Incorporated: 1928
NAIC: 311812 Commercial Bakeries; 311821 Cookie and Cracker Manufacturing; 422410 General Line Grocery Wholesalers; 445110 Supermarkets and Other Grocery (Except Convenience) Stores
SIC: 2051 Bread, Cake & Related Products; 2052 Cookies & Crackers; 5411 Grocery Stores
George Weston Ltd. is a major Canadian food processor and distributor, with a number of operations in the United States as well. The company has two main operating units: Weston Foods Inc., which is responsible for the company's baking and dairy operations in North America; and Loblaw Companies Limited, Canada's leading food distributor with operations also in general merchandise, drugstores, and financial products and services. Among the many grocery chains owned by Loblaw are Atlantic Superstore, Fortinos, Loblaws, No Frills, Provigo, The Real Canadian Superstore, Valu-mart, Your Independent Grocer, The Real Canadian Wholesale Club, and Zehrs. Weston Foods--one of the largest bakeries in North America thanks to the 2001 purchase of Bestfoods Baking Co.--makes nearly 65,000 deliveries per day and its brands include Weston, Arnold, Brownberry, Country Harvest, D'Italiano, Dutch Country, Entenmann's, Freihofer's, Gadova, Interbake Foods, Maplehurst, Neilson Dairy, Ready Bake, Stroehmann, Thomas, and Wonder. W. Galen Weston, company chairman and grandson of the founder, owns more than 60 percent of George Weston Limited.
Early History Under George Weston
George Weston, a baker's apprentice, started this family-run business in 1882 with two Toronto bread routes. His early success selling bread led to a rapid increase in the number of routes he managed, and soon encouraged him to establish a bread and cake bakery in Toronto, the Model Bakery, in 1896. The bakery expanded into the production of cookies in 1908, and by 1911 had 30 delivery wagons; its products were sold in more than 500 stores.
In 1910 Weston agreed to a merger with other major Toronto bakers to form the Canada Bread Company. As a condition of the deal, Weston had to stay out of the bread business for a ten-year period. Despite having pocketed CAD $1 million from the sale of his business, Weston continued to make cakes and cookies, establishing a new plant to do so. In 1921, with the ten-year noncompete period over, Weston reentered the bread business through the purchase of the H.C. Tomlin bread bakery, which was located across the street from the Canada Bread Company. At George Weston's death in 1924, his son Garfield Weston took over a business with a thriving biscuit operation and a less well-developed bread operation. In 1928 he incorporated George Weston Limited and took it public.
Expanding Through Acquisitions Under Garfield Weston
Under Garfield's leadership, the firm built its bread and biscuit businesses in Canada and the United States. Weathering the Great Depression without major problems, the company was able to take advantage of its position as a low-cost producer to overtake other competitors in the baking industry. Its 1937 acquisition of McCormick's Limited and its 1938 purchase of Inter-City Western Bakeries, Ltd., for example, provided Weston with the facilities and resources to produce 370 varieties of candy and 100 types of biscuits, in addition to its breads and cakes. Also during the 1930s, the company established operations in the United Kingdom, where it made available the first low-cost, high-quality biscuits. These British bakeries were amalgamated in 1935 into a separate company, Allied Bakeries, which eventually became Associated British Foods plc. Meanwhile, George Weston Limited also expanded into the United States through the 1939 purchase of the Associated Biscuit Company.
Despite World War II, expansion continued smoothly throughout the 1940s. The company diversified into the paper industry through the 1943 acquisition of E.B. Eddy, a firm dating back to the 1851 opening in Hull, Quebec, of a mill to make matches. In 1944 the company bought the Southern Biscuit Company, and the acquisition of Western Grocers marked the firm's initial entry into food distribution. This growth was strengthened by purchases of the Edmonton City Bakery in 1945 and Dietrich's Bakeries in 1946. In 1947 the company acquired William Neilson, a major Canadian producer of chocolate, cocoa, milk, and dairy specialty products.
During the 1940s and early 1950s, Weston began buying shares of Loblaw Groceterias, a food distributor, as part of a strategy designed to reach consumers directly with its products. By 1953, the firm had acquired a majority interest in Loblaw, a position that made possible Loblaw's subsequent acquisitions of other food distributors across Canada and the midwestern United States, including National Grocers of Ontario in 1955; National Tea, a U.S.-based retailer, in 1956; Kelly, Douglas and Company, a British Columbia wholesaler, in 1958; the Maritime-based Atlantic Wholesalers in 1960; and the Zehrmart supermarket chain in 1963.
During the 1960s the company pursued further diversification in an attempt to improve its value to shareholders by expanding into fish processing. Weston bought B.C. Packers, a salmon processor, in 1962, and five years later, Connors Bros., the largest herring and sardine processor in Canada.
