You've heard about synergies. They've talked about logistics. But the simple mechanics of Loblaw Companies' acquisition of Shoppers Drug Mart may seem a bit fuzzy.
For the everyday consumer, what changes? And in layman's terms, how will it help the two companies?
Executives answered the deal's pressing questions on a conference call Monday morning. Here's what you need to know:
Will Loblaw swallow Shoppers whole?
The two companies will operate independent of each other. Shoppers' management team stays in place, and there are no plans to close any Shoppers stores. Loblaw executive chairman Galen Weston Jr. noted that his company already has separate units – the financial division, high-end grocery, discount grocery – and Shoppers will simply be added as a new unit. "We believe they have to have the autonomy to build this business," Loblaw president Vicente Trius said.
Both companies believe they complement their partners' strengths – so they aren't building a behemoth that focuses on the same products. (The Competition Bureau will have the final word on that.) "This is a complementary transaction about leveraging existing strengths and retail assets, as opposed to the combination of fundamentally overlapping sales bases," Mr. Weston said. The numbers tell this story. Loblaw only has 5-per-cent share of the pharmacy business, something Shoppers specializes in, but its food division brings in revenues of $30-billion, versus $1-billion for Shoppers. "This is not just about stripping out costs and banging the businesses together," Mr. Weston added.
What does each company want from the other?
Loblaw thinks it has a lot to gain from beefing up its medical/pharmacy unit, while Shoppers wants Loblaw's food in its stores – in large part because quick food options bring people in, making them more likely to grab a bottle of shampoo at the same time. "Imagine seeing our President's Choice Blue Menu in their stores," Mr. Trius said, and vice versa Shoppers' Life Brand in Loblaw locations. At Shoppers, they are really happy to have the chance to expand their food offerings. "We didn't have the capability, and certainly we didn't have the access to the sources of supply that a Loblaw has," chief executive officer Domenic Pilla said.
Will the shopping experience change?
Don't expect dramatic makeovers. The stores will still offer two different experiences. There will be "no big change to the footprints of either model," Mr. Weston said. Yet, they will look a little more like each other. Shoppers, for instance, believes it can do away with areas like its photo departments, which are much less relevant given the growth of digital photography, and replace those with food options.
What happens to loyalty programs?
Do not fret: you will not lose your Optimum points, and the two loyalty programs will stay separate. "We don't, at this point, anticipate a merging of the currencies," Mr. Weston said. The advantages are more on the backend, and consumer analytics is driving the bus. By knowing what an Optimum customer purchases at Shoppers, Loblaw can better market its own products. Another example: Optimum has 10 million clients. "When we look at PC Financial, imagine the capability to reach all those customers in our Mastercard, insurance business," Mr. Trius said.
Did Shoppers have other options?
Shoppers executives weighed other ideas for the past two years, but decided on merging with Loblaw after being in on-and-off negotiations for three and a half years. The new partners took their time hashing out the details, and Shoppers even built a mock store to add in some Loblaw products and see how it looked and felt.
(Tim Kiladze is a Globe and Mail banking reporter.)
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