Inside This Issue - News
Pilla to exit SDM amid changes at parent company Loblaw
August 11th, 2014
by Alasdair McKichan
BRAMPTON, Ontario – When the acquisition of Shoppers Drug Mart (SDM) by Loblaw Cos. was concluded in March of this year, no changes in the senior management of either company were made, but commentators speculated that some significant shifts in responsibility would soon follow. Those predictions proved justified.
Last month Loblaw announced changes in its own management ranks and reported that SDM president and chief executive officer Domenic Pilla would be leaving at the end of 2014.
Galen G. Weston, executive chairman of Loblaw, will continue to have that responsibility, but he has also been appointed president, with immediate effect. Mike Motz, currently SDM’s executive vice president and chief merchandising officer, will retain these functions but, on the departure of Pilla, will assume the title and responsibilities of president.
Vincente Trius, president of Loblaw since August 2011, left the company the day of the announcement of the management changes and is to return to his native Brazil for family reasons.
Commenting on Trius’ retirement, Galen Weston was generous in his assessment of his contribution over the last three years. “Vincente has made an enormous impact on virtually every aspect of our business in the time he has been with the company,” Weston said. “Our businesses are stronger, our consumer proposition more compelling and our operating effectiveness much improved. He has set a strong foundation for the future.”
Pilla also is to leave his SDM responsibilities on good terms. His motivation, as he describes it, is to continue his career by pursuing opportunities to lead a widely held public company.
It seems clear Pilla concluded that his decision-making powers would be more limited as part of the Loblaw organization than they had been when SDM, Canada's largest drug chain, was a stand-alone company. Before he joined SDM, Pilla was president of McKesson Canada, a position to which he had been appointed in 2006.
Weston also had warm words for Pilla. “Domenic has done an outstanding job at Shoppers Drug Mart since he joined the business almost three years ago. He played a pivotal role in the negotiation of the agreement to acquire Shoppers Drug Mart, and since then Domenic has been actively engaged in driving Shoppers’ business to deliver on its plan.
“As well, Domenic has been focussed on working with the team to ensure we realize the synergies identified for the combined businesses as a result of the acquisition.”
Weston noted that Pilla is to be fully engaged in the business until his departure at the end of the year. “He is to work very closely with me to deliver on several important initiatives, including the transition to a new president,” said Weston. “I have every confidence that Domenic will continue to make a significant contribution to the second half of the year.”
When Motz assumes the presidency of SDM at the end of this year, he will be no stranger to the issues and opportunities the company faces, both internally and externally. He has been an officer of SDM since 2003, when he was appointed vice president of operations. After that he had a series of promotions until January 2012, when he was appointed to his present position, with both operating and merchandising responsibilities.
Internally, the work of rationalizing SDM’s business with Loblaw, and achieving the synergies that have been forecast, has barely begun. Externally, competition intensifies as Walmart delivers on its expansion plans and Target Corp. continues to open new stores and works hard at improving on its inauspicious start in the Canadian market. All this at a time when both governments and private payers put emphasis on reining in their expenditures on prescription drugs.
Weston also announced three new appointments within Loblaw’s management:
• Richard Dufresne has been appointed chief financial officer. He will combine this duty with his existing function as CFO of Loblaw’s parent, George Weston Ltd. As Galen Weston noted, one of Dufresne’s key responsibilities in his Loblaw role will be to achieve the targeted synergies related to the SDM acquisition.
• Sarah Davis, previously Lob-law’s CFO, will become chief administrative officer, responsible for supply chain, IT (including SAP implementation), goods for resale, Loblaw properties and strategy.
• Grant Froese, previously the company’s chief administrative officer, becomes chief operating officer. In this new role Froese will be responsible for the operating performance of the market, discount and emerging business; grocery operations; and the division support functions of controlled brands, e-commerce and offshore procurement.
Galen Weston, having worked in a number of management development functions within Loblaw, first achieved prominence when he was appointed executive chairman eight years ago, at the age of 33. In that capacity he has had a number of experienced senior executives handling the day-to-day management of the company including, prior to Trius’ term of office, Allan Leighton, who had been a senior officer in George Weston Ltd., a former chief executive officer of Walmart’s U.K. operation and chair of the Royal Mail, also in the United Kingdom.
Speaking to analysts during a conference call after the announcement in July, Weston said: “The time feels right for me. It shouldn’t surprise anyone that the family, through me, is getting closer to the business to make sure that the vision that we have established that supported the investment [in the SDM acquisition] actually gets delivered and executed.”
Commentary from the Canadian financial community on Weston’s appointment to this expanded role has been almost universally positive. As executive chairman, Weston presided with aplomb at the company’s annual meetings, deftly handling the often aggressive questioning from shareholders and employees. Similarly, under questioning from analysts on quarterly telephone conferences, when he shared management’s response, Weston demonstrated his deep understanding of Loblaw’s issues and opportunities.
In the last eight years he has also become a familiar face to Canadians. He appeared in many television commercials promoting, in an informal and low-key style, the company’s popular President’s Choice controlled brand products.
Weston won respect for the leadership role he played in responding to the plight of survivors and relatives of those who lost their lives in April 2013 in the collapse of the Rana Plaza building in Savar, Bangladesh, where some of Loblaw’s Joe Fresh apparel was made. The company’s generous and prompt decision to pay compensation, though not itself at fault, was a spur to other retailers to take similar action.
Followers of the history of the Weston family in relation to its members’ role in the development of Canada’s retail and wholesale grocery business must be experiencing a curious sense of déjà vu in the announcement that a well-educated and youngish, but experienced, scion of the family is to take full control of the Canadian distribution assets. It is just a little less than 40 years ago that W. Galen Weston, father of the current executive chairman and president, was appointed to lead the rejuvenation of the company.
That appointment was a resounding success. W. Galen Weston recruited talented executives, including Richard Currie and David Nichol, who had been fellow students of Weston’s in the M.B.A. course at the University of Western Ontario. Weston Sr. and his capable colleagues and advisers propelled the company to eventually become Canada’s largest grocer and one of its most successful.
Galen G. Weston acknowledged that there has been a lot of management change at Loblaw over the last eight or nine years and, as he put it, “that has the potential to be a little bit destabilizing, and that is never a good thing.”
But he went on to explain that he felt management needs to change as the business changes. “Given Loblaw’s strengthening operations and strategic shifts, the current timing of the changes is a relatively good one,” he said.
The market appeared to be modestly pleased with the new appointments. The Toronto Stock Exchange price for Loblaw common shares gained just 0.4%, to $49.43 (Canadian), by the end of the day of the announcement.
Some commentators have been more optimistic about the company’s future than that market reaction would suggest. Irene Natale, an analyst with RBC Dominion Securities, sees the expected completion of Loblaw’s multiyear effort to modernize its information technology and supply chain as creating efficiency gains that will improve margins and free cash for investment in driving up sales.