The parent company of grocery giant Sobeys announced Monday it was acquiring homegrown Ottawa food retailer Farm Boy, leaving a bad taste in the mouths of some customers of the much-revered local brand.
“Don’t touch Farm Boy!!!” urged one person on OBJ’s Facebook page, where the story was easily the most talked-about on a busy news morning. “On no!!! This makes me sad,” wrote another.
Monday afternoon, Farm Boy co-CEO Jeff York delivered a clear message to the company’s legions of fans: rest easy.
“There should be no concern from our customers because it’s only going to get better,” he told OBJ. “Nothing’s going to change. We’re just going to keep growing it better and faster and keep concentrating on what we do best.”
Under the deal, which still requires the approval of the Canadian Competition Bureau and is expected to close in early 2019, Sobeys parent Empire Co. will acquire Farm Boy’s 26 Ontario locations, which it values at $800 million.
Farm Boy will remain a separate company under the Empire umbrella, and York will continue to run the operation out of the Ottawa office along with founder and co-CEO Jean-Louis Bellemare. Bellemare, York and Farm Boy senior vice-presidents Shaun Linton and Donny Milito have agreed to reinvest in the company in return for a 12 per cent interest of the continuing Farm Boy business.
Empire says Farm Boy products will also be added to Sobeys’ Ocado-based e-commerce business, an online grocery platform which will launch in 2020 in the Greater Toronto Area. Some Sobeys stores in the GTA could be converted to Farm Boys, York said, depending on “what makes sense for that customer demographic.”
Farm Boy here to stay
York reassured customers that Farm Boy is not going to lose its unique brand identity.
“People think Farm Boy is (going to be part of) Sobeys,” he said. “We’re not part of Sobeys.”
Empire Co.’s president and chief executive Michael Medline said the company aims to “turbocharge” the Ottawa-based chain and double its business and footprint across the province over the next five years.
“This is a jewel of an asset,” Medline told analysts on a call Monday discussing the transaction. “They have a proven business model with an established brand ... and a significant runway for growth.”
"This is a jewel of an asset."
Empire’s chief financial officer Michael Vels said the door was open to expand Farm Boy into other markets beyond Ontario, but there was no time frame given the amount of “upside” in Ontario.
York called the deal “a total win for both parties.” He said it gives Empire an instant boost in an Ontario market where it has struggled to gain market share, while at the same time providing Farm Boy access to prime expansion locations it otherwise never would have had a shot at.
“The big three (grocery) companies – Loblaws, Metro and Sobeys – see all of the real-estate deals first because they’re national or they have a bigger scope,” he noted. “We get the deals after they’ve already seen them. So we’re going to start seeing the deals earlier in the process, which is a huge advantage in retail.”
Big GTA expansion plans
Farm Boy now has 14 locations in the Ottawa region – or roughly one for every 70,000 people – but just three in the GTA, which has a population of more than six million. York said the company’s Toronto-area stores outperform the average Farm Boy location by 35 per cent, a clear indication the retailer is ripe for expansion in southern Ontario.
“Our whole plan is to double the business, and most of it’s going to be in the GTA,” he said, adding the chain plans to open at least 14 new stores in the country’s largest metropolitan area over the next three years. “We have 14 stores in Ottawa. You can have 60 in Toronto easy.”
Farm Boy opened its first grocery store in Cornwall in 1981, and offers fresh foods and its own private-label grocery products, a format which has drawn some comparisons to popular U.S. food retail chain Trader Joe’s.
"The first time we met, I knew this deal was gonna happen."
The acquisition comes as competition in the grocery space continues to heighten, with Amazon acquiring Whole Foods Market last year.
York said he and Empire’s Medline first got together in May at the suggestion of a mutual friend. They talked about Farm Boy’s business model and future plans over lunch and immediately hit it off, York said, and the deal gradually came together over the next several months.
“I liked him; he liked us,” he said. “The first time we met, I knew this deal was gonna happen. It makes sense.”
– With files from the Canadian Press