GERMAN DISCOUNTER EYES CANADA

BRIAN DUNN

MONTREAL -- A major European discounter is preparing a rollout of grocery stores in Canada with up to 200 new outlets over the next few years.

Lidl & Schwarz of Germany plans to open its first Canadian outlet in Ontario next year, according to an industry source whose company is in contact with Lidl Canada officials at their head office in the Toronto suburb of Mississauga, Ontario. The grocer focuses on low prices and narrow selection in prime locations with parking. It also prefers to own rather than lease its property.

Privately held Lidl has about 4,800 discount department stores and no-frills supermarkets throughout Europe with estimated sales of $21.7 billion last year.

Their European stores average 10,000 to 12,000 square feet, but some are as large as 18,000 square feet, said Rick Pennycooke, a retail development consultant with Lakeshore Group in Toronto. "They'll have to do something different here, because at 12,000 square feet, they'll get hammered.

"They're a dominant force in Europe, but the European market is different. They don't have the volume of power centers that we have here, because Europeans like to shop two or three times a week, not once a week."

Lidl declined to comment.

Analyst Bill Chisholm of Toronto-based Dundee Securities thinks Lidl might design itself after the Aldi chain in the U.S., and questions its strategy.

"The discount segment is quite well developed in Canada," he said. "[Lidl] also targets key locations with parking and there's not much available in urban centers."

Another analyst, who requested anonymity, agreed, noting the discount segment is pretty saturated.

"You have No Frills [owned by Loblaw], Food Basics [A&P Canada] and Price Chopper [Sobeys], which account for about 20% of the market. If you include Wal-Mart and Costco, you're up to one-third of the market, so I don't know what opportunities are left for Lidl." The news of Lidl's planned entry follows last week's Canadian debut of Sam's Club, the discount club concept owned by Wal-Mart, Bentonville, Ark.

Analysts estimate Sam's, which reportedly has its first four outlets planned for the Toronto-area towns of Etobicoke, Vaughan, Pickering and Richmond Hill, could eventually open 50 to 60 stores across Canada. Costco, Issaquah, Wash., already has 61 outlets north of the border.