Air Miles hits turbulence after Sobeys and Safeway pull out of program
CBC
The long-running Air Miles rewards system could be facing turbulence after the withdrawal of one of its only remaining national grocery chains from the program, say experts in the Canadian loyalty points industry.
In early June, Canadian grocer Empire Company Ltd. announced it would be switching loyalty programs to Scene+, best known for its acceptance at Canadian movie chain Cineplex. Empire owns Sobeys, in addition to Safeway, Foodland, some IGA stores in Canada, FreshCo, Needs, Thrifty Foods, Les Marches Tradition, Rachelle Bery and Lawtons Drugs.
The shift will occur between August 2022 and the first few months of 2023, with the Sobeys company taking one-third co-ownership of Scene+ alongside Cineplex and the Bank of Nova Scotia.
It's a change to Canadian habits that could be difficult for Air Miles to recover from, according to industry watchers, after years of shoppers pulling out the familiar blue Air Miles cards at stores such as Safeway and Sobeys.
"To call it even the final nail in the coffin could be a little dramatic, but it wouldn't be too far off," said Ricky Zhang, founder of Prince of Travel, a website that tracks and compares travel reward systems in Canada.
"Losing the Sobeys and Safeway partnership is very much a major blow, and it's only the latest in a series of major blows that they've suffered in recent years," said Zhang. Those blows include losing the Liquor Control Board of Ontario and Lowe's hardware stores from the Air Miles network in 2021. As well, Staples Canada will no longer offer Air Miles as of July 2022.
According to Zhang, Air Miles have been one of the weaker options on the Canadian loyalty market in recent months, and these developments are not going to help things.
"Air Miles, last year, had tried to kind of rebrand itself and come out with a bit of a refreshed flight reward redemption system for people to use their Air Miles," he said in an interview with CBC Radio's The Cost of Living.
"It hasn't seemed to deliver extra value compared to before. And so I do find the program is very much, unfortunately, in a bit of a stagnant state."
It's not just points watchers saying that Air Miles is in trouble without Sobeys. Markets reacted badly to the announcement.
After news broke that Sobeys and its other brands would be leaving Air Miles, the company stock price plummeted by more than 40 per cent.
While there have been significant fluctuations in many stock markets in the days following the Sobeys announcement, the Air Miles parent company stock, which is traded as LYLT on NASDAQ, has not risen and fallen with general trends in the days since. The stock fell after Sobeys and Safeway pulled out, and stayed where it was.
According to stock filings and media releases from Air Miles parent company Loyalty Ventures, Sobeys represented about 10 per cent of the parent company's earnings in 2021 (before interest, taxes, depreciation and amortization are taken into account).
Sobeys stores, along with Safeway and its other brands in Canada, accounted for more than $21 million Canadian in earnings for Air Miles' parent company last year, according to calculations derived from annual financial statements.
This First Person column is the experience of Shannon Flaman, who lives in Red Deer, Alta. For more information about CBC's First Person stories, please see the FAQ.
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