to coast, many of them with large pantry sections. Last fall, it took the step that had kept Loblaw and other Canadian grocers on tenterhooks-it entered food retailing in earnest, opening its first three Supercentres, with a full array of groceries, in the key Ontario market. Many more are expected. Analysts predict that if Wal-Mart can maintain the high standards and low prices seen at the Supercentres to date, it will be able to siphon customers away from Loblaw and other supermarkets.
The threat is real. In the United States, Wal-Mart Supercentres have wreaked havoc on the supermarket industry since they were introduced in 1988. Unable to match Wal-Mart's low costs, economies of scale and clout with suppliers, dozens of grocers were forced out of business.
To respond to the looming Wal-Mart incursion, Loblaw decided that it, too, would be a low-cost one-stop shopping destination. After all, it had enjoyed some success on the general-merchandise side at its Real Canadian Superstores in Western Canada. But Loblaw may have been misreading the tea leaves. While consumers often say they like one-stop shopping, many of them don't actually practise it, according to research from consumer trends consultant the Hartman Group in Bellevue, Washington. The one-stop shop works for Wal-Mart because it has the international muscle to keep prices low, selection broad and systems intact. "We strongly advise retailers, especially ones that are already known in consumers' minds for quality and specialty products, not to try to be all things to all people," Hartman president Laurie Demeritt says. "You're just competing on price, and you're unlikely to succeed."
The superstores Loblaw built defensively in Ontario reflect the one-stop thinking. The partly glass-enclosed boxes are more attractive than a Wal-Mart supercentre, says retail consultant Jim Danahy of CustomerLAB, who has held senior jobs at some of Loblaw's suppliers. But the added touches of angled aisles, high ceilings and attractive display cases make them more expensive to build and operate. There isn't quite enough general merchandise to make it a destination, except in kitchen goods-"as you'd expect from a grocer"-and electronics, he says. The pickings are too slim in other areas. "They must hope consumers will pick up these items on impulse," Danahy adds.
The Wal-Mart defence rippled through the entire company. Focused on superstores, Loblaw virtually stopped investing in its conventional stores. It won wage concessions from employees in the name of battling the American invader. And it embarked on a plan to make its supply lines as lean and mean as Wal-Mart's. All told, the changes had an effect on customers: Loblaw was no longer the store they remembered.
"I have to walk from one end to the other to get my groceries and pass junk that has nothing to do with food," says Ann Claydon, 70, a former Loblaw devotee who lives near Kingston, Ontario. One of her daughters shares her sentiments, she adds. "Loblaw will never get me back as a customer."
What astounded customers like Claydon is that Loblaw, at its nadir in late 2005, couldn't manage the most basic retailing job of getting stock onto the shelves. Take the case of Daniel Gooch, who has been a long-time fan of the store. On repeated visits to the Real Canadian Superstore near his home in Ottawa last spring, he couldn't find some of his favourite products. It wasn't obscure stuff either, but things like pizza dough and unshelled peanuts.
Gooch shot off a letter to Loblaw. "You have a serious problem with your store," he wrote. "Product stock selection and/or inventory management issues with this location have seriously eroded the Loblaw image in my mind." He got a reply to the effect that the merchandise was now back on the shelves. That, he notes, wasn't much help to him. "Obviously this was disappointing," says Gooch, a 32-year-old communications manager. "I hope they get their problems fixed." Last fall, he in fact noticed some improvement in the store. But similar tales are legion: Other Loblaw shoppers have complained of the once-reliable retailer being out of some PC diet soft drinks, fresh-baked bread and even good tomatoes in summer. Bare spots are common on the home and hardware shelves.
Other supermarkets have made their own moves in response to Wal-Mart's advance and Loblaw's drift. Sobeys Inc. and Metro Inc., the second- and third-biggest national players, respectively, have bolstered their fresh food offerings. And Metro became more of a force in 2005 when it scooped up A&P and its subsidiary Dominion chain in Ontario. Now these supermarkets, alongside Safeway and Overwaitea in Western Canada, are harvesting disgruntled Loblaw customers.
