Winnipeg Free Press - PRINT EDITION

Safeway cuts prices anticipating Walmart move

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WALMART has yet to crash the Winnipeg market with its grocery-store concept but shoppers around town are already feeling its impact.

Last week, Canada Safeway stores cut their prices on thousands of items across all departments -- dubbed their "everyday low prices program" -- a move designed to win over price-conscious consumers as well as protect current market share.

"This is a reinvestment of profits back into lower pricing," said John Graham, Winnipeg-based public affairs manager for the Western Canada chain. "Hopefully, by lowering prices, we'll see more people shopping at Safeway and as a result, the net benefit will be higher."

He said Canada Safeway's strategy has incorporated Walmart and other competitors as well as the economic downturn. The amount of discounting varies across products but the move is permanent, he said.

"It's a part of our drive to update our stores to make sure the quality of our produce, meats and bakery is the best in the industry. (The lower prices) are a response to the economy and a desire to ensure we're offering value that will retain and hopefully build our customer base," he said.

It has been years since Canada Safeway has competed on price, preferring instead to focus on service, "lifestyle experience" and higher-end products, leaving the price-conscious market to Superstore and Price Chopper.

In recent years, however, non-grocery retailers, such as Shoppers Drug Mart, Walmart and even Canadian Tire have dipped their toes in the grocery waters, threatening the profit margins of traditional grocery players.

Last month, a City of Winnipeg official confirmed Walmart is seeking city approval to convert two of its local stores into "supercentre" outlets that carry both general merchandise and a full line of grocery products.

The company wasn't tipping its hand when it would finally enter Winnipeg's grocery market, however. Susan Schutta, Walmart director of corporate affairs, said it can't make a formal announcement until it has full approval from all levels of government.

"Winnipeg is one of the markets we're looking at across the country. Western Canada will be more of a target for us than Quebec and further east," she said.

John Winter, a Toronto-based retail analyst, said Safeway has "seen the writing on the wall."

"It's a good thing to be price-competitive before you need to be. Walmart will come in with a full-line grocery in a little while as they have in other markets," he said. "It's about time we had a price war. If Safeway does it, their competitors will do it, too, and the people who benefit are the consumers."

Winter said the high-flying loonie, which has been hovering around par with the U.S. greenback for a couple of weeks, makes it easier for grocery stores to offer lower prices because much of what they sell is imported from the U.S.

Mike Lupien, director of communications for Sobeys West, said it isn't planning to roll out a specific pricing event in response to Safeway's move but it undertakes regular initiatives in flyers and through its Club Sobeys program.

"Because it's such a competitive business, we're always aware of what everybody is doing and we make adjustments where we need to. We remain competitive on price, that's what we do," he said.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition April 23, 2010 A4

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