Co-op Atlantic looks to sell grocery, gas business to Sobeys

Co-op Atlantic wants to sell its grocery and gas business to Sobeys.

On Saturday, the board of directors of the Moncton, N.B.-based co-op asked its member-owners to ratify a plan to sell Co-op Atlantic’s entire food and gas retail and wholesale business to Sobeys.

Members have until May 12 to vote. The co-op also recommended that member-owners negotiate their own wholesale supply agreements with Sobeys for their stores.

Co-op Atlantic’s grocery business includes some 173 member-owned and franchised stores under supermarket banners such as Co-op, Valufoods and Village Mart and the convenience banner Rite Stop.

The co-op’s exit from food and fuel stems from “ongoing financial challenges for Co-op Atlantic in an increasingly competitive retail food and gas market,” a spokesperson told Canadian Grocer Saturday.

The decision followed several months of review of the co-op operations and finances.

“This decision has been a difficult one for management and the board but is, we believe, the best option for the continued viability of the member-owner stores and the co-operative movement in Atlantic Canada,” Adélard Cormier, Co-op Atlantic’s board chair, said in a statement.

Atlantic Co-op’s grocery business has faced stiff competition from the region’s two biggest grocery chains, Loblaw and Sobeys, in recent years.

In addition, two years ago, Walmart began to convert its discount stores in the Atlantic region to full-grocery Supercentres. In 2013 alone, Walmart spent $90 million to open nine Supercentres in Nova Scotia and New Brunswick.

This past January Walmart opened its first two Supercentres in PEI as well.

Grocers in the Atlantic have also had to deal with sluggish growth. Two years ago, sales for traditional grocery and convenience stores in the region fell 2.5 per cent. Last year they rebounded somewhat, rising 1.7 per cent.

Canadian Grocer estimates that Co-op Atlantic controls no more than six per cent of consumer packaged goods sales in the Atlantic region, whereas Sobeys’ and Loblaw’s share is likely 25 per cent to 30 per cent each.

If Co-op Atlantic’s members agree to the board’s plan, work to finalize the sale to Sobeys would begin.

It would be the third major purchase by Stellarton, N.S.-based Sobeys in the last four years.

In 2013, Sobeys spent $5.8 billion to buy Canada Safeway in Western Canada.

In 2011 it purchased 236 retail gas locations and related convenience store operations in Quebec and Atlantic Canada from Shell Canada for $214.9 million.

As of 2014, Sobeys had 351 corporate stores and 70 franchised stores in the Atlantic provinces. Its banners there include Sobeys and Foodland for grocery, Needs for convenience stores and Lawtons for drugstores.

Sobeys’ wholesale business to affiliate and independent stores in Atlantic Canada is called TRA Atlantic.