From dried shrimp to fermented black beans and kecap manis, ethnic foods are one of the country's fastest growing grocery segments - and one that Loblaw Cos. Ltd. intends to dominate.
Six years ago, the grocer took a cue from T&T Supermarket Inc., the country's top Asian supermarket chain, by stocking live crabs and barbecued duck in its No Frills discount stores, many of which are located in ethnic communities.
Now, Loblaw is moving to take a bigger slice of the Asian market, acquiring T&T in a $225-million deal and aiming to expand the 17-store chain.
Loblaw will also be able to tap into T&T's valuable roster of suppliers and its understanding of the Asian consumer to help it move beyond its Memories of Kashmir Spicy Tandoori sauce and packaged naan to other ethnic offerings at its own stores.
"We've got much more to learn from them than they have from us," Loblaw president Allan Leighton said Friday. "The ethnic market opportunity in Canada is vast. Today we have a relatively small share. Our objective is to be the No. 1 player. T&T gives us the platform to build to this objective."
Courting the ethnic community is high on Loblaw's to-do list.
It has done the math and thinks it can reap big returns from the strategy. Ethnic Canadians are estimated to spend about $12.2-billion on groceries, with East Asians alone accounting for about $5.2-billion of that, according to the grocer's research.
Chinese Canadians account for roughly $3-billion of that, added Kaan Yigit, president of market researcher Solutions Research Group. With the acquisition of T&T, which has annual sales of about $514-million, Loblaw will control about 70 per cent of all Chinese Canadian grocery spending in Vancouver and 60 per cent in Toronto, the two biggest markets in the segment by far, he said.
"This just leapfrogs Loblaw very quickly into becoming the dominant player for New Canada," Mr. Yigit said.
Other conventional retailers are also chasing the ethnic consumer, but Loblaw has led the way, said Ron Chang, president of Regal Communication Group, which specializes in ethnic marketing.
Still, it can learn a lot from T&T, said Mr. Chang, who once did work for Loblaw. For starters, some of Loblaw's Chinese produce - even its tea bags - have been priced higher than the same products at T&T stores.
The move comes at a crucial time for the retailer as it begins to see the start of a turnaround.
In part, Loblaw and other grocers have profited from the economic downturn as cash-strapped consumers still needed to put food on the table and were often spending less in restaurants and more at supermarkets.
On Friday, Loblaw underlined the trend, reporting its second-quarter profit jumped almost 38 per cent to $193-million, beating analysts' forecasts. But it expects both profit and sales to be "significantly challenged" for the rest of the year, partly because of an expected overall drop in food prices and possible price wars among rivals.
Already, it has noticed a decline in sales over recent weeks, Mr. Leighton told analysts. And sales of prepared foods, which generate higher profit margins than other fare, suffered to a "staggering" degree over past weeks, he said.
At the beginning of the recession, consumers were buying more prepared meals, such as pizza and roasted chicken, instead of indulging in a more expensive restaurant outing. Now consumers are becoming even more thrifty, buying ingredients for food and cooking from scratch, he said.
The retailer is benefiting from better margins and cost cutting. Its employees are more productive, for instance. Cashiers now are scanning products through the checkout 4 per cent faster than a year ago, said Dalton Philips, chief operating officer at Loblaw. Employees at night are stocking products on shelves 12 per cent faster.
Analysts credit Mr. Leighton for having spearheaded the improvements. A long-time adviser to the Weston family, which controls Loblaw, he took on the president's job more than a year ago after stepping in as deputy chairman in the fall of 2006, when Galen G. Weston was promoted to the top job.
Mr. Leighton said Loblaw plans to keep the T&T operation intact, provide capital and use its clout to get good locations for more stores.
Often called the Asian Loblaw, T&T, based in Richmond, B.C., has copied Loblaw's bright, wide aisles and its emphasis on fresh produce and prepared foods. Recently, T&T has branched out from its Chinese roots to stock South Asian goods, such as coconut milk, responding to a growing number of Filipinos and East Indians shopping at T&T.
And Loblaw will try to emulate T&T in some ways, said Mr. Leighton in an e-mail: "Where else but in T&T stores do they make their breads, rolls and cakes look more like gifts than products? That's how to attract and serve your customers."