Retrenching Under Galen Weston
Growth was temporarily curtailed in the 1970s as management focused on reorganizing the company's activities and operations to achieve greater control and efficiency. W. Galen Weston, one of Garfield's sons, had become president in 1970, and the firm began to refocus on food as its primary area of emphasis. The various grocery operations were consolidated under Loblaw Companies Limited and new management was installed. Underperforming stores were closed and many others were remodeled.
The most troubled distribution operation was National Tea, which lost $36 million on $1.06 billion in sales in 1973. The decline of National Tea was traced to the company's continued reliance on small stores located at downtown sites while the clear industry trend was to larger stores located in the suburbs. After attempting to turn around the chain's fortunes through drastic cost-cutting and major repositioning efforts, Weston leadership determined that National Tea's competitors had been given too much of a head start. In 1976, therefore, National Tea sold 75 percent of its supermarkets, including all of its Chicago operations; the company continued to operate the remaining stores, making limited attempts to improve their operations, with the idea of eventually divesting them.
Meantime, Galen Weston took over as chairman in 1974, four years before the death of Garfield Weston. Also in 1978, Loblaws joined the burgeoning market for private label grocery items by launching the No Name label. The new brand enjoyed immediate success based on its low prices, clean and simple packaging, and high quality. In 1984 Loblaws introduced a new premium private label called President's Choice, so named because the president of Loblaws at the time, David Nichol, chose the products. Offering premium value at low prices, President's Choice was able to compete directly with name-brand goods.
Returning to Acquisitions
In his initial years as chairman of the company, Galen Weston focused on improving financial results by bolstering management and making capital expenditures to enhance various systems. After posting a net loss in 1976, the changing fortunes of the company were evident by 1979, when record earnings of CAD $76.5 million on sales of CAD $5.9 billion were reported. With the outlook for the company looking brighter, Weston began seeking acquisitions once again. After being outbid by the Thomson family in a 1979 battle for control of Hudson's Bay Company, the oldest Canadian company and its leading department store chain, Weston acquired Stroehmann Brothers Company, a major baker of fresh bread based in Pennsylvania, in 1980. The acquired company was later renamed Stroehmann Bakeries Inc. In 1983 Galen Weston was the subject of a foiled kidnap attempt by the Irish Republican Army; following this incident, he and his family began maintaining very private lifestyles.
Also in the early 1980s, George Weston faced major labor problems involving the unionized employees of its Super Valu stores in Manitoba. These difficulties resulted from Weston's aggressive penetration of the Winnipeg retail food market. In order to convert its existing Loblaws stores in the area to larger-scale supermarkets and hire away experienced employees from other retailers, Weston offered to recognize the Manitoba Food and Commercial Workers Union and to match its current contract with Safeway Foods in return for a six-year, no-strike, no-lockout agreement that effectively eliminated the union's contract negotiation rights. Shortly after consummating this arrangement, Super Valu was accused by its employees of violating a number of contract provisions related to seniority, scheduling, and full-time employment, but a compromise was eventually worked out.
In 1986 the food processing operations of Weston were consolidated within an umbrella subsidiary called Weston Foods Ltd. At the time, its operations included baking and milling, biscuits, chocolate, dairy, and specialty products, providing food and ingredients both to intermediate processors and directly to consumers all over North America. Weston Bakeries stood as Canada's largest baker of fresh bread, buns, and cake products (distributed under a variety of brands and private labels). Stroehmann was one of the largest wholesale baked goods producers in the northeastern United States. Other members of the food processing group included Interbake Foods specialty biscuit division, which consisted of the cookie and cracker businesses acquired between 1928 and 1960, including the Southern Biscuit Company, the focus of operations in the United States; and the Canadian flour milling operations of Soo Line Mills and McCarthy Milling. The chocolate activities of William Neilson were bolstered in 1987 with the acquisition of the confectionery operations of Cadbury Schweppes Canada Inc., a unit of the U.K. firm Cadbury Schweppes PLC. The newly created Neilson Cadbury unit commanded a one-third share of the Canadian chocolate bar market and was Canada's largest chocolate manufacturer.