Warehousing, distribution and transportation systems may be largely invisible to the shopper, but they're the lifeblood of any retailer. And it's what Wal-Mart does best. It knows that just as food gets stale-dated, so do other products. It makes sure that a load of sweaters gets to its stores in time for a big flyer promotion. If the sweaters don't arrive on time, customers will get frustrated and may not return. Not only that-the sweaters, having missed their moment, may sit on the shelves for weeks and ultimately have to be marked down. That hurts margins. While Wal-Mart rarely has problems of this sort, Loblaw has been dogged by delays in getting goods to stores on time, resulting in millions of dollars of extra costs.
All this from the grocer's ambitious plan to get products to stores faster. Over the past few years, Loblaw was building Real Canadian Superstores in Ontario, modelled on its decades-long success with the concept in Western Canada. But there it had faced little competition in the big-box segment. Now in Ontario it was surrounded by savvy discount grocers and mighty Wal-Mart. In response, it bulked up on general merchandise in its new superstores. Aspiring to operate as efficiently as Wal-Mart, Loblaw decided to consolidate its distribution centres between 2004 and late 2006, resulting in a net reduction from 32 facilities to 26. And, at the same time that it was shutting old warehouses and opening new ones, it was also preparing to centralize its entire head office staff in a new building in Brampton, Ontario.
That's when things went south. "What we tried to do was put [four divisions]into one over a two-year period," says Galen Weston Sr., 66, who has stepped down as Loblaw chairman but continues as chairman and president at the parent company, George Weston Ltd. "We badly underestimated the complexity of that, and we're paying the price today."
Some 2,000 employees moved to Brampton from a number of offices in Ontario and Alberta in the fall of 2005. But only about half of the 150 general merchandise buyers, who had been based in Calgary, made the move. The others quit.
Buyers have a key role at a retailer, representing a large part of its intellectual capital. The loss of so many experienced hands left a huge hole at Loblaw. Even the buyers who did make the move to Ontario were distracted as they put down roots, finding homes and settling their families. The result was often chaos. Many suppliers couldn't even figure out who was calling the shots. "The guy that was buying last week isn't buying this week and may not be buying next week," one vendor, who asked not to be named, said at the time. "It's been very difficult."
The head-office confusion was matched in the field. One supplier shipped tens of thousands of dollars' worth of general merchandise to Loblaw's Calgary warehouse in the summer of 2005-only to have the shipment refused. The boxes sat for three or four months in containers in the warehouse's yard before making their way inside, the supplier says. Only then was he finally paid.
Another vendor sent $15,000 worth of seasonal merchandise to a Loblaw warehouse in September, 2005. The goods didn't make it to stores before December. "By then, the season was already gone," says the supplier. Result: markdown. The supplier says he had to wait 10 months before being paid, and is still short $5,000. Other seasonally sensitive merchandise, such as Christmas decorations, also had to be liquidated shortly after getting on the shelves that season.
By January of last year, president John Lederer acknowledged that he had mishandled the reorganization of the supply system, causing a significant hit to the bottom line. "It has to be said that probably we-I-went a little bit too fast. And, obviously, you learn from that." A few weeks later, Lederer went even further. "When you begin to take things for granted that you can just execute, you become a little bit careless. And so we are no longer careless."
But a snowball effect was taking hold. Because products weren't getting to the stores on time, Loblaw pared down its marketing. Fewer promotions meant fewer shoppers. And there were other, indirect costs. Stores scheduled crews to unpack boxes that never arrived. Suppliers shipped straight to stores rather than to warehouses, racking up extra labour and transportation costs for Loblaw. One store manager describes his staff receiving new shipments from the company warehouse this way: "It's a little bit of a surprise sometimes when they open the trailers and find out what they're getting." While stores were sometimes short-shipped, warehouses in Western Canada were so jammed that Loblaw had to rent more space.
