Metro's Eric La Flèche named Canada's Outstanding CEO of the Year

Article content

It may be unfair, but Metro Inc. is often overlooked by the English-speaking press since its footprint is concentrated in Quebec and Ontario, while its two primary homegrown competitors — Loblaw Cos. Inc. and Empire Co. Ltd. — are national, but it’s been as busy changing as any company.

Since Eric La Flèche became chief executive 12 years ago, the Montreal-based grocer has grown both organically and by acquisition to now include 950 food stores, under several banners including Metro, Metro Plus, Super C and Food Basics, plus around 650 drugstores, two-thirds of which are from its most recent major — and most important — acquisition, Jean Coutu Group (PJC) Inc. in 2018 for $4.5 billion.

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Metro's Eric La Flèche named Canada's Outstanding CEO of the Year Back to video

Managing all that is a tall order and a big reason why La Flèche has been named Canada’s outstanding CEO of the Year for 2020, as presented by Bennett Jones LLP, Caldwell Partners International Inc., National Post and BNN Bloomberg.

Article content continued

“In a market filled with strong and sophisticated competitors, La Flèche has guided Metro to a position of impressive strength and customer loyalty, doubling its asset base in the past five years, employing some 90,000 Canadians, and increasing its revenues to over $16 billion annually,” said John Wallace, chief executive of Caldwell Partners, founding partner of Canada’s Outstanding CEO of the Year. “La Flèche’s passion for understanding Metro’s customers — for analyzing the markets and acting upon the insights — has transformed the very nature of the customer experience.”

Metro has long had a history of making big acquisitions, which has fuelled the company named after Montreal’s rapid transit system into a retail giant. There were the 48 stores from Steinberg, once the largest supermarket chain in Quebec in 1992, a year after La Flèche joined the company’s real estate department, three years after earning an MBA from Harvard Business School.

More On This Topic

Metro posts better-than-expected Q3 results

Inside the intense, high stakes grocery battle for the best Victoria Day meat sale

Metro planning to expand grocery delivery service to gird against sector change

Metro adding more self-checkouts, testing scan-and-go tech to cope with minimum wage hikes

It also acquired Loeb from Loblaw in 1999, which gave Metro its first footprint in Ontario, a huge $1.7-billion deal for A&P Canada in 2005 (beating out Empire), as well as smaller ones including 15 supermarkets from Les Supermarchés GP Inc. in 2009 and a majority stake — 55 per cent — in ethnic food retailer Adonis Marché (now owned fully since 2017) in 2011.

Article content continued

That none of the more recent deals has tripped the company up might very well be due to the care and attention La Flèche, who seems fond of saying “retail is detail,” and his team have put into them. That attention to detail is even more paramount now, since the grocery industry has been in the news a lot this year, likely because the big three grocers have been among the few businesses to do well during the pandemic. Of course, that success hasn’t come easily.

“Everyone really went above and beyond the call of duty to provide the essential services of food and pharmacy and I could not be prouder to lead this team than I was during the crisis,” La Flèche said. “In fact, our whole industry — retailers, manufacturers, distributors — did a great job overall.”

On the surface, grocery is pretty simple: people need food and most of us have to buy it from somewhere. But that belies how complex the industry has become. Initially slow to adopt e-commerce, the grocers are now all-in, accelerating their investments and growth projections simultaneously. Add in other in-store technologies such as self-checkouts and electronic labels as well as back-end systems like so-called dark stores and bigger, more efficient warehouses, plus political attention on pay rates and codes of conduct and what was once a fairly sleepy business has become one of the most dynamic.

La Flèche has navigated Metro through the political turmoil and those investments, which he points out have required a lot of effort from staff in terms of change management and adapting to new processes and systems.

Article content continued

But more investments are on the books, including a new $400-million fresh-and-frozen facility in Montreal that should open in 2023. Through it all, the company has paid an increasing dividend for 25-plus years.

“Part of our success with investors is that we’re a steady performer: we deliver decent growth in our earnings, we grow our dividend every year, we buy back some stock every year,” he said. “Those three elements have delivered good value for shareholders over the long term and we’re very proud of that.”

