There has been a lot of news to digest in recent weeks. We want to ensure you have the most up-to-date information as we all work together to strengthen our Safeway stores and reconnect with our customers.

We’d like to address four important areas to help provide clarity around this news and other important issues to date:

• Project Sunrise
• Our continued commitment to full-service format stores
• The strong case for expanding our Discount format in Western Canada
• Set the record straight on the current status of bargaining and other issues

Project Sunrise

As you know, the grocery industry is extremely competitive and these effects are being felt across all banners, at all levels of the Company.

To address these challenges we launched Project Sunrise, a major transformation initiative to win back our customers and strengthen our stores. The first phase of Project Sunrise – reorganizing our office teams to operate as one national, functionally-led organization – is now complete. Through this process we have created a simpler office structure to operate more efficiently and better serve our stores and customers.

The second phase of Project Sunrise, to unlock our scale, is well underway. As part of this phase, we announced our significant plan to expand our Discount banner, FreshCo, into Western Canada.

Our continued commitment to full-service format stores

We have no intention to remove our full-service format. We remain committed to our full-service stores — they are the backbone of our business. In fact, even through the Discount roll-out in Western provinces, the vast majority of our stores in Western Canada will continue to operate as full-service format stores.

Unfortunately, many of our full-service stores are not competitive at this time. We need to implement changes in our full-service offering to be in a better position to serve our customers’ needs. We need to get our costs down and increase our flexibility to compete.

Our customers’ tastes are changing and we need to change with them to remain competitive. Customers are telling us that they want options through our conventional full-service stores and a Discount offering. This is the best way to grow our overall business and win back our customers.

Through the first phase of Project Sunrise, we have structured our office teams to ensure that support for full-service retail operations is strong and not distracted by our Discount roll-out in Western Canada. A dedicated team will be responsible for managing the Discount roll-out.

The strong case for expanding our Discount format in Western Canada

The expansion of FreshCo in Western Canada comes as a direct result of customer demand. We’ve conducted detailed customer and market studies and found that there is strong opportunity for Discount in Western Canada.

Today, Discount grocery is the fastest growing bricks and mortar segment of the grocery market.

Eighty-seven per cent of Sobeys Inc. stores across the country operate in a conventional grocery format, whereas Discount stores, like FreshCo, now make up nearly 44 per cent of the Canadian food retail market.

In short, customers are shifting heavily to Discount grocery shopping. In order to keep our stores open and provide good, stable jobs for our employees, we must be in a position to meet this clear customer demand.

Our goal is to build more stable stores, stores that create good jobs and opportunities for our people.

Update on the status of bargaining and other issues

Change of this magnitude is not easy on our team and we know you have questions. We want to ensure you to have the all facts to make clear decisions. Recently, there has been misinformation circulating about Company announcements and the status of bargaining.

In the interest of being clear and transparent, here are the details of the Company’s position:

• The Company has tried on a number of occasions to engage the Union by asking UFCW 1518 to set bargaining dates for the reopener negotiations. The Union has not agreed to do so, arguing they will not agree to dates until they receive extensive financial information. Our position has been clear: the Company will provide and discuss relevant financial information when the parties meet to negotiate. As a result of this impasse, the Company has had to take the unprecedented step of going to British Columbia’s Labour Relations Board for assistance in setting dates for bargaining.
• For almost six months, the Company has tried to engage with the Union in the Quarterly Review process to discuss the status of 19 underperforming stores in B.C. Unfortunately, these attempts have been unsuccessful as the union would not engage in the process. The Quarterly Review process is set out in the Collective Agreement, and the Union has not recognized this responsibility. As part of the Quarterly Review process, the Union would have received financial disclosure on the 19 stores in question months ago.
• It has been well known in the industry that the Company was contemplating expanding our Discount format. In the UFCW’s own letter to the membership, it noted that Michael Medline, President and CEO, Empire Inc., stated publicly months ago that the FreshCo expansion was being considered. Despite this, the Union has indicated that it was “blindsided” by news of the FreshCo expansion.
• Over the course of the last year, the Company has met with UFCW 1518 leadership on an ongoing basis, having many frank discussions about the state of the Company and possibilities for the future, including the possible expansion of a Discount banner like FreshCo. As a result, this latest announcement should come as no surprise to UFCW 1518.
• The Company was not in a position to provide UFCW 1518 with firm details on the FreshCo expansion decision until the decision was reported publicly. The FreshCo expansion is a material announcement and we are a public company. As such, securities regulations would not allow us to discuss this internally without informing the market first. The Union is aware of this rule. It is our goal to be as transparent as possible with UFCW 1518 and you, our employees.

Working together for a successful future

We all share a vested interest in growing our business together. We are striving to return to profitability – profitability that will serve both the Company and our employees’ best interests.

We need to work together to build a stronger Safeway.

Over the past year, the Company has made tough decisions and changes to focus on winning back our customers and strengthening our stores. We need to move quickly to respond to customer demands in order to be successful. An important part of this process is having the necessary conversations with employees and unions to discuss moving forward with these plans.

The only way to move forward together is to get to the bargaining table and start the important work of building a stronger future together.

If you have any further questions about this information, we encourage you to submit them on safewaytalks.ca. We are committed to continue communicating with you as more information is made available and will connect again soon.