Walmart Canada has made steady in-roads into the Canadian grocery business this year as it converts and expands hundreds of locations to “Supercentres” that sell food alongside its general merchandise.
Experts at the University of Guelph suggested this week Walmart now accounts for about 10 per cent of all supermarket sales in Canada. But its continued expansion faces a fresh test, according to other experts, as the U.S. discount giant turns up the pressure on prices in its grocery aisles.
“[Our] charts indicate that Walmart Supercentre has been raising prices over the last few months,” retail stock analysts at BMO Capital Markets said in new note to clients.
A price check by BMO at Walmart locations in Montreal and Toronto on a basket of 70 goods showed steadily higher retail prices for groceries through the end of August.
The report didn’t provide the percentage increase in Walmart’s prices (see chart below, courtesy BMO Capital Markets). But price inflation at food bought at stores was 2.3 per cent in August, according to Statscan.
Walmart’s rising price trend differs sharply from BMO’s previous look at Walmart’s prices in the spring, which showed the U.S. discount giant keeping them lower and absorbing the financial hit of rising wholesale costs, particularly for red meat and produce, which have climbed sharply this year.
In contrast, Canadian grocery chains Loblaw, Safeway, Sobeys and Metro passed much of the higher costs onto customers – moves that allowed Walmart to gain a bigger slice of the Canadian grocery pie, BMO analyst Peter Sklar said.
“Unlike Walmart Supercentres, other grocers have been passing through some of the [rising] wholesale cost into retail prices,” Sklar’s note said.
But Sklar said his latest reading on Canadian retail grocery prices suggests the entrenched grocers are no longer passing on the hefty price increases to consumers, and instead are absorbing some of the hit – or doing exactly what Walmart was doing earlier in the year.
Each grocer was losing too much business to Walmart, BMO suggested, pointing to the amount of groceries moving through their stores.
Tonnage, the industry term for volume of food being moved through stores, has declined at each food retailer as it lifted prices, BMO noted, an indicator shoppers were reducing their basket sizes at Canadian grocers — and increasing their basket elsewhere, like at the U.S. discount giant.
“The decline may be attributable to lost market share to Walmart,” Sklar said.
WATCH: Comparison shopping Target, Loblaws & Walmart to see who gives you more bang for your buck. Global Toronto’s Minna Rhee fills the shopping cart.
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