Canada's Grocery Wars

grocery wars

An article this weekend in the Montreal Gazette showed that this was an exciting time to be a food shopper in Quebec.  Basically, the food retail industry is adding retail square footage faster than the market is growing – all because of an invasion of American giants:  Wal-Mart, Costco and Target.   Costco and Wal-Mart have been in Canada for years, doing solid business.  Target is the newcomer and its entry has been more fizzle than sizzle.  Still, no one would count Target out at this point and their entry has only pushed Walmart and Costco to expand faster than before.

This growing competition for the consumer’s food dollar is great for the consumer but not so terrific for the traditional grocers who – however tenuously – dominate:  Loblaws, Sobeys and Metro.  These companies must struggle against the Yankee Triumvirate to keep Canadians buying food in the classic supermarket format.

The article posted some interesting statistics about these supermarket operators which I share with you here:

  • Loblaws gross revenue $31.6 billion – net earnings $650 million (2.0%)
  • Sobeys gross revenue $17.6 billion – net earnings $385 million (2.2%)
  • Metro gross revenue $11.4 billion – net earnings $722 million (6.3%)

Clearly, Metro runs a vastly more profitable business than either Sobeys or Loblaws.  Why would that be?  I don’t know but maybe I can throw in a little insight in terms of their distribution networks.

Loblaws distribution is essentially third-party operated and has been the subject of a massive overhaul in the past 5 years.  Perhaps not entirely successful.

Sobeys self-distributes but has spent gargantuan sums in Ontario and Quebec to install the WITRON case picking system for dry grocery – swallowing up precious capital for something that no consumer will ever notice.

As for Metro?  It self-distributes, running conventional facilities in Ontario and Quebec.  Boring but effective.

Is it fair to lay this all on the starkly different supply chain strategies?  Probably not.  But like life, this blog isn’t always fair.  Sometimes, we just want to provoke our readers.  That being said: what do you think?

Blog, Capital investments, Distribution Network, Food retail, Industries, Market share

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