"A lost sale is one thing," says a vendor of Loblaw's disorganization. "But even in your transportation network, you're sending out trailers that are not full, which is not an efficient situation. You lose on both sides. You don't make your margins, and it's going to cost you money because the trailer is going in with 900 cases-that's not as good as a trailer going at capacity with 1,200 cases." And even while Loblaw was having trouble making its shipments on time last fall, it clamped down on suppliers, warning they would be fined $1,000 for each late delivery. "Loblaw would like to look at this not as a revenue producer, but it will turn out to be that," says a supplier.
Retail analyst Michael Van Aelst at TD Newcrest provides an example of how pernicious the snowball effect can be. The cosmetics business relies heavily on the success of new product launches. "Because Loblaw appears to have lost control of its inventory management, its shelves are still full of old products when new products are being launched," Van Aelst says. "This ends up hurting both the company's revenues and margins." Loblaw cleared out older merchandise at low margins just to make room for new stock, taking a hit. Meanwhile, competitors were getting a head start on product rollouts. Another hit.
The snags at Loblaw go well beyond the supply chain. The private labels that once defined the store have slid into anonymity, charges Dave Nichol. Then there's the plethora of general merchandise that flooded the stores-woefully below Loblaw standards for style and quality, declares the former pitchman. "You need products you can only buy at Loblaw that are fairly priced," says Nichol, who left Loblaw in 1993 and then joined private-label pop specialist Cott Corp. "And then you get somebody wild about them on TV talking about them. I'm even willing to lend them a French bulldog."
Nichol's critique is echoed by his old colleague Don Watt, who advised Loblaw for more than two decades and who has also helped Wal-Mart design its Supercentres in the United States. Loblaw's food offering "has just gone bland" and has lacked for innovation over the past few years, says Watt. Although the store has strong private labels, "they seem to be coasting with them," lacking smart promotion. The general merchandise, meanwhile, "really doesn't reach out and make you want to buy it. It's not compelling." All told, the bond with customers is broken, Watt says. "Trust is a very difficult thing to get back. They have to prove themselves every day."
Nichol, who now heads his own consulting firm, reserves some of his sharpest criticism for Lederer's leadership. "These people were allowed to go on and run the company for [five]successive declining quarters after they were handed over a money machine-a money machine that everybody from all over the world came to see," Nichol says. "Any time you can lose $8 billion in shareholder value and keep your job, it's almost like a scandale," he says. Nichol himself has lost "millions and millions of dollars" on his own shares.
Nichol faults his friend Galen Sr. for having let the problem fester. Galen Sr. was distracted by his acquisition in 2003 of the high-end Selfridges department-store chain in the U.K., Nichol contends. "Since Galen bought it, it has become an absolute money pump," he says. "He probably found that more exciting than he did being at the store at St. Clair and Bathurst" in Toronto. At bottom, he says, "I think he got terrible, terrible advice." He doesn't say from whom, but the drift of his critique points to Lederer and, indirectly, to Lederer's mentor, Richard Currie.
While there are varying accounts of who did what to whom, there is no doubt that a rift opened up in Loblaw's executive ranks in recent years. In one version, the strains predated Currie's replacement by Lederer as president in 2001. Lederer had been Currie's choice, but Weston had put forward the name of Allan Leighton for the job.
A charismatic British executive, Leighton has been a trusted adviser to various Weston businesses over the past six years. During Lederer's last year on the job, Leighton was quietly providing counsel behind the scenes. The dual lines of authority, reflecting Galen Sr.'s declining confidence in Lederer, led to boardroom tensions by last summer.
Currie, who retired from the Weston organization in 2002 after three decades of enjoying a firm grip over Loblaw (and then over George Weston Ltd.), dismisses the idea of a Lederer/Leighton rivalry. He says there was no brawl over who would succeed him as president in 2001: Rather, Leighton withdrew after Currie told him that he would be backing Lederer. Lederer, as far as Currie was concerned, had proved himself: He was a major contributor to Loblaw's success. "John would continue the evolutionary process and take it to the next level," Currie says. "The introduction of Allan Leighton at that point in time-or anybody else-simply wasn't required." Others say Leighton was never even officially in the running.
