Loblaws-Shoppers Drug Mart Deal: What Happens To Optimum Points, Brands?

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With the announcement Monday morning that grocery giant Loblaws has bid to buy pharmacy chain Shoppers Drug Mart in a $12.4-billion deal, many consumers are wondering what it will all mean for them.

From the iconic No Name and President’s Choice house brands at Loblaws to Shoppers Drug Mart’s popular Optimum points card, many things Canadian consumers have come to take for granted will undergo change.

But for now, the two retailers stress it’s business as usual for consumers. Shoppers sought to calm fears about a possible end to its Optimum loyalty program with a tweet that declared there would be “no immediate impact” on it.

Not everyone is willing to take Shoppers’ word for it, though. AvidTap, a Toronto startup working to grab a share of the loyalty program market, cast doubt on Shoppers’ claim in a press statement Monday.

“Everyone who has read corporate talking points knows one thing for sure: ‘There is no immediate impact’ is robot talking-point talk. It’s what people in suits say when they want to distract your attention.”

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But one thing does seem to be on the chopping block, at least in the long term: The No Name house brand that helped make Loblaws a dominant supermarket chain (under various names) across the country is headed for the the dustbin of history.

Loblaw chief executive Galen G. Weston says eventually Shoppers’ Life house brand and the Loblaws No Name brand will be rolled together into one new house brand, according to The Toronto Star.

Another concern among consumers is whether this will lead to store closures. The answer, at least for now, appears to be no, with both Loblaw and Shoppers executives saying there are no plans to reduce stores.

In fact, for Loblaws, the strategy appears to be to use Shoppers locations to gain more of a foothold in the urban market.

In an analysis piece, the Globe and Mail notes that both Loblaws and rival Sobeys have been working to grab a larger share of the market within city centres, after decades of focusing on the suburbs. The trend reflects the fact that an ever-larger proportion of Canadians are moving into high-density urban housing.

But analysts suggest two immediate developments prompted the Loblaws-Shoppers move: The $5.8-billion buyout by Sobeys of Safeway’s (mostly western) Canadian stores, and the arrival this spring of Target to Canada.

It increases the strategic imperative for Canadian retailers to do further acquisitions,” Kenric Tyghe, an analyst at Raymond James Financial Inc., told Bloomberg News. “With recent M&A competitive activity in the retail space, certain of Canada’s retailers have gone from leaders to outliers.”

The Loblaws-Shoppers deal will need approval from the Competition Bureau — and from the shareholders of both companies.

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