What follows is a condensed and edited interview with La Flèche in September.

Q: Being at one company as long as you’ve been at Metro is pretty rare, unless it’s a family-run operation.

A: That’s true, I’m surprising myself. I never thought I’d be here for 30 years and it’s coming on to that. It’s been a good run, no complaints, on the contrary it’s been great.

Q: You’re a lawyer by training. I’m sure that’s helpful, but that’s not what you trained to do.

Training is a big word. I have a legal degree. Coming from Quebec, we can go to law school, or med school, or engineering school right after CEGEP. After Grade 11, we do two years of CEGEP and then we apply to the universities, not just for a liberal arts degree but for a professional degree. I always thought of law as my BA, not as my career. I was young when I went to university and my plan was to go into business at some point. I was going to do a second degree so I said I’ll combine law and business and see where that goes. I never really aspired or wanted to be a practising lawyer. I could have been. I liked it. I admired it and I articled and I was at a great firm and worked with great people. I never thought I’d be in the grocery business, but, hey, things happen, one thing led to another and here I am.

Article content continued

Q: I was reading one story that said the closest you had come to being in the grocery business was unloading Labatt products.

A: That’s exactly right. I did that for three summers. Some routes were for the supermarkets, some routes were for the bars. It was a good summer job.

Q: What attracted you to the grocery industry in the end?

After my MBA, I worked in real estate development and, in typical MBA fashion, I joined that industry on the day it peaked and then it went downhill from there. Two-and-a-half years later I was looking for a job. I had met Pierre Lessard at a social function a few years earlier and I had spoken to him when I was at HBS (Harvard Business School), so I reconnected with him three years after I had first met him. I called him up saying I was looking for a job with my real estate background. There was an opportunity at Metro, so I joined to head up the real estate department a few months after he had joined as CEO in a turnaround situation. I was lucky.

Q: Three years is a long time to wait. It’s almost a cold call at that point.

A: Yeah, it was a warm call. But it was a good call.

Q: At the time in early 1991, did you think you’d still be here in 2020?

A: I was 29-years-old. You don’t plan for 30 years, but things kept moving. The company grew and my scope within the company grew, and the challenges were there so I ended up staying. It was the right thing for me to do. I was happy and I was progressing. Next thing you know, it’s almost 30 years and I’m still there.

Article content continued

Q: Is there something about the grocery industry that keeps you constantly motivated, constantly challenged?

A: Retail is very competitive. You get scores on what you do every day, every week, every four-week period, every quarter. We’re measured constantly, we’re competing constantly. I’m a competitive person and that appeals to me and keeps the blood flowing, like they say. I like competing and I like the people aspect of retail. We have hundreds of stores, thousands of people working in the same direction on the same team, so it’s very much a team sport. There’s a lot of different aspects to it: real estate, technology, finance, unions, negotiations. There’s lots going on, so it’s never the same.

Q: The stories I used to write about the grocery industry were very, I don’t want to say boring, but they weren’t on the most interesting of topics. But the industry now seems to be in the news constantly.

A: Absolutely. It’s always an evolving business, but the speed and pace of change has accelerated for sure in the past five years. The trend toward health and eating prepared foods has been there for quite a while, but the quality of what we sell, the technology to support us, the personalization of marketing, the digitization of processes is all changing our business for sure. It’s adding a lot of complexity sometimes. You referred to “boring,” well, sometimes being in a defensive, more predictable industry is a good thing. Our industry is not boring at all. Maybe not sexy, but never boring.

Article content continued

Q: E-commerce is a big recent change, one fuelled by the pandemic.

A: E-commerce is the big “watch out,” how will that change our business. It’s starting to change, but how fast and how much will it stick post-pandemic is anybody’s guess. Some are betting it will be a big portion of sales, but I think it’s going to still largely be a bricks-and-mortar business. E-com is going to be a part of our future and we have to make it work.

Q: How has e-commerce done since the initial stages of the pandemic?

