Loblaw's health store format 'Nutshell' abandoned

Loblaw has abandoned plans for its health and wellness store format Nutshell, claiming its focus is elsewhere in the wake of last year’s $12.4 billion purchase of Shoppers Drug Mart.

The first inkling that the grocery giant was abandoning the project came via a cryptic poem on Nutshell’s now-defunct Facebook page late last month. The poem read: “Pistachios are green, almonds are brown, try not to frown, Nutshell has shut down. While we have to abort, we thank you all for your support.”

Loblaw did not respond to repeated interview requests by Canadian Grocer, but a company spokesperson confirmed to the Financial Post late last week that the Nutshell concept had been abandoned.

The spokesperson said the concept was abandoned because of potential conflicts with future “small-store” concepts that might be introduced by the recently acquired Shoppers Drug Mart division.

But Toronto retail consultant Ed Strapagiel told Canadian Grocer that those claims sound “hollow,” and it’s more likely the decision to abandon the Nutshell concept was financially motivated.

“Loblaw is a huge organization that runs about 20-25 different store banners…so surely they could run one more,” he said. “I think it just comes down to the fact that they tried an experiment and it didn’t work. Years ago they tried an experiment called Joe Fresh and it did work, that’s how you do these things.”

Strapagiel said that many companies have adopted a “fail-fast” approach to new business ventures, quickly scrapping plans that don’t appear viable. He theorized that Nutshell was killed based on consumer response to the concept via Facebook, Twitter, etc. “They raised the flag up there and maybe they got the impression that not enough people saluted,” he said.

He also said it’s possible that Loblaw discovered it wouldn’t be able to successfully leverage its corporate buying power to obtain favourable prices from its supplier partners.

Strapagiel couldn’t estimate what kind of costs Loblaw incurred in developing the Nutshell concept, but said it typically costs anywhere from $20 to $100 per square foot to upgrade an existing retail space.

Loblaw’s plans to expand into the health and wellness space were first made public last year, when a company spokesperson confirmed its plans to open a 9,000-square foot store called Nutshell Live Life Well in Toronto’s King West neighbourhood.

READ: Loblaw to test health store format

Its Twitter feed, also now abandoned, said that the store would offer “fresh, natural and convenient food choices,” as well as a pharmacy built around a “preventative approach.”

The company set about recruiting employees – dubbed “Health Nuts” – with Nutshell’s social media channels portrayed it as a grassroots-type venture, and made no mention of the corporate parent.

The Nutshell launch was widely perceived as Loblaw’s defending its territory against Austin, Texas-based Whole Foods, which offers a similar proposition and has publicly stated its intention to open 40 or more stores in Canada.

Co-CEO John Mackey has said that the Canadian market could ultimately account for $1 billion in annual sales.

However, Strapagiel said that the notion that Nutshell was intended to compete with Whole Foods was also questionable, and that diversifying its product offering was more the issue. “I’m not sure they sat around worrying about Whole Foods, not the way they worry about, say, Walmart and Target,” he said. “In a competitive context, Whole Foods is a few notches down the ladder.”