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Winnipeg Free Press - PRINT EDITION

Grocery-store war

Sobeys slashes prices to compete with retail giants

By: Geoff Kirbyson

Posted: 09/8/2011 1:00 AM | Comments: 0 (including replies)

JOE BRYKSA / WINNIPEG FREE PRESS Enlarge Image

At Sobeys on Taylor Avenue, employee Aaron Herkert stocks shelves with items at the chain's new, lower prices.

Attention grocery store shoppers: The latest salvos have been fired in what will soon be a full-out war for sales of produce, meat, dairy products and baked goods.

Sobeys has just slashed prices on 4,000 items in its Manitoba stores in an effort to provide better value to its customers.

Chain expanding stores

Sobeys isn't just investing in lower prices, it's also putting money into store expansions.

The grocery giant has made a seven-figure investment in its River Grove store at 2575 Main St. and its Birds Hill location in East St. Paul. When the two are completed in "early winter," they will be approximately 40,000 square feet in size.

The Main Street store is having 9,000 square feet added, while the Birds Hill store is being built up by 18,000 square feet.

"The stores had a fairly limited selection. Now they'll be able to offer more baked goods, produce and meat," said Mike Lupien, Edmonton-based director of communications for Sobeys West. "At Birds Hill, they'll be getting our deli street (concept) around the middle of the store, with the deli and cheese counter on one side and hot meal replacements on the other."

"These are permanent price reductions," said Mike Lupien, Edmonton-based director of communications for Sobeys West. "There was a perception that in some cases we had higher prices (than our competitors). We've made a major investment in price. It's part of our commitment to be competitive in all of the markets we serve."

Lupien also made no bones about the fact that Sobeys is readying itself to take on a pair of giants in the grocery market -- Walmart and Target. The former recently converted three of its locations into its "supercentre" concept -- at St. Mary's Road and Bishop Grandin Boulevard, at Empress Street and Ellice Avenue and at Portage Avenue and Buchanan Boulevard. The supercentres carry general-merchandise products as well as a full grocery line, including fresh meat and vegetables. Walmart is also planning to revamp its Regent Avenue store and is seeking city approval to do the same to its Kenaston Boulevard location.

Target, meanwhile, plans to revamp five Zellers outlets in the province into Target stores by mid-2013.

"We're being competitive in markets where we see low-cost providers," Lupien said.

Robert Warren, a marketing professor at the I.H. Asper School of Business at the University of Manitoba, said Walmart and Target are the "big elephants" in the room.

"What Walmart did to general merchandise when they came in, that's what's going to happen on groceries. If the experience in the U.S. is any indication, established players will see a substantial drop in their market share. When Walmart went into Dallas (with its grocery offering), it took 50 per cent of the market share," he said.

Food will be a "critical" part of Target's offering in Canada when it arrives here, just as it is in the United States, according to spokeswoman Sarah Van Nevel.

"Our assortment will vary by store. We are still working to determine the appropriate fresh food assortment for each of our Canadian stores," she said.

Canada Safeway made a similar price-cutting move last year, which was surprising considering it hadn't competed on price for years. It has traditionally preferred to focus on service, "lifestyle experience" and higher-end products, leaving the price-conscious market to Superstore and Price Chopper.

The traditional grocery market has been under siege for several years as retailers such as Shoppers Drug Mart and Canadian Tire have dipped their toes in the grocery waters.

Warren said Sobeys and Safeway have made pre-emptive strikes to position themselves so they don't get "creamed" when the new reality sets in.

"Everybody who is an existing player is trying to line up in the marketplace and get their prices as competitive as possible," he said.

Warren said stores such as Walmart and Target are so successful because their low prices attract streams of customers.

"Once you've got customers in the store, it's not difficult to get them to spend a lot of money. With groceries, it doesn't take that long," he said.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition September 8, 2011 B5

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