A: It has receded some since, but it’s still quite a bit higher than it was prior to the pandemic. It’s certainly more expensive for us and not as profitable as a sale in a store, because we end up doing a lot of the work that customers do when they shop in the store. We have to make it work in the sense that we offer exactly the same assortment of products in-store as we do online. People during the pandemic were tolerant, but down the road we have to do a better job with filling their order.

Q: Do people shop differently online?

A: The order size is larger, typically it’s a sizable order. The frozen content is similar in percentage terms to what we see in store, it’s just a bigger basket. It tends to be a good basket in the sense that there are more fresh, better-for-you products and fewer specials and promotions in it. It’s a healthier basket for us. Some people, I’m sure, are exclusively online, but not many. Most people are doing some of their shopping online. It’s an extension of our service, so we have no choice.

Article content continued

Q: Do you think there will be permanent consumer behaviour changes?

A: We don’t have those crystal balls. We just have to see how it evolves and be ready for it. Depending on the store, or the location, that could be a good thing for us. The typical suburban store with the big order once a week can be a good thing for us, it’s more productive. But in downtown locations, you need the flow, you need the traffic, you need people coming in. We expect things like cleanliness, and expectations of sanitation, clean carts, that bar has been raised for good and that’s not going away. Plexiglass at the cashiers, that’s not going away anytime soon.

Q: Some people say the pandemic will hollow out city cores. How much preparation can you make for things like that?

A: We have good urban locations in Toronto and Montreal that we’re committed to and we think we have a good future in those stores. They are good stores and some of them are affected by the pandemic, but we expect (traffic) to come back eventually. But if you ask us to commit to a new downtown location in a condo project tomorrow, we may take more of a wait-and-see attitude. It really depends on the opportunity. But our footprint is our footprint and it’s not going away. We’re confident it’s going to perform well over time.

Q: You mentioned technology and you’ve done a few things at Metro recently, such as self-checkouts, electronic labels.

A: At the store level, technology is supposed to improve service for customers, speed of checkout mostly, and also with a link to productivity and availability of staff. Pre-pandemic, we had staff shortages. Getting labour was an issue, always is an issue. Fast checkouts address that need for speed and convenience in our stores while also addressing some labour shortages, so it’s a win-win for customers and retailers. Electronic shelf labels add value to the customer in the sense that there is more information on the tag, there’s more precision. With the apps now, people can just tap their phone on the tag and get a list of ingredients and origin of the product. It’s all going that way, to where there’s going to be more transparency on product information, nutritional content, origin, all that stuff will ultimately be more accessible with technology. Shelf labels also help reduce the number of hours to change pricing in the store and they also help with the precision of pricing so that it reduces shrink for us. Those are investments that have become more accessible, because it used to cost a fortune. They still cost a fortune, but they’re more accessible and we can get an ROI on them.

Article content continued

Q: That’s on the customer-facing side, what about the back end?

A: At the other end of the supply chain is our distribution centre, and that’s changing, too, quite rapidly. We’re moving to an automation model. Big cranes and robots in big warehouses, working 24/7, is going to be a big change. Some of our competitors in Canada, and a lot of players in Europe, especially, have gone that way over the years and we have been looking at it for several years. Three or four years ago, we committed to doing it and we are building, as we speak, two new centres in Toronto on our land at Dundas and 427, so a new fresh facility and a new freezer on the West Mall side that are largely automated. That’s going to be a big change for us, a huge investment, but that’s going to change our precision, give us more assortment, better product quality, better service to our stores and, again, address labour challenges. It’s hard to get people in those warehouses more and more, especially the night shift, holidays and long weekends. Automation is a way to address these labour challenges. We’re doing the same in Quebec, so we’ll have a fresh and frozen facility in Montreal. That’s another $400 million and that will start later this fall when it’s going to be the first shovel in the ground, I hope, and in a couple of years we’ll be up and running.

Q: Whenever we write stories about why farmers or grocers can’t find workers, we always get letters from readers asking why their layabout son or daughter can’t do the job? Why is there that challenge to find local staff?

