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Galen G. Weston of Loblaw Cos. Ltd. (KEVIN VAN PAASSEN FOR THE GLOBE AND MAIL)
Galen G. Weston of Loblaw Cos. Ltd. (KEVIN VAN PAASSEN FOR THE GLOBE AND MAIL)

Loblaw plans to battle Amazon and Wal-Mart with online food operation Add to ...

It’s been late in coming to Canada but online food retailing is expected to soon get a boost here.

Already, U.S. behemoths Amazon.com Inc. and Wal-Mart Stores Inc. run food e-commerce in this country, but neither yet offers fresh food, such as fruits and vegetables.

By later this year, grocer Loblaw Cos. Ltd. will launch a test e-commerce site that will include fresh food, with a “click and collect” operation that will allow consumers to order groceries from its website and then pick them up at the stores after employees have packed the goods. The company anticipates an aggressive roll-out if the pilot works out.

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“We believe this is going to be a fundamental aspect of e-commerce in Canada,” Galen G. Weston, executive chairman of the country’s largest grocer, said on Thursday after Loblaw’s annual meeting.

“We expect the test to be successful and we would expect to roll it out quickly following that successful test.”

Food e-commerce is one of the last frontiers of online retailing in Canada – a tough sector to penetrate because of the added costs of keeping food fresh and handling a lot of low-cost bulky items, from canned pop to soup. But with large retailers such as Amazon.ca and discounter Walmart.ca pushing into the food category, domestic players feel the heat to grab their fair share of the business.

At Amazon.ca, “customer interest and feedback has been really positive” to its grocery launch last October, said spokeswoman Katie McFadzean. She would not comment on speculation that the online purveyor will pilot selling fresh food here, as it is doing south of the border.

Loblaw is focusing more on its fresh food, aiming to grow that high-margin category at twice the rate of packaged goods, Mr. Weston said.

“I’d like to encourage you to imagine a world where fresh fruits and vegetables outsell packaged groceries in our stores,” he told shareholders.

To help in achieving its goal, it will start a test of carrying fresh fruits and vegetables and prepared foods at some of its Shoppers Drug Mart stores late this year, Mr. Weston confirmed. On March 28, Loblaw closed its $12.4-billion takeover of Shoppers, the country’s largest pharmacy retailer.

He said that if Loblaw’s e-commerce test at three Loblaw stores in Toronto later in 2014 is successful, he envisages using Shoppers stores as well as pickup locations for online orders.

“So instead of the Canadian consumer taking the 20-minute drive to one of our stores, they take a five-minute drive or perhaps even walk to a Shoppers Drug Mart store,” he said. “We think that represents a very significant potential strategic advantage for us ultimately.”

Loblaw was attracted to Shoppers partly because its stores are located in convenient urban sites close to where a growing number of people are moving; many Loblaw stores are larger and in the suburbs.

Mr. Weston said he has long believed in marrying the businesses of food and health. He imagines a world in which all of Loblaw’s meat is free of hormones and antibiotics, all its in-house President’s Choice products are free of artificial flavours and colours, and nutritional information can be customized with the touch of a button on a phone.

He also sees a world where the company’s pharmacists are also nutritionists and can provide basic medical diagnostics and write simple prescriptions, and where customers can earn President’s Choice rewards points not just for shopping but also for doing exercises and taking the stairs at work instead of riding the elevator.

“We are making headway today on every one of those initiatives,” he said. “So while it represents the future, it is not that far away.”

To help reach his goals, he pledged that Loblaw will reduce sodium levels in its President’s Choice products by an average of 20 per cent by the end of 2015.

Mr. Weston also said he doesn’t think the United Food and Commercial Workers, the largest union representing Loblaw employees, will be successful in its bid to represent more Shoppers employees. In Manitoba, the UFCW is arguing that its contract with Loblaw gives it the automatic right to represent Shoppers workers as well. “We strenuously disagree,” he said. “We feel comfortable with our position and that we will be successful.”

Follow on Twitter: @MarinaStrauss

 
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