Loblaw ups its game in grocery wars

Plans to spend $1.3B on new stores, upgrades

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Loblaw has fired the latest volley in an escalating war between the country’s traditional supermarket chains and discount challengers such as Walmart and Costco.

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Hey there, time traveller!
This article was published 13/04/2016 (2356 days ago), so information in it may no longer be current.

Loblaw has fired the latest volley in an escalating war between the country’s traditional supermarket chains and discount challengers such as Walmart and Costco.

Toronto-based Loblaw, which is Canada’s largest grocery retailer, announced Tuesday it plans to spend $1.3 billion this year to build 50 new stores in Canada and renovate 150 existing ones. That follows a $1.2 billion investment on new stores and store renovations in 2015.

Loblaw’s grocery banners in Manitoba include Real Canadian Superstore, No Frills and Shoppers Drug Mart stores, which also sell groceries. The company wasn’t saying Tuesday which stores will be renovated or where the new outlets will be built.

SUPPLIED If grocery stores can’t beat Walmart or Costco on price, beat ’em on service, experience and ambience, an analyst says.

Catherine Thomas, director of external communications, said the new-store investments will be made across the country and throughout the company’s retail network, “from discount, to full-service grocery stores and Shoppers Drug Mart stores.”

She said the renovation work will range from general store refreshes, as part of the normal lifecycle of a store, to adding more space for new or existing sections within a store. The company also will be expanding its click-and-collect program, which allows customers to shop online and pick up their order at a participating store.

Kevin Grier, a Guelph, Ont.-based food market analyst, said competition is one of the main driving forces behind Loblaw’s latest building spree.

“The reason they’re back at it again is because, ultimately, Costco and Walmart just keep on taking market share,” Grier said. “Walmart is the place everybody loves to hate, but they’re doing all Canadians a favour by keeping their prices lower.”

He said when traditional supermarket chains such as Loblaw, Sobeys, and Vancouver-based Save On Foods can’t beat the discount retailers such as Walmart and Costco on the price for packaged grocery products, they have to try to outshine them in other ways. That includes offering shoppers a more pleasant shopping experience by designing their produce section to look like a farmers market and, in some cases, adding things like Wifi service and in-store dining areas, where weary shoppers can sit down, eat a ready-made snack or meal, and catch up on their emails.

“It’s about investing to make that conventional banner a place you want to go to and a place that’s interesting and different. Otherwise, why would anyone in their right minds go there as opposed to a deep discounter if they’re just in the market for ketchup or Cheerios? There is no reason.”

Maureen Atkinson, senior partner with the Toronto-based J.C. Williams Group, noted Loblaw isn’t the only conventional grocery retailer that’s building new stores and renovating existing ones. Sobeys has been as well. Even the discounters such as Walmart have been expanding and improving their grocery offering because they recognize the importance of keeping areas such as produce looking fresh and appealing.

“If you walk in and see wilted lettuce, that’s not going to encourage you to continue on and buy more things,” she said. “So you have to stay at least in the ballpark with everybody else.”

She also noted it isn’t just the discount retailers the traditional supermarkets have to worry about. There’s also the online operators.

“Everybody can just buy what you’ve got online. And if it’s easier and less of a hassle, then why would they bother coming to your stores? So it’s really important to stay up to date on that.”

Atkinson said another advantage to constantly tweaking and improving their retail offering is that it may help keep other international discount supermarket chains like Aldi from entering the Canadian market.

“Our grocery sector is very competitive and they have stayed up to date and they’re not sleepy. They have covered a lot of the areas these other retailers cover.”

And how do Canadian consumers benefit from all these store improvements?

“The benefit is you get a better store experience,” Atkinson said, and usually without an accompanying hike in prices to help pay for the improvements.

“Retailers now don’t really have that option. Pricing is so transparent now. You can just go online and compare flyers… and prices for Sunlight soap or whatever. It’s all very easy to do, so the retailers have to be there in the price game. They have to differentiate in other ways, and part of it is through good-looking stores.”

murray.mcneill@freepress.mb.ca

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