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Oil crash hits Safeway supermarkets as shoppers dial back

Ben Nelms/Bloomberg via Getty Images

A “vibe” has settled over regions hit by oil’s steep fall that’s diminishing shoppers’ appetite to splurge on weekly treats or more expensive dining-in options, supermarket executives for Empire said Wednesday.

Empire, which owns the Safeway and Sobeys banners, counts on Western Canadian markets – and importantly Alberta – for a third of its sales, a sum that’s feeling the financial strain wrought by deteriorating economic conditions in the Prairies.

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“There’s clearly an Alberta situation that’s being played out, which can be analyzed two-fold,” Marc Poulin, head of Empire, said on a conference call.

“There’s the direct oil-related markets … Then there’s an overall Alberta market vibe or negative vibe if I can call it that that’s also having a factor. That also spills into Saskatchewan to a certain degree,” Poulin said.

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“The weakness in Alberta has become a bit broader-based because the psyche of the consumer [has been affected],” Jim Durran, an analyst at Barclays Capital, said.

Price cuts?

Like other areas of the economy, supermarkets are now seeing a “serious impact” from the oil and commodity slump, analysts at CIBC World Markets said in a Nov. 12 research note.

Many customers affected by the slowdown have traded down to lower-priced options or into discount banners for example.

Yet Nova Scotia-based Empire, the country’s second-biggest supermarket operator, doesn’t own a discount banner in the region, and counts on Safeway, a conventional store with sometimes higher price points, for much of its Western Canadian sales.

That’s left some experts speculating that the Empire may tinker with pricing in order to prevent customers from moving to a discounter.

“We’re clearly looking at the way we go to market,” Poulin said. “That’s the work that’s currently going on.”

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