Tightening the Company Focus
The worldwide recession of the early 1990s coupled with the unfolding consequences of the North American Free Trade Agreement (NAFTA) of 1989 wreaked havoc on both the Canadian economy and George Weston Limited. Sales fell each year through 1993, dropping from $9.35 billion in 1990 to $9 billion in 1993. Net income fell during the same period from $107.7 million to $43 million. The operations of Weston Foods were hit the hardest, particularly as they increasingly had to compete with such U.S. food giants as RJR Nabisco Inc. and the Pillsbury Company. Anticipating the effects of the expected passage of NAFTA, Weston had in fact begun to overhaul its food processing operations as early as 1988, when it sold its Canadian biscuit operations for CAD $120 million. Then in early 1991 the company exited the flour milling business, having determined that it no longer made economic sense to mill wheat in-house when it could instead seek out the best supplier of this raw material from anywhere in North America. The ice cream operations of William Neilson were also under competitive pressure from John Labatt Ltd., Beatrice Foods Inc., and the Pillsbury Company, so Weston decided to sell the operations to Labatt and concentrate on William Neilson's stronger businesses, fresh milk and yogurt. At the same that it was pruning its portfolio of underperforming units, Weston also launched capital improvement programs to bolster its remaining core. For example, the company spent CAD $55 million to build a new, state-of-the-art bakery in Montreal from which it began distributing fresh bread throughout Quebec and New England. In 1993 E.B. Eddy bought Island Paper Mills Co. Ltd., which operated a coated paper mill located on an island near Vancouver.
In the mid-1990s George Weston continued to unload unprofitable or noncore units. In 1995 Loblaw finally rid itself of its National Tea albatross, selling the company to St. Louis-based Schnuck Markets Inc. for $368 million. This completed Loblaw's exit from the U.S. market. Another significant divestment occurred the following year when Weston sold Neilson Cadbury, the only domestically owned chocolate company left in Canada, back to Cadbury Schweppes for CAD $225 million. Weston continued to own dairy food processor William Neilson. Seeking to focus even more strongly on its core food operations, Weston next looked to offload E.B. Eddy. In September 1997 Weston announced that it planned to spin off the paper company through an initial public offering, but two months later shelved that plan because of turmoil in the stock market. It then began shopping E.B. Eddy around, leading to the July 1998 sale of E.B. Eddy to Montreal-based Domtar Inc. for CAD $803 million. These divestments reduced George Weston to its majority ownership of Loblaw and food processing businesses focusing on bakery products, cookies, milk, and fish.
With revenues and profits growing, a tighter assemblage of operations, and its cash reserves swelled from the divestments, George Weston began looking for acquisition opportunities to bolster its core areas. In 1998 one of the company's U.S. bakery units, Maplehurst Bakeries Inc., purchased the frozen bagel business of the Quaker Oats Company, which included the Arnie's Bagelicious and Petrofsky's brands. That same year, Stroehmann Bakeries acquired Maier's Bakery, a family-owned Reading, Pennsylvania-based bakery that had sales of about $100 million per year.
Loblaw expanded as well, as supermarket consolidation spread from the United States to Canada. In November 1998 Loblaw acquired the 80-store Agora Foods, which had been the Atlantic Canada division of Oshawa Foods, for CAD $81 million. Then the following month, Loblaw spent CAD $890 million to acquire Provigo Inc. To this point Loblaw had only a minuscule presence in Quebec, where it operated four stores. With the addition of Provigo, it gained the number one supermarket chain in Quebec and for the first time had truly a Canada-wide retail network, not to mention a dominating 40 percent nationwide market share. Following completion of the acquisition, Loblaw retained the Provigo banner on the more than 250 stores it had acquired in Quebec; but of the 90 or so Provigo stores in Ontario, which were mainly operated under the Loeb name, about half were converted to Loblaws and half were sold.
George Weston continued to fine-tune its operational portfolio in 1999. Early that year, the dairy operations were bolstered through the purchase of Fieldfresh Farms, the Ontario dairy operation of Oshawa Foods. The fisheries operations were scaled back through the sale of the branded tuna and wild salmon processing businesses of B.C. Packers. This divestment largely removed Weston from the volatile wild fish processing industry, allowing it to focus on its more stable canned sardine and farmed Atlantic salmon operations, which also had greater potential for growth. Weston also earmarked about CAD $800 million for capital expenditures in 1999, most of which was spent on expanding or remodeling grocery outlets in eastern Canada, particularly the Provigo stores. The addition of Provigo in particular led to a 41 percent jump in sales for George Weston in 1999 to CAD $20.85 billion. Looking to the future, Weston planned to spend an additional CAD $900 million to open, expand, and refurbish more than 100 of Loblaw's stores throughout Canada. Loblaw also began expanding the nonfood offerings of its stores, with plans for selling more general merchandise, such as children's clothes, and for marketing financial services, such as no-fee bank accounts.
George Weston in the New Millennium
George Weston strengthened its positioned in the baked goods industry in 2001 through the $1.77 billion purchase of Bestfoods Baking Co. from the Unilever Group. By acquiring Bestfoods--manufacturer of the Thomas, Entenmann's, Arnold, Freihofer, Brownberry, and Oroweat brands--Weston Foods secured the number two position among bakeries in North America and became ensconced in the highly competitive U.S. market.
