Simons: Sobeys’ purchase of Safeway comes with grocery baggageRestrictive covenants damaged relationship with EdmontoniansBy Paula Simons, Edmonton Journal June 17, 2013
EDMONTON - When I was a kid in Edmonton, Safeway was a towering giant in the world of groceries.
The U.S.-based grocery chain had a near-stranglehold on the local retail food sector.
By 1973, there were 35 Safeway stores in Edmonton — significantly more than today.
IGA, the next-largest competitor, had just 15 stores. In the days before every family had two cars there were Safeways every 10 or 15 blocks.
In 1968, a Royal Commission on Consumer Problems and Inflation recommended a probe into prairie grocery retailing. Then, in 1972, Safeway was charged under the Combines Investigation Act with being party to a monopoly in both Edmonton and Calgary.
The Crown assembled a case involving 800 witnesses and 10,000 documents. But the matter never went to trial. Instead, in 1973, Safeway agreed to a court order that severely restricted its ability to open new stores and to engage in predatory pricing.
Safeway also had to acknowledge that it has negotiated clauses in leases which included extraordinary caveats on land titles of stores, which forbade competitors from opening up grocery stores nearby — even if Safeway closed and sold a store.
The deal should have been good news for Edmonton consumers, since it paved the way for more competition. In practice, the court order meant Safeway closed many of its smaller stores in older neighbourhoods, to open larger new ones in the suburbs.
Yet those restrictive caveats stayed in place, decade after. Neighbourhoods were left without grocery stores, stuck with huge empty buildings that sucked the life out of communities, and soured Safeway’s relationship with Edmontonians. Neighbours like those in Lendrum, Highlands, and Belvedere are still haunted by the caveat’s powers.
Now, 40 years later, Edmonton’s complex love-hate relationship with Safeway is coming to a bumpy end.
Last week, Safeway Canada announced that it was selling all its Canadian stores to Sobeys for $5.8 billion. The deal allows Safeway’s American parent company, which has a long-term debt of $5.3 billion US, to pay down its debt and shore up its defences against Walmart.
It’s a coup for Sobeys in its own battles against Loblaws and Walmart in Canada. Right now, Loblaws, which also owns The Real Canadian Superstore and the T&T Asian supermarkets, has annual revenues of about $32 billion, roughly double Sobeys’ annual revenues of $16.2 billion. Capturing Safeway’s revenues could bring Sobeys closer to $24 billion a year and add real estate worth $1.8 billion to Sobeys’ portfolio.
Given the robust competition in Edmonton’s grocery market these days — not just from Superstore, but from the likes of Save-On, Walmart, Costco, and smaller outfits such as Planet Organic and the Italian Centre — Sobeys won’t have anything like the near-monopoly Safeway enjoyed in the 1970s.
But those old Safeway caveats remain, ugly, blighting legacies of a very different time.
Indeed, if Sobeys consolidates and closes some existing Safeways, matters could even get worse.
Does Sobeys inherit the caveats, or do they expire with this sale? If Sobeys does retain the caveats, will it insist that they be enforced? Or is the company prepared, in the name of happy community relations, to the jettison the restrictive covenants that Safeway was able to demand back in the days when it ruled the Edmonton grocery market?
Sobeys simply isn’t saying.
“The deal hasn’t closed and we’re not prepared to discuss details of the transaction beyond what we’ve publicly disclosed,” Andrew Walker, Sobeys vice-president of communications and corporate affairs told me via email, late Monday. “It is early days and, in any event, the transaction still requires competition bureau approval before it can close.”
But at City Hall, councillors who’ve spent years battling the destructive Safeway caveats are striving for optimism.
“When Safeway let the land sit vacant for years, they created eyesores in communities,” says Kim Krushell. “That got a lot of people’s backs up. It would be wonderful if Sobeys actually looked at this and removed those caveats.”
“Who knows? You gotta hope,” says Ben Henderson. “When you take away a grocery store, you sterilize an area.”
After all those decades that Safeway so completely dominated Edmonton’s grocery market, it’s hard to believe that big red S may soon disappear from our landscape, that those familiar Lucerne products, that crusty French bread, might disappear from our kitchen tables.
Most Edmontonians, I expect, will say goodbye with complicated emotions.
Is it too much to hope Sobeys will begin its deeper relationship with Edmonton by cleaning up the mess that Safeway left behind?
ref. -
http://www.edmontonjournal.com/news/edm ... story.html