How Loblaw is strengthening its core business, enhancing it through AI and healthcare, and building new growth engines around it.
Why global grocery retailers should be learning from Loblaw
Canada's leading retailer, Loblaw, is building for growth on more fronts than most grocery and drugstore operators. Across value, private label, loyalty, health and wellness, retail media and supply chain, it is investing in areas that could materially change where its growth comes from over the next decade.
A broader agenda for growth
Few food retailers are pursuing growth across as many fronts as Loblaw. It is investing in discount, private label, AI, personalisation, healthcare, retail media, supply chain services and financial services, while continuing to invest heavily in stores and the core retail business.
These are not peripheral activities. Loblaw already has meaningful positions in many of the areas that others are starting to develop. Its scale in grocery and pharmacy gives it access to customer relationships, data, supply chain capabilities and regular consumer engagement that can be applied across multiple parts of the business. The company expects the areas it identifies as growth businesses to increase from around 10% of earnings today to 20% by 2031.
Behind the individual initiatives sits a clear structure. Loblaw's strategy operates on three levels. The first is improving the core retail business. The second is strengthening that business through capabilities such as AI, personalisation, digital engagement, healthcare and private label. The third is building new businesses around capabilities developed through operating at scale.
A strong core creates the platform
Despite the focus on new revenue streams, Loblaw continues to see considerable potential within its core retail businesses. It is accelerating its discount presence, introducing a new drugstore format and developing its supermarket offer with new merchandising, private label ranges, value programmes and customer experiences.
Private label remains particularly important. President's Choice and No Name remain two of the strongest brands in Canadian retail, giving Loblaw additional ways to differentiate its offer through continued innovation while strengthening value credentials at a time when consumers remain focused on affordability.
Technology is also becoming a bigger part of how the company intends to improve its retail businesses. More than 5,000 colleagues are already active ChatGPT Enterprise users, alongside a growing range of internally developed tools. AI is being used across merchandising, ecommerce, customer engagement, healthcare and productivity. It is helping merchants analyse promotions and assortments, supporting digital experiences for customers and giving colleagues access to tools that simplify routine tasks. The company is also introducing AI into health through services such as PC Health.
AI increasingly sits across Loblaw's agenda rather than within a single function. It is being used to strengthen the retail business, support healthcare services and deepen customer engagement, making it one of the few capabilities that touches almost every part of the organisation.
Enhanced retail is becoming increasingly important
Between the core retail business and its newer growth businesses sits a second layer focused on strengthening the overall proposition. AI, digital engagement, personalisation, connected healthcare and private label all sit within this group. Unlike the growth businesses, these initiatives are not primarily designed to create new earnings streams. Their purpose is to make the core business stronger, more relevant and more connected to customers.
PC Optimum, its loyalty programme, sits at the centre of much of this activity. It gives Loblaw a way to connect grocery, pharmacy, beauty and financial services through a single customer relationship. The value of that relationship increases as the number of businesses connected to it grows. The same principle applies to digital engagement and personalisation. The objective is not simply to improve marketing effectiveness but to create a more connected business around the customer.
Health plays a similar role. Through Shoppers Drug Mart, Lifemark physiotherapy clinics, pharmacy services and digital health, Loblaw occupies a position that extends across multiple parts of consumers' health and wellness needs.
GLP-1 drugs could widen this further. Loblaw already has a 28% share of the Canadian GLP-1 market, while new treatments, formulations and indications could significantly expand the category. Their impact extends beyond pharmacy into nutrition, weight management and preventative health, areas where Loblaw already has substantial positions.
Growth businesses provide additional sources of growth
Loblaw is also building businesses that extend beyond the traditional boundaries of retail. Supply Chain as a Service is among the clearest examples. The company operates one of North America's lowest cost-to-serve supply chains and is now commercialising that capability externally. Its target of more than CAD400 million in EBIT illustrates the scale of its ambitions.
Retail media follows a similar pattern. Loblaw Advance combines customer reach, data and digital capabilities to create a business from assets originally developed to support retail operations.
Lifemark represents another example, extending Loblaw's presence deeper into healthcare services. Financial services continue to build on existing customer relationships.
The expansion of its Asian banner, T&T Supermarket, into the US is different again. Rather than monetising an existing capability, it exports a proven retail proposition into a much larger market. It demonstrates that Loblaw is pursuing growth not only through new services and capabilities, but through retail itself.
The bigger lesson
Many retailers are investing in areas such as retail media, healthcare, loyalty, AI and new revenue streams. Few of these initiatives are unique in themselves. What stands out at Loblaw is the extent to which it is pursuing all three layers simultaneously. It is continuing to improve the core retail business. It is strengthening that business through AI, personalisation, healthcare and private label. It is also building a portfolio of growth businesses around capabilities developed over decades.
Retail remains at the centre of the company. But the number of ways the company can create value from that retail foundation continues to expand. That may be the most significant aspect of Loblaw's strategy. Not any individual initiative, but the breadth of growth opportunities it has assembled around a strong core business, and the extent to which many of them are already operating at meaningful scale.