If Lederer harboured feelings of insecurity early in his tenure, they were offset by the continuation of the company's stellar run. But by last year, poor results kept flowing in. Some sources say that Lederer was losing confidence in himself, while Galen Sr. was becoming alarmed at the company's waning market capitalization. Communications between the two men became strained. By late August, it was apparent to people around him that Lederer's days were numbered. Why did it all take so long? "There was always a sense of, 'Don't worry, it will be all right next quarter,' " says one source. "Loblaw was so successful for so long. You think that success will always be there."
Today, the Weston family and its loyalists have won out: Lederer is gone-at a cost of $22 million, including $10 million in various incentive plans-and the younger Weston has the top job of executive chairman. Leighton is deputy chairman, a vague new position that effectively translates into chief adviser. He will undoubtedly play a pivotal role in steering the still-untested Galen Jr.
Galen Jr., who's known as G2, has worked at management jobs since arriving at Loblaw eight years ago. He first helped run a small, pilot online grocery business in Mississauga. (The company ultimately nixed a major foray onto the net.) He next was part of a team that set up PC Financial kiosks at Loblaw stores, and then got a taste of the nitty-gritty on the operations side of the No Frills chain. Most recently, as senior vice-president for corporate development, he gathered data on market dynamics-including Wal-Mart's encroachment-and helped map out a direction for Loblaw.
In person, Galen Jr. is soft-spoken and reflective, choosing his words with care. People who have dealt with him say the lanky scion-who holds an MBA from Columbia University-is bright and polished. Nichol, who has known him since infancy, gives him a strong vote of confidence. He has "tremendous potential," Nichol says, and simply "needs strong mentoring." John Chamberlain, an analyst at Dominion Bond Rating Service, met Galen Jr. and his father for lunch last March. Chamberlain was surprised by the younger Weston's depth of knowledge about the U.S. grocery industry-unusual in Canada, he says. "I found him charming, which I didn't expect. Unlike a lot of people who have grown up in opulence, he came down to my suburban financial analyst level very quickly. There was none of that, 'I'm a billionaire and you're not.' I left that meeting thinking, 'This guy will be able to do it some day.' I didn't think it would be this quickly, frankly. It's a pretty sharp learning curve." Chamberlain says Galen Jr.'s easy manner will be a particular asset. "He strikes me as a guy who is going to be able to relate to people throughout the company. I think that he'll actually be better at that than John Lederer. In my experience, he [Lederer]wasn't a great listener."
Galen Jr. hasn't been left alone to figure it all out on his own. Indeed, a triumvirate took over the reins when Lederer left. While Galen Jr. is the titular No. 1 man, the most influential person in the short term may be Leighton. Mark Foote, who was promoted to president and chief merchandising officer in September, rounds out the threesome. He's only been at Loblaw since last April, when he was plucked from Canadian Tire Corp. Ltd. to provide much-needed expertise on the non-food front.
Currie, however, doesn't see much resemblance between today's triumvirate and the one he belonged to. Three decades ago, each of the Loblaw leaders had precise responsibilities and areas of strength. Today, Currie says, Loblaw has created a convoluted chain of command at just the wrong moment. "I'm greatly saddened, it's heartbreaking," he told The Globe and Mail in September, shortly after the executive shuffle. "I think the delineation of responsibilities could at best be described as fuzzy." Currie doubts, in any event, that a shakeup was necessary. A turnaround was just around the corner when Lederer left, Currie argues. The sentiment is seconded by Robert Almeida, a former Loblaw executive who is senior vice-president at AIC Ltd., the mutual fund that is one of the largest shareholders of Loblaw after George Weston Ltd. "The wheels weren't about to fall off," says Almeida.
