As it fights off stiff competition, Loblaw Companies, the country's largest supermarket chain, is focusing on knowing exactly what its customers want.

Galen G. Weston, the company's executive chairman and newly named president, said Loblaw is appealing to customers who want smaller stores, more personalized product discounts and a wide assortment of high quality fresh food.

"Early indications across the board suggest that when we put the right proposition in front of the customer, price is not the biggest determinant of what they choose to buy," he said Thursday following the release of the company's latest financial results.

Across nearly all its banners including its discount chain No Frills, Weston said the company has seen that customers are willing to pay more for better food, particularly produce.

"Customers seem to be trading up in fresh for what they perceive to be significant improvement in quality," said Weston.

Loblaw is navigating its way through a competitive time in the grocery industry. On top of that, it's also facing inflationary pressure with the rising cost of meat and produce that it did not completely passed onto shoppers in the last quarter.

"This investment in price allowed us to remain competitive in the market, which in turn supported our sales momentum," he said.

Weston said the company will concentrate on utilizing one of its "greatest strengths": its loyalty programs which help it offer tailored discounts to repeat customers.

The Shoppers Optimum program has more than 10 million active members, while the PC Plus program and more than six million members.

In its second-quarter results, Loblaw (TSX:L) reported a loss of $456 million, or $1.13 per share. The loss compared with a profit of $177 million, or 63 cents per share in the same quarter of 2013.

However, excluding the adjustments related to the Shoppers acquisition and other one-time items, the company said it earned $301 million, or 75 cents per share, for the quarter compared with a profit of $181 million, or 64 cents per share a year ago.

Analysts on average had expected a profit of 67 cents per share, according to data compiled by Thomson Reuters.

The grocer said the addition of Shoppers Drug Mart helped boost revenue nearly 40 per cent to $10.3 billion compared with $7.5 billion year-over-year.

Excluding the acquisition of Shoppers Drug Mart, the company said retail sales were up 1.6 per cent and same-store sales were up 1.8 per cent. Shoppers Drug Mart sales totalled $2.61 billion in the quarter as its same-store sales increased 2.5 per cent over the second quarter of 2013.

Loblaw acquired Shoppers last year in a $12.4-billion deal that was finalized in March. Since then, it has been integrating the chain's 1,800 pharmacies with its grocery and other businesses.

Part of the restructuring included the appointment last week of Weston as company president amid broader changes to the food retailer's management structure. Weston replaced Vicente Trius, who is returning to Brazil due to "family reasons." Shoppers president Domenic Pilla will also leave the company by the end of the year, with Mike Motz, Loblaw's executive vice-president and chief merchandising officer, to take over the top position at Shoppers.

RBC analyst Irene Nattel said Loblaw delivered better than expected results by "ticking all the boxes investors are looking for."

In addition to Shoppers Drug Mart and its main grocery store business, which includes several other banners, Loblaw also operates the clothing line Joe Fresh, real estate trust Choice Properties and financial services division President's Choice Financial.