Sobeys' pending takeover of Canada Safeway stores could not only delay new grocery entrants into downtown Winnipeg but spell the end of the regional grocer altogether.
Peter Kaufmann, a real estate broker at CBRE, said Nova Scotia-based Sobeys will be preoccupied with optimizing its real estate portfolio once the $5.8-billion deal receives regulatory approval, expected before the end of the year, including closing down stores that are close to others.
"They won't be worrying about what happens in downtown Winnipeg," said Kaufmann, who is also the author of a soon-to-be-released report on the feasibility of downtown grocery stores.
'They won't be worrying about what happens in downtown Winnipeg'
One of the biggest hurdles to overcome as the grocery store battle shakes out, he said, is the ability of an outgoing store to put a caveat on its property that another grocer can't open on that site.
Those caveats are the right of property owners and it's "almost impossible" to get them removed without the agreement of the original grocer, he said.
"They shouldn't have the right to decide forever that no grocery store can go on that land. You could have a neighbourhood that could use a local grocery store but nobody can open one up there," he said.
Some observers have speculated that a regional provider of grocery services could step into the pending void once the Safeway brand disappears.
The Jim Pattison Group, a Vancouver conglomerate that includes banners such as Save On Foods, Cooper's Foods and Buy-Low Foods, is one player that has the resources to expand beyond its traditional markets of B.C. and Alberta.
Jim Pattison, president of the third-largest private company in Canada, wouldn't comment on whether Save On Foods or another one of its brands would fit in Winnipeg.
He said he believes in the strength of the Winnipeg market, as evidenced by his company recently buying Frontier Toyota and Frontier Subaru and entering into a deal to buy Fab 94 and QX 104.
"We have a significant interest in Winnipeg through the other businesses that we're in," he said.
The buying power of "department" stores such as Walmart, Target, Costco and Real Canadian Superstore is making it increasingly difficult for grocery stores to survive, Kaufmann said.
"If they use 50 grocery items every week as loss leaders to bring people in the door, it forces grocers to match prices on staple items like eggs, milk, bacon and bread.
"You have butter being sold for $2.99 to $3.49 (per package) but the cost to the grocer is $4.50. That especially hurts the small grocer," he said.
Sobeys is already the second-largest grocery retailer in Canada after Loblaw Co. and will solidify that position by adding 213 Safeway stores from Thunder Bay, Ont., to British Columbia.
It has 11 stores in Winnipeg while Safeway has 24.
Sobeys owns or franchises more than 1,300 stores cross Canada under such banners as Sobeys, IGA, Foodland, FreshCo and Thrifty Foods.