February 11, 2015 4:17 pm
Updated: February 11, 2015 5:10 pm

Forget Target, Walmart Canada’s aim is squarely on supermarket sales

Walmart is pushing aggressively into the grocery business, creating headaches for Canadian supermarket owners.

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It might appear to be an exclamation point punctuating a triumph over Target, but sweeping expansion plans announced Wednesday by Walmart Canada hold little connection to the surprise retreat of its chief rival back to the United States.

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Instead, it’s all about a far bigger battle that continues to rage between the U.S. discount giant and Canadian grocers like Loblaw, Sobeys, Safeway and Metro.

“We typically announce expansion plans around this time of year, and that’s what this is about. Our continued growth, in particular accelerated growth in food and e-commerce,” Andrew Pelletier, vice-president of corporate affairs, said by phone.

Walmart says it will spend $340 million over the next year in part to convert 27 existing stores into “Supercentres” outfitted with a full complement of grocery aisles, adding to the 282 locations that already sell food.

One-stop shop

Two brand new locations will also be built, bringing Walmart’s total count of Supercentres up to 309, or more than three-quarters of the nearly 400 Walmart Canada locations spread throughout the country.

A major reason for Walmart’s push into grocery sales is falling foot traffic, a problem that plagues many retailers amid stiff bricks-and-mortar competition and growing online sales. Groceries are a known driver of frequent visits, which often lead to purchases elsewhere in the store, experts say.

MORE: Walmart Canada turns focus to grinding down grocery prices

“It’s a direct response to what our customers are telling us they like,” Pelletier said. “Customers have responded positively to our one-stop shop environment that allows them to save money under one roof on their grocery and general merchandise needs.”

Like Walmart Supercentres, the discount banners of Canada’s big grocery operators easily fended off Target Canada’s brief, two-year incursion into the Canadian food retailing business.

MORE: In food fight, Canada’s discount supermarkets ate Target’s lunch

Banners like Loblaw’s No Frills, Metro’s Food Basics, Empire’s Price Chopper and FreshCo managed to increase sales in the face of Target’s aggressive expansion into Canada.

But weathering Walmart’s more gradual assault will prove tougher, experts say, with the world’s largest retailer continuing to win more business away from Canadian supermarkets. “We want to be right rather than fast,” Pelletier said.

Food fight

“Walmart has gained considerable share through its accelerating Supercentre rollout,” retail stock experts at Raymond James said in a recent research report.

Raymond James analysts said Walmart grew its slice of the grocery pie by 35 per cent between 2008 and 2013. Loblaw meanwhile has seen a five percentage point decline in its market-leading position over the same amount of time (see graph).

Walmart converted 35 Canadian department stores to Supercentres last year and analysts suggest it will continue to overlay existing locations beyond its current announced plans.

Pelletier declined to comment on whether Walmart would acquire any former Target locations slated to be sold off in the coming months.

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— With files from Mike Drolet, Global National 

jamie.sturgeon@globalnews.ca

© 2015 Shaw Media

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