The new team says it needs up to three years to achieve its goals. "That's just ridiculous," Currie says, arguing that most of the hard slogging is already done. The rest must be completed within 18 months at most, or the competition will trample Loblaw. "All of them are getting better, and they're not standing still."
One of the first things that Galen Jr.'s team did in September was take a whirlwind three-day cross-country tour to meet store and district managers. At meetings in hotel conference rooms, they got an earful: about empty shelves, about messy stores, about irate customers. The senior leaders put the employees who showed the most promise into groups of six. Each of these "positive action groups" was given 40 days to present solutions to a defined challenge. An "Ask Galen" e-mail box was created to get further feedback from staff-an idea that has worked at other companies Leighton has headed.
The executives' goal is partly generic: Downsize the company, close unprofitable stores and reduce the payroll. And partly Loblaw-specific: Simplify the organization, repair the damaged supply chain and return to the store's food roots (one step in the latter program is the promotion of private-label specialist Pietro Satriano to what is essentially Nichol's old job-tastemaker-in-chief). Above all, they want to bring a spirit of innovation back to the company.
The new brain trust also plans to revamp the superstores, which it deems too big and too complex for shoppers to navigate. Among non-food items, furniture will probably disappear, electronics and hardware may be trimmed, and toys will be sold only at Christmas.
But not all non-edibles are on the hit list. Galen Jr. intends to grow the cheap and chic Joe Fresh Style fashion collection that was launched in the superstores last year. The stakes are high, because fashion requires replenishment almost as regularly as groceries, albeit while producing much higher margins.
The deployment of Joe Fresh will be an interesting test of the new regime. The line was developed by Joe Mimran, who made his name in fashion and design as co-founder of the Club Monaco chain. His work for the Westons began at the beginning of the decade, when he was contracted to develop Loblaw's private-label home furnishings line; fashion was soon added to his mandate. But Mimran grew frustrated with company officials who were blocking some of his decisions on home decor offerings, sources say. All that will likely change now. The new regime thinks Mimran is a rare find, and should be left alone. "He's a talent," a source says. "When you've got talent like that, use it."
All the changes will mean short-term pain. The supply-chain overhaul is expected to soak up more than the $90 million that Lederer had budgeted to carry through to the end of 2008. One analyst figures the bill could come to an additional $60 million just by the end of 2007. For the fourth quarter of 2006, the company is taking a charge of as much as $120 million to liquidate excess general merchandise. Another charge of as much as $140 million covers store closings and a new labour agreement that will allow the company to convert conventional stores to lower-paying superstores or better supermarkets. Currie figures that the writedowns could soar by the time all the changes are made. There may be something to that, since the new team has warned of more warehousing restructuring and a shrinking of management layers. Not surprisingly, the new team is also backtracking on Lederer's pledge to realize at least $100 million in supply-chain savings over three years.
As it works through its problems, Loblaw is expected to go through a personality change. "Many executives in the retail industry regard Loblaw as insular, paternalistic and having a king-of-the-hill attitude," says retail consultant Jim Danahy. "Some would also say there is envy in those words." Loblaw is, after all, still the leading supermarket chain in Canada.
A notable break from the past is that the company is now deigning to hire executive talent from competing retailers. "You are seeing a sea change at Loblaw, which has not made a practice of poaching from other companies," Danahy remarks. Loblaw officials have recently shown a more humble, open-minded approach, say people dealing with them. In November, Galen Jr. provided a hint of a more open attitude when he told analysts that he aims to "increase external transparency." He will have his first chance to demonstrate what he means on Feb. 21, when the triumvirate is scheduled to present analysts with the strategic fruit of its 100-day review.
By most accounts, deputy chairman Leighton is driving a lot of the strategy. A tall, shaven-headed man, he's amiable and media-savvy, something of a legend in British business. The native of Hereford started out as a salesman for candy maker Mars Inc., moved up the corporate ladder and joined the company's pet-food business, and then landed at Asda Group PLC, a supermarket chain. Leighton helped turn the retailer around; it was subsequently acquired by Wal-Mart in 1999. Leighton next logged a year as CEO of the discounter's European arm.
