9B20M017SOBEYS-PROJECT SUNRISE: RESPONDING TO DISRUPTIONR. Chandrasekhar wrote this case under the supervision of Professor Andreas Schotter solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to [email protected]Copyright © 2020, Ivey Business School Foundation Version: 2020-02-11In late May 2017, Michael Medline, president and chief executive officer (CEO) of Sobeys Inc. (Sobeys), the second-largest grocer in Canada, was poised to execute the strategic growth plan— labelled “Project Sunrise”—that he had announced on May 4, 2017. When Medline joined Sobeys in January 2017, the company was facing serious financial difficulties. It had posted a loss of CA$2.1 billion1 for the fiscal year (FY) ending May 2016, compared to a profit of $419 million just a year earlier. One reason was that a high-profile acquisition had gone sour, resulting in goodwill impairment charges of $3 billion for the year (see Exhibit 1). The company also faced some level of leadership vacuum, with the chief financial officer (CFO) serving as interim CEO since July 2016. In addition, a ratings agency had downgraded Sobeys’s debt to junk level, citing underperformance and lost market share as the reasons.2Medline was still working on a long-term plan of transforming Sobeys into a grocery powerhouse that could reshape Canadian food retailing. Project Sunrise was meant to be an interim plan, riding on a three-year time frame. It had two limited objectives: quickly relieve Sobeys from financial difficulties and prepare for the long-term industry disruption that was becoming prevalent, both locally and globally. However, Medline had to overcome some challenges to reach those objectives, as he explained:I am facing three challenges in executing Project Sunrise. First, how should Sobeys turn its byzantine organizational structure, siloed for decades into four regions, into a functional organization structure facilitating national reach and agility? Second, how should Sobeys generate demonstrable wins and momentum in lowering costs? Third, how should Sobeys get closer to the customer and regain its customer centricity for which it was once well-known?PROJECT SUNRISEThe immediate triggers for Project Sunrise were twofold: recent negative growth and uncertainty in the industry’s future.Growth in the company’s top line was crucial in the grocery retailing business, but Sobeys had seen negative growth for five of six consecutive quarters. Several key financial parameters were also in decline, including1 All currency amounts are in CA$ unless otherwise specified. 2 “DBRS Downgrades Sobeys Inc. to BB (High), Trend Remains Negative,” Morningstar, March 15, 2017, accessed July 11, 2019, www.dbrs.com/research/307088/dbrs-downgrades-sobeys-inc-to-bb-high-trend-remains-negative.
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