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Thomas Underwood is seen shopping in the toy section of Walmart in Mississauga on December 2, 2011. (JENNIFER ROBERTS For The Globe and Mail)
Thomas Underwood is seen shopping in the toy section of Walmart in Mississauga on December 2, 2011. (JENNIFER ROBERTS For The Globe and Mail)

Wal-Mart’s Canadian expansion adds fuel to grocery wars Add to ...

Shelley Broader, chief executive officer of Wal-Mart Canada Corp., has a rallying cry for the discount giant: Fresh food in every store.

Ms. Broader, a former U.S. grocery executive, is at the forefront of this country’s vicious retail food fight as she races to add more low-cost items – especially fresh produce and meat – to even more Wal-Mart outlets. In the process, she’s stealing business from incumbents, forcing them to lower their costs.

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On Tuesday, Wal-Mart Canada raised the heat again, announcing a further incursion into traditional grocers’ turf. The U.S.-owned retailer said this year it will add 35 supercentres – each with full supermarkets – to its current 247. It will do it by expanding 10 existing stores, adding fresh food to 19 others (including a relocation) and building six new supercentres.

The company’s $500-million investment will bring the total number of Wal-Mart stores to 395 from 389, including 142 that don’t currently offer fresh food.

“I’m not stopping until I get food in every box in Canada,” Ms. Broader said, sitting at a patio set in a mock Wal-Mart store at the retailer’s annual store managers’ meeting.

Ms. Broader is throwing down the gauntlet in an industry feeling the pressures of big new U.S. entrants – discounter Target Corp. opened here in 2013 – and the expansion of Wal-Mart along with Costco, Whole Foods and online players.

As the competition intensifies, traditional grocers are consolidating and looking for more savings, increasingly counting on their suppliers to lower or freeze their prices. The shifts are creating “one of the toughest years in decades,” said Perry Caicco, retail analyst at CIBC World Markets.

Wal-Mart’s 2014 expansion plans are more aggressive than Mr. Caicco had anticipated, suggesting that the discounter will bolster its “food-specific” retail space by close to 6.3 per cent rather than an expected 4.1 per cent this year.

Target, for its part, announced last week it will add nine stores to the 124 it launched in Canada last year. And while Target has posted disappointing results here, it has become more competitive in its weekly flyers, touting lower food prices more frequently and prominently, Mr. Caicco said. Target “needs to rebuild its entire consumer offering and price is key.”

Wal-Mart’s push to improve its fresh food capabilities is “a negative for the Canadian grocers,” said Peter Sklar, retail analyst at BMO Nesbitt Burns.

Still, Wal-Mart faces it own challenges. It has grappled with slipping same-store sales – a critical retail measure of sales at outlets open a year or more – in each of its last three quarters. At the same time, the company says it has increased its market share in key food and consumer product segments.

Ms. Broader said Wal-Mart, which is marking its 20th anniversary in Canada next month, is still in its “infancy” when it comes to fresh food.

Food, consumer products (such as soap and toilet paper) and health and wellness items made up 43 per cent of Wal-Mart’s sales last year, compared with 41.7 per cent two years earlier and 30.6 per cent in fiscal 2008, her data has found. Wal-Mart’s prices are 8 to 20 per cent lower than those at conventional rivals on a typical grocery shopping trip, it found.

In the mock store set up for the managers’ meeting, Wal-Mart featured displays with signs that compare its price for a product to that at rival Costco, such as a 12-piece acrylic tumbler set for $18 at Wal-Mart and $24.99 at Costco.

“When you have a price gap like we have in the marketplace, you want to make sure store managers fully understand that price gap,” Ms. Broader said.

One of her focuses at Wal-Mart is improving the quality of fresh food, partly by investing $91-million in its distribution network this year to shrink the time it takes to get products from the field to store shelves, she said. The retailer has cut the number of vendors it deals with, using fewer brokers and middlemen and instead dealing directly with suppliers.

But she suggested Wal-Mart will not change terms of its agreements with suppliers, as Sobeys and Loblaw Cos. Ltd. has done, even though the discounter is known to demand low costs from vendors from the outset. “We certainly take a different path than most retailers,” she said.

“If you look at the retail landscape of 20 years ago, many of the players have changed – merged with someone else, gone out of the market completely, sold off aspects and pieces of their store,” she added. “One of the reasons why we have remained constant is because of the constant change that is required to stay ahead in a marketplace as competitive as this.”

 
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