Leighton then switched tacks. He decided that he wanted to work with multiple organizations simultaneously. He called it "going plural," and he set up a website under that name to provide advice to entrepreneurs. Leighton has occasionally been accused of dabbling in too many areas to be able to know any of them in depth. He has dropped some duties and directorships recently, although he is still chairman of the Royal Mail (his tenure has been controversial, but he is credited with putting the state-owned service in the black). Leighton spends about half his time in Canada.
In the U.K., Leighton is known for his no-nonsense style and tough approach with labour. He hasn't shied away from slashing thousands of jobs, or from bypassing union leaders to communicate directly with staff-he's a great believer in staff input. He sits on the board of George Weston Ltd., the parent of Loblaw, and is deputy chairman of that company, Selfridges and two other Weston family-owned luxury goods companies.
For general merchandising know-how, Galen Jr. can turn to Mark Foote. After 27 years at Canadian Tire, Foote knows all about facing Wal-Mart-he was part of the leadership that decided Canadian Tire ought to invest in its core strengths of car parts, sporting goods and housewares, focusing in particular on goods it offers exclusively. "He just seems universally respected," analyst John Chamberlain says of Foote. Chamberlain knows of a Loblaw manager who'd decided to quit out of frustration over the company's bogged-down operations-but who reversed the decision when word came that Foote was coming.
Nobody is writing off Loblaw. "We believe it's an undervalued holding with a tremendous amount of potential for upside," says AIC's Almeida. The retailer has a strong foundation and valuable assets. It is better positioned to fend off Wal-Mart than were American grocers, the first line of defence being the company's own discount chains. Unlike many retailers, Loblaw owns most of its real estate. Its President's Choice bank is popular, and draws customers back to the stores with its loyalty program. (In fact, Loblaw may eventually introduce a broader loyalty program.) Meanwhile, Joe Fresh is showing signs of becoming a draw on the non-food side.
Indeed, Loblaw is attractive enough to catch the eye of suitors. Some observers even think that the Weston family may be laying the groundwork for a sale. Galen Sr. insists that is not the case: Loblaw is "core for the family," he says. But he also points to instances in his past when he divested weak assets, most notably those belonging to George Weston. "My history, wherever it is in the world, is: You buy things or you inherit things and you keep them fresh and you keep them vital," Galen Sr. says. "And where it doesn't work, like our fishing business or our pulp and paper business or our cookie business, we've decided to exit those businesses."
So Loblaw could be sold-if it continues to founder. It would only mean selling off the Weston legacy, too.
Weston Civilization Lots of families make money. The Westons make a mystque Alec Scott "People will eat horseshit if it's got enough icing on it." George Weston, the son of a Cockney immigrant to Canada, knew whereof he spoke. Starting out selling buns door to door as a baker's boy at a Toronto breadworks in 1875, he opened his own bakery in 1882 and made such a success of it that he off-loaded his business for an estimated $1 million in 1911. On this foundation, three further generations of Weston men (all with names beginning with "G") have built a multinational food-and-fashion empire.
The family divided its holdings in the 1970s, with one part managed by the British branch and the other by the Canadian side-who are oft-dubbed Canada's Royal Family. Apart from pointing to the family's status in the U.K., the royal designation captures the aura that distinguishes them from the dour dynasties that predominate here. Unlike their peers, the lanky, soft-spoken Westons appear to enjoy their money-making it and, especially, dispersing it, lavishly, on parties and charities. "There's a reason successful families are successful," says William Thorsell, head of the Royal Ontario Museum, a frequent recipient of Weston largesse. Indeed, but what is it?
