LOBLAWS MANAGEMENT TEAM

Following September 2006, several major changes occurred in Loblaw's executive ranks. Galen Weston Sr.,
who had been in charge of Loblaw since 1978, stepped down, and his son, 34 year old Galen Weston Jr., took
over his position of executive chairman of Loblaw. Galen Jr. had earned his MBA at Columbia University
and had begun working at Loblaw in 1998. He started by managing a pilot online grocery business in
Mississauga, Ontario, and then joined a team that was introducing President's Choice financial services at
Loblaw stores. In his next job, Galen Jr. was responsible for managing operations at the No Frills chain.
Before assuming his executive chairman position, he was involved in market analysis as Loblaw's senior vice
president of corporate development. After meeting Galen Jr. in person, one of the financial analysts said that
he was impressed with both his depth of knowledge about the U.S. grocery industry, which was unusual in
Canada, and his ability to relate to people. Nichol, who had known Galen Jr. since infancy, also expressed
confidence in him. He had "tremendous potential," Nichol said, and simply "needs strong mentoring."
At the same time as Galen Jr. was appointed executive chairman of Loblaw, Lederer, who had been president
of Loblaw since 2001, left the company. In April 2006, he was succeeded by Mark Foote, who had worked
for Canadian Tire Corporation Ltd. for 27 years. At Canadian Tire, he had been one of the leaders who had
decided to meet competition from Wal-Mart by focusing on goods that it offered exclusively and by
investing in its core strengths of car parts, sporting goods, and housewares Commenting on this appointment,
one retail analyst said that Foote had extensive expertise with general merchandise, which was much needed
at Loblaw, and that "he just seems universally respected." The analyst also mentioned that he knew a
manager who had decided to quit Loblaw because he was disappointed with its performance but changed his
mind when he learned that Foote was coming.
Also recruited to play a crucial role in developing Loblaw's strategy was Allan Leighton. After Lederer left
Loblaw, Allan Leighton was appointed to a newly created position of the company's deputy chairman. Since
2000, Allan Leighton had been a trusted advisor for a number of Weston businesses. He also sat on the board
of George Weston Ltd., the parent of Loblaw, and was deputy chairman of Selfridges and two other Weston
family owned luxury goods companies. In Great Britain, Leighton had started his career at Mars Inc., as a
salesman for the subdivision manufacturing confectionary, earned several promotions in a few years, and
eventually was involved in the company's pet care business. He then moved to a supermarket chain, Asda
Group PLC, and was later credited with helping improve its performance. In 1999, Asda was acquired by
Wal-Mart, and Leighton spent a year as CEO of the discounter's European division. Subsequently, Leighton
set up a website to provide consulting services to different organizations, which he referred to as "going
plural." In the United Kingdom, Leighton was known for his uncompromising position in labor related issues
and his strong belief in staff input. He had a reputation as a person who did not hesitate to cut thousands of
jobs or bypass union leaders to communicate directly with employees.
In January 2007, Dalton Phillips, a former executive with Irish department-store chain Brown Thomas, was
named chief operating officer of Loblaw. He replaced Dave Jeffs, who had been with Loblaw for 28 years.

Regarding this appointment, one analyst remarked that "notwithstanding the talents of Phillips," it was
unusual, as it added to the ranks "yet another senior executive lacking solid North American food distribution
experience at a time when we see it as sorely needed."39 Another analyst noted that Loblaw was interested in
Dalton's experience with Wal-Mart in Germany, which was one of the divisions that Wal-Mart recently
shuttered because its performance had not measured up to expectations. Commenting on the management
changes at Loblaw, Richard Currie said that they added up to a lot of uncertainty. In his opinion, the
company created a tangled management structure at just the wrong moment, and he doubted that all
replacements in the head office were necessary. "I think the delineation of responsibilities could at best be
described as fuzzy," he added.
FEBRUARY 2007
Loblaw's new executive team had completed a 100-day review of the company's performance and had
outlined a new business plan. "We are not delivering the right value for money and we are not getting the
credit with the customer for the investments that we do make," executive chairman Galen Weston Jr.
acknowledged in a meeting with analysts. "We have insufficient distinctive formats, with poor availability
and, in relative terms, we are still overpriced," he added.
Galen Jr. said that the company's goal was to increase sales by 5 percent. He also said that Loblaw was
aiming to increase earnings by 10 percent by cutting prices, offering more products, and improving customer
service. Following this announcement, Loblaw's share price dropped $0.29 to $48.13 in Toronto trading. The
management team estimated that three to five years were needed to reach the company's announced goals.
"That's just ridiculous," said Richard Currie, regarding this time frame. He argued that the hardest part of
reorganization had already been done, and that the remaining changes should be completed within 18
months; otherwise, the competition might start surpassing Loblaw. Although at the beginning of 2007,
Loblaw remained the leading supermarket chain in Canada, its rivals "are getting better, and they're not
standing still," Currie said.
As the new executive team was working through the company's issues, different options were being
considered:

Loblaw's spokesperson made a statement that the company would clear out excess inventory and
improve stocking so that neither groceries nor general merchandise would become "stale-dated." He
said that the company would continue to "manage inventory levels down to more desirable levels in
store backrooms, outside storage as well as in distribution centres.

When Loblaw announced the signing of a four-year contract with unionized employees in October
2006, it emphasized its intention to "vastly improve" the food offering. Retail analysts predicted that
Loblaw would continue the strong offering of private labels, deemphasize national brands, and
eliminate redundant sizes and ineffective promotions.

New president Mark Foote told analysts that The Real Canadian Superstores allocated too much
space to general merchandise. He said that the company would either rearrange the space and devote
more area to food, or reduce the size of stores. He also said that the company would narrow the
assortment of general merchandise. Specifically, the plan was to eliminate furniture, shrink
electronics and hardware, and sell toys only during holiday seasons. Instead, the retailer intended to
strengthen its focus on drugstore products, housewares, and the in-house Joe Fresh Style fashion
line. One retail analyst mentioned that Galen Jr. was very supportive of Mimran's collection and
wanted to expand it. He believed that its low prices fit well with the overall positioning of The Real
Canadian Super-stores and could give Loblaw an advantage over Wal-Mart, which had difficulties in
promoting its fashion business.

One retail analyst predicted that Loblaw would lower prices for selected items to retain its
customers. "The pricing actions will be serious and lengthy and, despite better labor economics, will
take a toll on Loblaw's bottom line," he said. "Investors should prepare for a pricing bloodbath"
between Loblaw and Wal-Mart, the analyst added. Another consultant commented that the strategy
of one-stop shopping destination worked effectively for Wal-Mart because of economies of scale and
scope, which allowed the discounter to maintain low prices and broad assortment. "We strongly
retailers, especially ones that are already known in consumers' minds for quality and specialty
products, not to try to be all things to all people," he said. "You're just competing on price, and you're
unlikely to succeed." Thus, the question for the new executive team was whether it would be
possible for Loblaw to be competitive with Wal-Mart, which had lower labor costs, a refined
logistics system, and significantly fewer SKUs as well as experience with a fundamental
merchandising strategy of EDLP.

The new management team said that the company needed to clearly differentiate between the smaller
conventional Loblaw supermarkets and the larger discount outlets, The Real Canadian Superstores.
The company's intention was to use both brands simultaneously to defeat a threat from Wal-Mart.

In February 2007, the company made a formal announcement to investors that it would reconstruct
the famous Maple Leaf Gardens in downtown Toronto, the former home of the Toronto Maple Leafs
hockey team, into a grocery store. "This is an icon, just like Loblaw is an icon. I think it represents a
huge evolution of what's happening to Loblaw, as well as what's happening in Toronto," said Galen
Weston Sr. The arena had been empty since the Toronto Maple Leafs hockey club moved to the Air
Canada Centre in 1999. Galen Weston Jr. said that the company would begin to clean up the building
in the summer of 2007, and planned to open the store in 22 months.

Finally, some observers speculated that the Weston family might be preparing to sell its controlling
stake in Loblaw Companies Limited. Galen Sr. refuted this suggestion and said that Loblaw was
"core for the family." However, he also acknowledged that there were some situations in which he
decided to divest weak assets: My history, wherever it is in the world, is: You buy things or you
inherit things and you keep them fresh and you keep them vital. And where it doesn't work, like our
fishing business or our pulp and paper business or our cookie business, we've decided to exit those
businesses.