The Canadian Press - ONLINE EDITION

Hot and fresh foods will be tested at some Shoppers Drug Marts this year

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TORONTO - The head of Canada's largest grocer wants you to imagine picking up a hot sandwich, a bunch of bananas and a pair of Joe Fresh earrings while you wait for a prescription at Shoppers Drug Mart.

Loblaw chairman Galen G. Weston, head of Canada's largest grocer and the new owner of the pharmacy chain, says all these possibilities could soon be a reality.

"The question that we're asking ourselves... (is) can we sell more? Can we sell some fresh foods? Could we sell bananas? Could we sell meals that are ready to go? Is that something the Canadian consumer would embrace or would be interested in?" Weston told shareholders at his company's annual meeting Thursday.

The pilot project, which will be rolled out later this year at five or six Shoppers locations in Toronto, could see fruits and "quick breakfast, lunch or dinner" options next to dry food items already available at the drugstore chain.

"And if they don't want it, we will pursue something different," Weston said.

Loblaw (TSX:L) closed its $12.4-billion purchase of Shoppers stores in March.

Weston said the company is working out how to fully incorporate the two businesses including trying to figure out how much food, and what types, to add to existing Shoppers shelves without "chipping away" at other departments in the pharmacy chain.

Last year, sales of food and convenience items totalled $1 billion or about 10 per cent of Shoppers' overall sales. Loblaw's annual food sales totalled about $24 billion.

Since the acquisition was announced, some of Loblaw's President's Choice branded cookies as well as organic baby food items have begun to appear on Shoppers shelves. Meanwhile, the drugstore's Life brand products have also been brought into Loblaw supermarkets.

As part of the combination, Loblaw is also considering using Shoppers stores in Toronto as pickup locations for the company's soon-to-be launched "click and collect" pilot project, which will allow consumers to purchase groceries and perhaps, Joe Fresh clothing, online and pick them up later at the store.

Weston said customers will soon be able to buy Joe Fresh accessories and cosmetics inside the drugstore chain, but it has no plans to add clothing stores, like the ones found in Loblaw locations.

At the shareholders meeting, Weston said one of the ways Loblaw plans on bringing the food and health and beauty categories together is through its PC Plus program. The loyalty card, which was recently launched, now has more than five million members, with half of them registered online. In Ontario, about 40 per cent of sales at all of its grocery banners are by PC Plus members.

He said in the future, the company wants to reward customers with loyalty points not just for grocery purchases, but for lifestyle choices. One of the new ways members can earn points for groceries will be through physical activity, like if a they choose to use stairs instead of an elevator.

As part of promoting a healthy lifestyle, Loblaw also announced it will reduce sodium in all its President's Choice products by an average of 20 per cent by the end of 2015.

On Wednesday, Loblaw reported lower first-quarter earnings and warned that competition in the Canadian grocery industry has reached "historically high'' levels that is likely to remain unchanged in the foreseeable future. It also raised its quarterly dividend by about 2.1 per cent to 24.5 cents a share.

Besides, its main grocery store business, Loblaw also operates the clothing line Joe Fresh, real estate trust Choice Properties, drugstore chain Shoppers Drug Mart and financial services division President's Choice Financial. It also owns 22 different banners, including Independent, Zehrs, Superstore, Wholesale Club, Value-mart, No Frills, Maxi, Loblaws and Provigo.

Follow @LindaNguyenTO on Twitter.

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