General counsel discuss strategies for navigating supply chain issues and evolving consumer habits
The grocery retail sector has seen tremendous changes over the past two years, with an onslaught of ever-evolving pandemic restrictions, supply chain challenges, and changing shopper habits. Demand for e-commerce groceries has surged, and many retailers have introduced automated systems such as self-checkouts.
The entire grocery sector responded robustly to the pandemic and worked together in ways it never before had thought possible.
“It was a challenge to work together through associations and through our competitors to try to share best practices around things that were permissible to share,” says Doug Nathanson, senior vice president, general counsel, and corporate secretary at the Empire Company Ltd. – the parent company of Sobeys. “Groups formed to share resources or share information and lobby governments, which we had never encountered before. My team stayed at the forefront of that to understand how to do that in a very legally compliant way, but also in a nimble way because it was happening in real time.”
At Loblaw Companies Inc., customers began to interact with the retailer in a variety of new ways across different parts of the business. Customers chose to bake and cook at home and to shop online a lot more, notes Nick Henn, executive vice president and chief legal officer at Loblaw Companies. Customers not only changed the way they shopped for groceries, but they also changed the way they used financial services, pharmacy services, and even the Joe Fresh business.
“It’s been quite a change across the enterprise,” says Henn. “Legal has been there throughout to turn that changing customer behaviour into the reality of what we need to do from a legal, regulatory, and business operations perspective.”
The rollout of COVID testing and vaccinations in pharmacies required a huge amount of heavy lifting from the Shoppers Drug Mart legal team, as they navigated varying rules and regulations in every province.
“We had to come up with ways to ensure that we could safely deliver these services to customers and move the billion-dollar online business to a three-and-a-half billion-dollar online grocery business,” says Henn.
Henn’s team also managed contracts with third parties, and the real estate side of the business.
“All aspects of the business that have changed have a legal element,” says Henn. “My team spent a lot of time supporting the business and asking the right questions to understand legal risks for the first time on things that had never been done before.”
At Sobeys, the legal team supported the launch of the online grocery delivery business Voila in 2020, which has since surged in popularity in Ontario. Sobeys opened a second distribution centre in Quebec, and the retailer is now piloting in-store fulfilment or “click and collect” programs at some of its Atlantic stores.
“The legal team accelerated all of its efforts to help the online business grow at a pace that we thought would take years, but it was really forced upon us very quickly,” says Nathanson. Demand for Voila has persisted, despite the easing of in-store pandemic restrictions.
Supply chain challenges have been a rollercoaster throughout the pandemic for grocery retailers, as global shipping was disrupted by closed ports and poor weather conditions, and the cost of shipping rose as a result.
“Supply chain was pushed in ways that we never thought it would be, and my team responded remarkably well, with great resilience,” says Nathanson.
Nathanson’s team had to re-examine every supplier relationship and the way in which the company operates from its distribution centres. The team rose to the challenge of being creative advisors and adapting as the business adapted.
Retailers have accelerated innovation strategies to continue reaching consumers through new channels in a competitive market. Sobeys was the first grocer to pioneer a “smart cart” that allows the shopper to scan directly from the cart.
In other initiatives, the legal team at Sobeys led the charge last year – together with Food, Health and Consumer Products of Canada – to put forward a supplier code of conduct that aims to govern the relationship between retailers and suppliers.
“It’s a huge undertaking that has never been done in Canada,” says Nathanson. “Now we realize that a harmonious relationship between retailers and suppliers just serves the country much better. When you’re not fighting over fees and fines it increases your focus on a stronger, collaborative relationship.”
As the world slowly settles into a less-transient phase, grocery retailers are monitoring which trends will continue for the long-term and which may be phased out in the post-pandemic world.
“One of the things we’ve noticed during the pandemic is that our business is much more digital and much more data-driven than ever before,” says Henn. “We’re increasingly becoming a data company alongside our physical grocery and pharmacies.” One of the challenges for the legal team is to collect and process data, and to use it to create insights that will add value to customers, Henn says. Privacy and cybersecurity have never been more crucial, he adds.
The legal team has to stay nimble to support Loblaw’s evolving businesses, such as the launch of an emerging health care business called PC Health.
“My team are increasingly having to think about the services they are offering in a different way, to be creative and stay close to the strategy of the business,” he says. “Our strategy is to make sure that no matter how and where customers want to shop, we have a really good strategy that works for them.”
In the years ahead, the grocery retail sector will continue to seek new ways to innovate and reach customers, according to Nathanson. He anticipates an increase in personalized offers and loyalty that will drive customer behaviour.
“We’ve seen a lot of innovation behind the scenes with analytics and data usage, but we haven’t seen a ton of customer-facing innovation,” says Nathanson. “I think that’s what will start to become apparent in the next few years.”
