Grocery store chain Metro Inc. says the construction of its first automated distribution centres are unrelated to its efforts to offset added costs from Ontario's rising minimum wage.
The Montreal-based company said it will eliminate about 280 jobs – 180 full-time and 100 part-time positions – starting in 2021 as part of a $400-million overhaul of its Ontario distribution network.
"In our industry, we're always looking at ways to become more efficient to lower pricing, but we have been talking about this for three years since I joined the company and well before anybody said anything about minimum wage," said Carmen Fortino, division head at Metro Ontario.
The announcement follows comments by Metro in August that it would study automation as it looked to cut costs in the face of the Ontario government's plan to raise the minimum wage next year.
Metro has six distribution centres in Ontario including four in Toronto and two in Ottawa that employ a total of more than 1,500 workers.
It said the existing Ontario distribution network dates back to the 1960s and no longer meets the needs of its business.
"We see a lot of opportunities in the province and we wanted to make sure that we were going to be in a position to be able to grow but support our stores in a cost-efficient manner and add some flexibility to the way that we service our stores," Mr. Fortino said.
The company plans to modernize the operations in Toronto between 2018 and 2023 by building a new fresh distribution facility and a new frozen distribution centre. The old fresh-food warehouse will close and be dismantled while the frozen space will be used for non-perishable groceries.
Metro has no immediate plans to automate its six distribution centres in Quebec, including the latest built five years ago in Laval.
However, further upgrades in other Ontario centres are eventually possible, Mr. Fortino said. "Technology changes so quickly I think you have to keep an open mind to everything."
He said the existing Ontario network built up through a series of acquisitions no longer has the capacity and technology to meet the needs from a proliferation of products, including ones that serve ethnic communities.
Mr. Fortino said the goal is to supply stores with better on-time deliveries, offer more types of products and use systems that keep produce fresher, while also reducing costs that hopefully can be passed on to customers.
"The whole experience for a customer should improve," he added.
Metro looked at automated systems around the world, including the latest technology in Europe, before settling on a system supplied by Witron, a German-based company described as a worldwide leader in order-picking systems for retail and industry.
Although Metro faces competitors with automated distribution centres, Metro is just entering the field.
With technology changing so rapidly, Mr. Fortino said he's happy that the company has taken the time to study its options.
Before the new facilities are built, however, the company will acquire a modern automated facility in Varennes, Que., with the closure of its purchase of pharmacy chain Jean Coutu Group.
Irene Nattel of RBC Dominion Securities Inc. said the modernization of Metro's distribution network is consistent with the company's "measured and methodical approach to improving efficiencies in the business."