Skip to main content

The Globe and Mail

Why I’ll still be pushing a cart behind my wife at both Loblaw and Shoppers Drug Mart

These are stories Report on Business followed this week.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Every Saturday morning, I go to the Loblaw superstore in North Toronto and wheel a cart around behind my wife while she dumps stuff in.

Story continues below advertisement

Then, not always but often enough, I go to the Shoppers Drug Mart just down the street from the Loblaw superstore and wheel a cart around behind my wife while she dumps stuff in. (Or, worse, she says we don't need a cart when really we do.)

So my big question this week was whether the Loblaw-Shoppers marriage will, at some point, negate the need for one of those trips and allow me to nap instead.

The analysts tell me no.

That's not the aim of the $12.4-billion takeover of Shoppers Drug Mart Corp. by Loblaw Cos. Ltd. Nor are they likely to cannibalize each other like that.

So Monday's deal isn't going to rock my world – I'm just the wheel man, after all – but it is going to rock a retail sector already shaken by consolidation and the power of U.S. chains that have moved north.

As Loblaw executive chairman Galen Weston put it as he unveiled the takeover, "this combination creates a compelling new blueprint for the future, positioning us to capitalize on important trends in society, from the emphasis on health, wellness and nutrition, to the imperatives of value and convenience."

Analysts agree.

Story continues below advertisement

Loblaw gets to bolster its pharmacy operations, and Shoppers its food offering. But analyst point to far wider ramifications in the unique marriage of Canada's biggest grocer and its largest drugstore chain.

"The real opportunity is to launch hybrid stores – focused on the consumer's relentless pursuit of the fountain of youth," said Tony Chapman, chief executive officer of Capital C Partners.

(Wonderful. Another store to go to on a Saturday, though the two companies have announced no such plans yet.)

"Leverage technology to capture key data points on health – blood, sugar levels, calories in and out, nutrition – and then index it against a custom plan involving food, supplements, exercise," Mr. Chapman said.

"Loblaw becomes an enabler to life, versus a provider of goods and services.

Here's where I come in. While there may be some cannibalization, it's not expected to be significant. You can already find pharmacy and grocery offerings at either, which for some may suffice. (Not in my family.)

Story continues below advertisement

Loblaw and Shoppers cater to different groups of people, said Michael Jaczko, a partner and portfolio manager (and a pharmacist, by the way) at Toronto's K.J. Harrison and Partners.

Shoppers is bringing in customers who aren't necessarily chasing the lowest prices. They like the convenience and what's on offer.

"I don't think you're going to be seeing Loblaw people abandon one to go the other," Mr. Jaczko said.

There are, of course, questions among stock analysts, who began raising their price targets on Loblaw shares after the deal was announced.

(Shoppers shares surged as the price moved into line with the Loblaw bid price, which suggests I may have been better off buying the stock rather than chasing my wife down the aisle.)

"This transaction, as announced, is in our opinion about Loblaw driving (and thereby leading) a disruptive change in the Canadian grocery and drug retail landscape, and as such Loblaw is playing offence versus defence," said Kenric Tyghe of Raymond James, who hiked his price target on the grocer's stock to $54 from $46.

"Shoppers' proposed acquisition by Loblaw would facilitate Shoppers further levering its private label, convenience food and class-leading loyalty competencies, and Loblaw leading the charge on the grocery format evolution in Canada (in addition to levering its class-leading private label and recently refreshed loyalty offering)."

Analyst Keith Howlett of Desjardins said much remains to be seen, so the jury's still a bit out.

"While 'health, wellness and nutrition' is a theme that aligns well with changing consumer values and demographics, it is not yet clear how the combined entity is going to 'grow faster together' and monetize the opportunity," said Mr. Howlett, who raised his Loblaw price target to $55 from $50.

He raised his target on Shoppers to $64 from $42.

The week in Business Briefing

The week in Streetwise (for subscribers)

The week in Economy Lab

The week in ROB Insight (for subscribers)

Required reading
Jeffrey Immelt says Canada will play a part in his effort to transform General Electric Co. into a dominant global player in intelligent machines and advanced manufacturing. Read Bertrand Marotte's interview with the CEO of the 135-year-old industrial conglomerate.

Grace Fusillo-Lombardi was at a yoga class at her downtown Toronto gym about a month ago when she finally saw for herself why some Lululemon pants were making women blush. Josh Kerr, Thandiwe Vela and Susan Krashinsky look at the "sheerness" issue dogging the yoga wear maker.

The 'think small' philosophy of spending may be the only way some first-time buyers will ever get into today's housing market, where borrowing costs have climbed and prices are holding firm or rising on a national basis, personal finance columnist Rob Carrick writes.

The old-fashioned payphone could become even harder to find after Canada's telecommunications regulator rejected Bell Canada's request to double the cost of a call to $1, Steve Ladurantaye and Thandiwe Vela report.

Decades after feminists first called for her tiny, perfect head, Barbie's plastic appeal is melting away. Thandiwe Vela looks at her waning fortunes.

Almost 175,000 Canadians are watching the economic recovery from the sidelines. Thandiwe Vela looks at an OECD report that warns long-term unemployment is still dogging Canada.

Central bank chiefs in Ottawa, Washington and London stepped up their efforts at giving markets the clearest signals they can. Sean Silcoff, Paul Waldie and Kevin Carmichael report.

Telus Corp. chief executive officer Darren Entwistle is ramping up a campaign for what he calls a "level playing field" in a looming battle with U.S. giant Verizon Communications Inc. for wireless customers, Rita Trichur and Boyd Erman report.

The Cushing logjam has broken, Shawn McCarthy writes, and with its opening North American oil has lost the bargain-basement status it has sustained for the past two years.

TransCanada Corp. is moving to bolster its case with President Barack Obama for the long-delayed Keystone XL pipeline, sending a laundry list of reasons why the project will have minimal impact on greenhouse gas emissions. Shawn McCarthy reports.

Report an error Editorial code of conduct Licensing Options
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to