Born in 1898, the dynasty's second "G," Garfield, left Toronto's storied Harbord Collegiate to serve in the First World War, touring English biscuit factories while on leave. After the war, he convinced his father that making biscuits available to the tea-swilling masses at an affordable price would be a smart move. Indeed it was, but it was followed by a dumb one: Shortly before the Wall Street crash, the now-in-charge Garfield-George died in 1924-expanded into the U.S. While struggling to avert bankruptcy, he was sidelined by an ulcer. "During my convalescence [in a Boston hospital]" he later recalled, "I bought 20 or 30 of the finest books I could find in biography and history. ...I went back to Canada a failure, but a different man."
Instead of retrenching, Garfield used his remaining capital to go on a buying spree, moving to England with his growing brood (he'd eventually sire nine children). The food companies he bought (often for a song) throughout the Depression formed the empire's foundation. Too old to serve in the Second World War, the ardent anglophile pitched in as a Tory MP.
After the war, Garfield continued the spending spree, adding Fortnum & Mason-the Queen's own grocery and quintessential British tearoom-to his stable in 1951. Only slightly less rough around the edges than his plain-spoken father, Garfield loved to make stockholders sing militant hymns at annual meetings, and to weigh in on international affairs, much to his increasingly refined family's embarrassment. In support of apartheid, he was once quoted as saying, "Every black pickaninny or mammy can call on the government for solutions to every social problem."
Amid marrying his six daughters off, mainly to well-to-do Americans, Garfield tested his three sons. The eldest, Grainger, opted out, starting a cattle-ranching business in Texas-where his seldom-heard-from branch of the family remains. Garfield Jr., known as Garry, was sent to Australia to oversee the family's interests there, while Galen was dispatched to Ireland and Canada. Both Garry and Galen managed their regions adeptly, and when their father died in 1978, both felt entitled to lead the consortium. After a discreet power struggle, the assets were split, leaving Britain and points east to Garry, and Ireland and points west to Galen.
The two brothers' styles differed markedly. The elder, Garry, was as scholarly, shy and cautious as the younger, Galen, was party-hearty, outgoing and risk-courting. The Oxford- and Harvard-educated Garry was wont to visit family factories in a decrepit Ford that, as often as not, needed jump-starting. Remembered since his death in 2002 primarily as the inventor of the chocolate-and-marshmallow Wagon Wheel, Garry sold off many of the companies Garfield had bought, holding on, however, to such well-known brands as Twinings, Ryvita and Ovaltine, as well as the U.K.-based discount clothing retailer Primark. Two of Garry's six children, Guy and George, now oversee these operations. (Taking the "G" naming convention to a whimsical extreme, George has a son named Gulliver.)
Not surprisingly, it was the flamboyant Galen who put the glitter in the Weston name. A member of the varsity crew in his undergrad years at the University of Western Ontario, the tall, fair-haired youth is remembered by a university contemporary, former Ontario premier David Peterson, for his "crummy old car" and for living with roommates in a "hole" of a house. "It took me months to figure out he had two cents," Peterson says. When Galen left Western one credit shy of a degree, he embarked on a career building the family's higher-crust retail properties-the couture-carrying Holt Renfrew (in Canada), Brown Thomas (in Ireland) and Selfridges (in the U.K.)-not to mention moving Loblaw upmarket.
As a young man, Galen might have struck an alliance through marriage with another prominent or wealthy family. Instead, his was a love-match, to Hilary Frayne, the daughter of a Dublin appliance salesman. Galen espied the leggy teen model on a billboard (wearing hot pants and Sheer Dynamite stockings) and finagled an introduction. Three years later, in 1966, they were married in a Klondike-themed ceremony at a family estate on the Thames. So raucous were the celebrations, a guest fell overboard from a steamer rented for the occasion.
The pair settled down at Roundwood Park, a 17th-century castle in the picturesque Wicklow hills south of Dublin. Here their two children, Alannah and Galen Jr.-both born in 1972-spent many of their formative years. But the idyll was not to last. In 1983, the IRA attempted to kidnap the family. Because of a tipoff, none of them were on site during the pitched gun-battle between police and the seven terrorists assigned to make the snatch-in fact, Galen Sr. was playing polo in Windsor with Prince Charles.
