PROVIGO INC. SETS SIGHTS ON ONTARIO MARKET

BRIAN DUNN

MONTREAL (FNS) -- Provigo Inc. has set its sights on the Ontario market for future growth while it attempts to maintain its leading 35% share of the Quebec retail food industry.

"We have a substantial investment planned for the Ontario market," Provigo chairman Pierre Michaud said after the company's annual meeting here. "In fact, we plan to open more Maxi and Maxi & Co. [discount and superstores respectively] in Ontario than Quebec."

Michaud said there is only "one major player" -- Loblaw Cos. -- in Ontario and that the discount store sector is underdeveloped in that province.

As a result, he sees a "tremendous opportunity" to gain market share in Ontario where Provigo only has about a 10% market share through its 92 Loeb supermarkets, one Maxi and three Maxi & Co. stores.

Provigo expects to have a total of 12 Maxi or Maxi & Co. stores in Ontario by December 1999. The company also plans to spend $59 million (Canadian $85 million) over the next two years to transform 110 Provigo supermarkets in Quebec and Loeb supermarkets in Ontario into the company's "new generation" supermarkets.

The new concept stores, introduced last year, dedicate 50% of floor space to fresh products, compared to 30% in regular stores. The stores have also increased in average size from 25,000 square feet to 35,000 square feet.

In addition, the renovated stores feature a hot and cold cooked meal section at the front of each store.

Sales have increased 39% in the first three renovated supermarkets, according to company president and chief executive officer Pierre Mignault. He said the new concept store has resulted in customers returning to the store several times each week.

Mignault told shareholders the company has never been in better shape to fight the competition, particularly Loblaw and Sobey Stores which have started to encroach on Provigo's home turf of Quebec.

He said profit for the first quarter ended April 25 was up 11.1% to $12.6 million from a year ago, while net sales were $910 million versus $938 million. Net profit margin of 1.38% of sales in the latest quarter set a new high for Provigo, which is aiming for a net profit margin of 2% within the next two or three years, according to Mignault.

Asked after the meeting if he was concerned about Wal-Mart exporting its supercenter concept to Canada, Mignault saidany competition is always a concern.

"However, Wal-Mart people from the United States have come into our Maxi & Co. stores and are puzzled that we do as much volume in our 80,000-square-foot stores as they do in their 100,000-square-foot superstores," he said.