In order to pay down debt related to the purchase, George Weston sold the Oroweat unit and five plants in the western United States to Mexico's Groupo Bimbo S.A. for $610 million. The company also sold several noncore businesses including its interests in canned seafood, its fisheries operations, and its forest products unit. By this time, George Weston was focused on its two main operating units: Weston Foods and Loblaw.
For Weston Foods, future profits relied on its ability to stay one step ahead of ever-changing consumer tastes and shopping habits. This was challenging for bakery operations, especially as shoppers began to demand whole wheat and whole grain products versus Weston Foods' traditional white flour products. At the same time, high costs threatened to derail the company's bottom line. Weston Foods remained focused on new product development, cutting costs, and increasing its market share throughout North America.
Meanwhile, Loblaw was struggling amid intense competition. The company not only had to remain one step ahead of its traditional competitors, it was forced to fend off encroaching new rivals like Wal-Mart Canada. A giant in the retail world, Wal-Mart Canada was slowly chipping away at Loblaw's leading market position. At the same time, distribution problems left inventory sitting in warehouses while many of Loblaw's store shelves were bare, and new general merchandise offerings were proving to be unpopular with Canadian customers. Sales and profits at Loblaw began to falter, and in 2006 the company posted its first loss in 19 years.
In response, Loblaw began to retool its operations. The company adopted a new strategy titled, "Simplify, Innovate, Grow." According to George Weston's 2006 annual report, the goal of its new plan was "To Make Loblaw the Best Again." The initiative included instituting a new, four-year labor agreement in Ontario, shuttering unprofitable stores, decreasing inventory levels at its warehouses, and making price cuts at its stores. Loblaw's chairman Galen G. Weston commented on the restructuring in a May 2007 Globe and Mail article claiming, "We're not afraid of Wal-Mart. ... We have to make sure we are in fighting fit fashion, and we're not there yet." Indeed, Loblaw had its work cut out for it, but with 12 million Canadians shopping at Loblaw stores each week, this unit of George Weston appeared to be on track to shore up profits in the years to come.
Principal Operating Units
Weston Foods; Loblaw Companies Ltd.
Principal Competitors
Maple Leaf Foods Inc.; METRO Inc.; Sobeys Inc.; Canada Safeway Ltd.; Wal-Mart Canada Corporation.
Further Reading
Austen, Ian, "Back to Roots for Retailer in Canada," New York Times, April 11, 2007.
Bertin, Oliver, "Acquisition Boosts Weston Bottom Line," Globe and Mail, February 22, 2002, p. B7.
------, "Investors Lap Up Weston Shares," Globe and Mail, June 23, 2000, p. B14.
------, "Weston Adjusts to 'Cruel World': Free Trade Gives Food Firm Big Rivals," Globe and Mail, August 19, 1991, p. B1.
Bourette, Susan, and Dave Ebner, "Weston to Bolster Existing Operations: Much of $800 Million to Be Spent on Eastern Businesses and Small U.S. Acquisitions," Globe and Mail, May 11, 1999, p. B11.
Cherney, Elena, "Canada's Weston Girds for U.S. Food Fight," Wall Street Journal, March 28, 2001, p. A18.
Davies, Charles, Bread Men: How the Westons Built an International Empire, Toronto: Key Porter, 1987, 211 p.
Greenberg, Larry M., and Christopher J. Chipello, "Loblaw Agrees to Purchase Provigo for $897.5 Million in Cash and Stock," Wall Street Journal, November 2, 1998, p. B2.
Heinzi, Mark, "Weston to Buy Unilever's Bestfoods Baking," Wall Street Journal, February 20, 2001, p. A15.
Mahood, Casey, "Weston Sells Two B.C. Packers Seafood Brands to U.S. Company," Globe and Mail, January 5, 1999, p. B5.
McFarland, Janet, "Grocers Brace for a Food Fight," Globe and Mail, October 31, 1998, p. B1.
Steinhart, David, "Weston Sells U.S. Unit to Mexico's Groupo Bimbo," National Post, January 23, 2002.
Strauss, Marina, "Cadbury to Swallow Neilson: U.K. Giant Grabs Canadian Candy Bar Leader for $225 Million," Globe and Mail, May 11, 2000, p. B6.
Waldie, Paul, "Domtar Buys E.B. Eddy," Globe and Mail, June 17, 1998, p. B1.
------, "E. B. Eddy IPO Shelved," Globe and Mail, November 14, 1997, p. B1.
------, "Weston to Spin Off E.B. Eddy in IPO," Globe and Mail, September 12, 1997, p. B1.
"Weston Expects Loblaws to Rise," Calgary Herald, May 17, 2007, p. E2.
Yakabuski, Konrad, "New Provigo Bid Wins over Caisse," Globe and Mail, December 1, 1998, p. B1.
— Sandy Schusteff; Updated by David E. Salamie, Christina Stansell Weaver