Galen and Hilary retreated from Ireland to a home in Toronto's Forest Hill and a castle in Windsor-Fort Belvedere, in which Edward VIII famously signed the papers of abdication. In addition, the couple bought a 416-acre island off Florida's Atlantic coast and developed it into one of the world's most exclusive gated communities, affectionately named Windsor.
Vanity Fair dubbed Galen and Hilary "the golden couple of the Nineties," in large part for their deluxe parties. In 1993, for the Oxford-educated Alannah's 21st birthday at Fort Belvedere, they threw an elaborate Alice in Wonderland-themed do, reputed to have cost upward of £250,000. Alannah has gone on to become one of London's brightest young things. After slumming for a couple of years as a reporter at the Telegraph, she assumed the creative direction of Selfridges; in off-hours, she has dated the pop star Seal, and has been seen in the right places sufficiently often to routinely make Tatler magazine's most-invited list.
Where his father is an adherent of the traditional gentlemen's club-White's in London, the Brook in New York, the York in Toronto-Galen Jr. has opted for a hip update. Taking their cue from Soho House in London, Galen Jr. and an Upper Canada College pal, Michael Shore, opened Toronto's Spoke Club in 2004. The King Street spot is designed for young creative types, but to date is an uneasy mix of art and Mammon.
The Harvard- and Columbia-educated G2 (as he's known) celebrated his marriage to Bata heiress Alexandra Schmidt at a chateau in the south of France-and in a Toronto Loblaw warehouse decked out with orchid chandeliers and waterfalls.
But the swankiest Weston do of all was Hilary's 60th birthday party in 2003. In a huge marquee next to Fort Belvedere, she hosted the likes of the Queen, Prince Philip, Prince Charles, Princess Caroline of Monaco, Brian Mulroney and, as chronicler, the gossip columnist Taki Theodoracopulos-who duly gushed over Alannah's appearance and described the fireworks as "Dresden without the destruction."
For all this high-society hobnobbing, and for all their money (net worth: around $10 billion), the Westons have an earnest streak, highly valuing hard work, philanthropy and family ties. If Galen Sr. sometimes swanned into George Weston Ltd.'s head office in Toronto wearing a floor-length fur, flanked by two Dobermans (it was the 1970s), he still sweated over his hires, fires and the major decisions needed to keep the company in the black. If Hilary often made international best-dressed lists, she also took seriously her work at Holts, on the Florida development and as Ontario's Lieutenant-Governor, from 1997 to 2002. ("I may not be the man who accompanies Jackie Kennedy to Paris," her proud spouse joked, "but I am the man who gets to accompany Hilary Weston to Timmins, Kingston or Kenora.") On Saturday mornings throughout the '80s, Galen and Hilary would take their children on spot visits to local Loblaw stores. As Weston biographer Charles Davies comments: "Underneath the modern, efficient and ruthlessly stylish shell is a soft centre of middle-class sentimentality."
Galen Sr. is staunchly loyal to his close friends. When Dave Nichol, his college buddy and former lieutenant at Loblaw, was in a Beverly Hills hospital recovering from cancer surgery in 2001, Galen Sr. sent his private jet to pick up Nichol and bring him home to Toronto. "That's a nice friend," Nichol says appreciatively today.
Through the W. Garfield Weston Foundation and personally, the family usually dispenses over $10 million per year, making major gifts in recent years to the British Museum, the Nature Conservancy of Canada, the Ontario Science Centre and the Royal Ontario Museum. "When I met with Hilary to see if she'd head our fundraising campaign," the ROM's William Thorsell says, "she'd read all the briefing books. Looking out over Toronto, she turned to me and said, 'If you can promise me that you won't ever compromise the quality [of the proposed addition] I'll help.' " For Thorsell, herein lies the secret of the Westons' success. "They're careful, but not cautious," he says. "They assess the risks, but if they decide to do something, they go the whole way."