Article content continued

A: We can find people, we can attract people, but for a lot of people it’s not their career. It’s entry level, it’s temporary, a student job, an in-between job. People have different aspirations for their careers and it’s always been like that and always will be like that. We can attract professional staff, just like any other business. In the stores, there’s always been turnover, there always will be turnover, but there’s also opportunities for long-term careers. We still attract people who become department managers, assistant store managers, stores managers, district managers, VP of ops. But it’s retail, it’s tough, it’s weekends, it’s nights. Some folks today don’t want to work those hours.

Q: Your stock is doing well, your stores are doing well, you pay a good dividend, why couldn’t you pay more? And if you did pay more, that would give you a competitive advantage in attracting workers, temporarily at least.

A: For people who don’t want to work nights and weekends, if we increase pay by, I’ll take a number, 10 per cent, which is huge, it wouldn’t necessarily change the attractiveness for them. Paying dividends, we have to balance the interests of all the stakeholders here. We have employees, we have customers, we have shareholders, we have the community, we have to balance all of those and deliver a good experience for all of them. That’s what we try to do. Our pay rates, we think, are competitive. It’s not just salaries, it’s benefits, pension funds and the rest. To say we’re going to cut the dividend and increase salaries, I don’t think that would be good news for shareholders. The industry structure allows for certain wages and we have to work within those boundaries. It’s a Rubik’s Cube, where you have to make it work, but it’s challenging.

Article content continued

Q: The pandemic also brought the issue of food security to the forefront. Is there a solution? Obviously, we can’t grow or make everything.

A: Exactly, we want everything. We want all the varieties, 52 weeks of the year, available all the time at very competitive prices. We have quite a resilient supply chain, quite efficient, not perfect, but quite efficient, providing access and good quality to our customers. The cost of food in Canada if you look at it as a percentage of family income is among the lowest, so we’re doing pretty well. We encourage local as much as we can, but I don’t think it’s realistic to say all the food is going to come from here. It would certainly not be the same quality and it would certainly not be at the same price, so I don’t think customers will want that. Every survey you see says they are willing to pay slightly more, or not more at all, and usually it would be more and substantially more. Some people would pay it, but not enough.

Q: There seems to be a lot more attention on the grocery industry, and not just at the store level, whether it’s arguments over pay, the unions are seemingly getting more aggressive, there’s talk of a grocery code of conduct.

A: Absolutely, public scrutiny is increasing, even more so with the pandemic. I think we’ve always acted as responsible corporate citizens and that’s not going to change. But I told my colleagues last week, it wasn’t an off-site, it was a Zoom thing, people are looking at us, we’re under the microscope and we have to be even more careful than we ever have been. A code of conduct, we’re looking at exactly what’s in those codes in the U.K., Australia and in other countries. I think we’re treating our suppliers correctly. There’s always some tension sometimes with some of them, but, overall, our relations are good. We are a good outlet for them, we have good growth, so our relations are good and strong. We negotiate responsibly and ethically with them. We want to be treated fairly and equitably, and I think we are, and we want that to continue. Do we need a code of conduct, do we need more government oversight? I’m not sure, but I’ll reserve my comments until I know what’s in the code of conduct and what could be in a code of conduct.

Article content continued

Q: The temporary bonus pay the Big Three offered got a positive public reaction and then a negative one when it was removed.

A: There’s a lot of focus on the Big Three grocers. We went to the Parliamentary committee and, of course, it was just the three of us. But there’re a lot of other bigger players, some of them American companies, that compete hard with us and have a substantial share of the Canadian food market: Walmart, Costco, Amazon, to name them. Those guys are huge companies, but they don’t necessarily face the same scrutiny we do. When I said we want to be treated equitably by our suppliers, we should be treated the same way by the public authorities.

Q: Switching gears, how would you describe your management style?

A: I expect a lot of my colleagues and teammates. I have high standards. I work collegially, I consult, I ask a lot of questions and I think everyone has a chance to say what they have to say and they get to back up the story for whatever they are pushing for. I try to surround myself with a team that is high performing and are experts — a lot of them are a lot better at what they do than I am. I like to build a team that works well together, make sure they do work well together, and get the maximum out of them. It’s a collegial, high-expectations work environment. I think I’m pretty accessible, I’m close to the ground, I’m close to the business at the retail level. I like to walk the stores, talk to people at store level: what’s going on, what’s on their mind, what’s working, what’s not working. Retail is detail and you have to be present and you have to get a feeling for the business.

