Born at the dawn of the Great Depression, Canada Safeway Ltd. became the most successful international division of one of America’s great grocery chains. But its parent’s relative indifference to the Canadian market placed it on the losing side of recent industry-wide consolidation.
The U.S. giant’s foundations were laid by grocery barons Sam Seelig in Los Angeles and Marion Skaggs in Idaho. Seelig grew his business rapidly but lost control to his largest creditor in 1925. Skaggs did better, assembling more than 400 stores across 10 states. In 1926, Merrill Lynch bought out Seelig’s legacy and promptly merged it with the stores run by Skaggs, who became CEO of the new 750-store Safeway chain.
A flurry of acquisitions ensued and, over time, Safeway became the dominant chain in Western Canada. There was a time when being a strong regional player was enough. But Wal-Mart’s 1994 debut in Canada raised the prospect the cutthroat retailer would dedicate significant floor space to groceries.
Against that backdrop, the differing fortunes of Sobeys and Safeway are instructive. Until the late 1990s, Sobeys had been a regional chain operating exclusively in Atlantic Canada. But its purchase of IGA in 1998 signalled its ambition to become a national player. Those aspirations brought it head-to-head with Safeway in the West. Safeway made occasional noises about heading east—but never did.
While the much larger Loblaws, Sobeys and Metro each retained greater negotiating clout with suppliers than Wal-Mart, Safeway seemed comparatively inert. Though Safeway’s 220 northern stores were considerably more profitable than their U.S. counterparts, they represented only 14% of Safeway’s North American presence.
Consolidation favours the bold: it was Sobeys that bought Canada Safeway, for $5.8 billion, in June. Whether it will continue using the Safeway trademark has yet to be determined, but the sale signifies the end of nearly a century of international adventures: Safeway previously exited Australia in 1985 and the U.K. in 1987. It is now once again almost exclusively an American chain.