TORONTO — Supermarket retailers in Canada are particularly vulnerable to disruption as a result of the ongoing and planned expansions of U.S. retail brands Target and Wal-Mart there, according to a report released this week by BMO Capital Markets.
Wal-Mart Stores, Bentonville, Ark., has captured around 5.9% of the Canadian grocery market since it first made its arrival in Canada via an acquisition in 1994, according to BMO. It stands to gain greater share as it continues an ongoing effort to convert stores from general merchandise stores to supercenters.
BMO said 164 of Wal-Mart’s 300-plus stores in Canada today operate as supercenters, and that number could grow as Wal-Mart continues converting them at a pace of around 40 per year. Those figures do not include 39 Zellers leases Wal-Mart bought from Target as part of the latter’s acquisition. BMO predicted Wal-Mart could control well over 10% of the Canadian grocery market by the time its store conversions are complete.
Target is expected to make its Canadian debut early in 2013, opening 130 stores at former Zellers sites.
The report said Wal-Mart’s impact on existing grocers in Canada — which include banners operated by Loblaw Cos., Sobeys and Metro Inc. — have included a vigorous price-reduction effort led by Loblaw in anticipation of its growth in 2007 and a more recent pricing re-set in Western Canada by Sobeys.