August 18, 2015 10:36 am
Updated: August 18, 2015 11:29 am

Walmart Canada makes jump to being a ‘real grocer’

A Walmart employee in the U.S. pushes a cart of baked bread.

Patrick T. Fallon/Bloomberg via Getty Images

Amid an economy that’s slowing down, sales at Walmart Canada are picking up as more Canadians turn to the discount retailer for not just an array of general merchandise but now groceries, too.

The world’s largest retailer, which operates about 400 stores in Canada, said Tuesday the number of Canadian shoppers walking through its doors increased between May and the end of July, while sales jumped by 3.9 per cent at existing locations.

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Driving the sales gain were groceries, an area Walmart Canada has been ramping up quickly over the past few years as sales momentum in general merchandise has slowed.

Calling food now a “core” area for Walmart Canada, company chief exec Doug McMillon said Walmart’s Supercentres – formats that support food aisles Walmart is rolling out to new and existing locations across the country – delivered a “strong performance” in a “low growth environment,” a nod to the weaker economic backdrop.

‘Real grocer’

Experts say Walmart has moved in the past couple of years to improve merchandising by sourcing better and fresher produce, including higher quality items like 100 per cent Canadian beef, artisanal bread and a greater selection of seasonal products.

“The company is quickly transforming into a real grocer,” CIBC analysts said in an Aug. 12 research report.

At a time when traditional grocers are looking to generally raise prices, Walmart is countering with aggressive promotions, CIBC said. The retailer “won” the August long weekend in several markets by running strong promos in its weekly flyer for corn, hot dogs, watermelons and chicken, the experts said.

“It was easily the best ad in the market place,” the analysts said.

Price investments

Walmart officials said they continue to look for areas to drop pricing where they can in order to continue drawing in customers. “We’re investing in price and value, as we look for opportunities to lower costs in our business,” McMillon said in prepared remarks.

MORE: Grocers are lifting prices — ‘and don’t care what you think’ about it

Walmart has turned its attention toward expanding supermarket sales in Quebec, rival grocers say.

“They will now be starting to roll out in eastern Quebec. Quebec City is next,” Eric La Flèche, CEO of Metro Inc., the country’s third-largest grocery chain, which operates primarily in the province as well as Ontario.

‘They will have an impact, as they have had an impact elsewhere’

“So, we’ll see. I think we have a strong presence in that market and I’m confident that we will defend well. But they will have an impact, as they have had an impact elsewhere.”

While Walmart is making inroads with food shoppers, the country’s largest incumbent grocers – Loblaw, Empire (which owns Sobeys and Safeway) and Metro – still account for more than 70 per cent of all grocery sales in Canada, according to CIBC estimates.

“They [Walmart] are coming from a small base,” CIBC’s retail analysts said.

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