Albertans have endured some dark days on the economic front the past two years. Now comes another blow: Dreams of paying premium prices for organic kale, vegan cookies and kombucha have been dashed.
Whole Foods Market Inc., the U.S.-based chain of upscale grocery stores, announced this week it has cancelled plans to open locations in Edmonton and Calgary as it expands in Canada.
It did not provide specific reasons for the move, which comes nearly nearly four years after its co-CEO John Mackey had touted a grand strategy to quadruple its number of Canadian stores to 40. It currently has 12 in Ontario and British Columbia, with another being developed in each of those provinces.
Many Albertans are downhearted by the corporate backtrack. Like other Canadians, they were attracted to the pleasant, softly lit stores during visits to the United States, happy to fork over extra coin for products guaranteed to be free of pesticides and preservatives, or to tuck into organic meals prepared in the stores' delis. The experience at what is jokingly referred to as "Whole Paycheque" is worlds away from trudging with your cart through a noisy discount warehouse.
Predictably, foes of Alberta's New Democratic Party, including Conservative leadership hopeful Jason Kenney, blamed Premier Rachel Notley's policies, such as a rising minimum wage and corporate taxes, for Whole Foods' decision to pull the plug. This, however, ignores the actual reasons for a lot of carnage that's played out in retailing.
The biggest danger, as the recent experiences of Target and Sobeys shows in spades, is misjudging the market and expanding too quickly in unfamiliar circumstances. Both paid heavy prices and Whole Foods looks wary of similar risks.
Minneapolis, Minn.-based Target's Canadian invasion, which involved opening 124 stores in its first nine months, was plagued by supply-chain snafus and, even worse, product offerings and prices that proved disappointing to Canadian shoppers who had frequented U.S. locations while on vacation and wanted the same at home. The company shut down the operation after 681 days, putting 17,600 people out of work across the country.
Nova Scotia-based Sobeys, meanwhile, is still struggling to put its Safeway business on solid financial footing after last year writing off half the value of the $5.8-billion acquisition. It bought the Western Canadian institution in 2013, a year before the region's economy began to tank. The new owners dealt with a customer backlash against its private-label products as well as its own supply-chain glitches just as the collapse in oil prices hit many Alberta and Saskatchewan families hard.
Shoppers changed their habits, seeking deals at competitors' discount-banner stores, such as Loblaw's Real Canadian Superstore or No Frills, or in the expanding cut-rate grocery department at Wal-Mart locations. In December, Sobeys parent, Empire Co. Ltd., reported sales woes in the West continue and its shares are at a seven-year low.
Lately, oil prices have climbed to a new plateau as OPEC moves to cut its production levels, and that is fuelling new optimism in Alberta. Forecasters are calling for a gradual rebound following two years of contraction, but they are not predicting a snap-back to boom times. ATB Financial recently forecast Alberta's economic growth at 2.1 per cent this year, following a 2.6-per-cent contraction in 2016. Meanwhile, the grocery business remains crowded, even amid the downturn.
For Whole Foods, the question becomes one of consumer confidence, and whether there is enough of it in Alberta's major cities to risk entering the retail fray. Apparently, it read the fair-trade tea leaves and decided now is not the time to try to tempt shoppers with its brand of grocery store, as it has done in Toronto, Ottawa, Vancouver and Victoria.
If anything, the existing local organic retailers that have struggled through lean times will be breathing a sigh of relief now that their industry's biggest player is taking a pass for now.