Article content continued

Q: What do people tell you?

A: There’s some good stuff, there’s some bad stuff. It could be the store got a late order from the warehouse or a lot of short ships or backordered products … you get a sense from the floor, without the minute detail, of what can improve, what sector of the business needs help or focus. Advertising strategies, promotions, I look at store conditions, I look at the displays in the store and then I just ask questions, talk to my colleagues. Like I said, retail is detail and you have to get a sense of what’s going on at store level from food and pharmacy.

Q: You were once a Top 40 Under 40 and at that time you said you had no hobbies at all. Your only hobby was buying groceries for the kids, because you didn’t have time for anything else. Has that changed?

A: My goodness, I don’t remember saying that. That’s a pretty lame answer. You dug that piece out? Wow.

Q: That was in 2002.

A: No, I have hobbies, I have a life. I work a lot and work is on my mind a lot, but I do other stuff outside of work. I’m active physically, I’m an avid skier. I ski a lot in the winter, both alpine and touring. I water-ski in the summer. I play some golf, I play some tennis, I like the friendly competition. I stay fit and I have an active social life thanks to my wife, not because of me. We have a lot of good friends and there’s more than work, thank God.

Q: Finally, why do you think you earned this award?

A: I very much think this is a company award. I’m the CEO of a company, so it’s a company award. Retail is a team sport. I lead a team and this award is more a team thing than an individual award. I’m sure everybody who receives this award says the same thing, but it’s the absolute truth. I’ve been lucky enough to see Metro changed from a Montreal, Quebec-based wholesaler to independent retailers that evolved into more of a corporate structure while having maintained those relations with those independent retailers in Quebec we’ve grown substantially through acquisitions and development. We’ve made acquisitions that have allowed us to grow and change and be a better company. I think the award is a testimony to Metro’s performance over the long term, which is fair and I’m happy that’s being recognized. We’re proud of what we have delivered to our shareholders, our communities and our employees.

Article content continued

———

Selecting Canada’s Outstanding CEO of the Year

Celebrating its 31st anniversary this year, Canada’s Outstanding CEO of the Year award was established by executive search firm Caldwell Partners in 1990. This highly respected award honours an executive in Canadian business who exemplifies integrity, insists upon excellence, earns the trust of others and has built a globally competitive organization. It is the preeminent recognition for Canadian CEOs.

Canada’s Outstanding CEO of the Year advisory board comprises more than 20 of the country’s most respected business leaders and academics, including past honourees of the award. The board meets annually to select the current year’s recipient based on five key criteria: vision and leadership, corporate performance, global competitiveness, innovation and social responsibility.

The 2020 advisory board members are:

James Balsillie; Marie-P. Charette-Poulin, corporate director; Dean Connor, CEO and president, Sun Life Financial Inc.; George Cope, chair, Bank of Montreal; Patrick Daniel, chairman, Daniel Family Foundation; Paul Godfrey, executive chairman, Postmedia Network Inc.; Linda Hasenfratz, CEO, Linamar Corp.; Krystyna Hoeg, corporate director; Dezs? Horváth, dean emeritus, Schulich Chair in Strategic Management, Schulich School of Business, York University; Harold Kvisle, former CEO and president (retired), TransCanada Corp.; Jim Leech, chancellor, Queen’s University; Hugh MacKinnon, chairman and CEO, Bennett Jones; Nadir Mohamed, former CEO and president (retired), Rogers Communications Inc.; Gordon Nixon; Philip Orsino; Michael Roach, corporate director; Calin Rovinescu, CEO and president, Air Canada; Indira Samarasekera, president emeritus, University of Alberta; Lino Saputo, Jr., CEO and president, Saputo Inc.; Guylaine Saucier, corporate director; John Sheridan, corporate director; Edward Sonshine, CEO, RioCan Real Estate Investment Trust; Frank Vettese, corporate director and CEO emeritus, Deloitte Canada; Donald Walker, CEO, Magna International Inc.