WAL-MART SET TO DEBUT SAM'S CLUBS IN CANADA

BRIAN DUNN

TORONTO -- Wal-Mart Stores will introduce its Sam's Club stores to Canada with the initial focus on the $14.7 billion (U.S.) food market in Ontario, where it plans to open four to six stores next fall.

Wal-Mart Canada, based here, said it will roll out more stores across the country in two other phases over the next two years. Like Costco, its main rival, the stores will require a membership fee and each unit will be over 100,000 square feet, vs. 57,000 to 100,000 square feet for Wal-Mart outlets.

The stores will be tailored to the Canadian market and use as many Canadian suppliers as possible, said Andrew Pelletier, spokesman, Wal-Mart Canada.

Sam's Club will carry three food categories not currently available at Wal-Mart: fresh produce, meats and bakery items, Pelletier said. Wal-Mart also will increase the number of traditional Wal-Mart discount stores that have groceries to 80, from 65, by January, he added. Wal-Mart operates 207 outlets in Canada.

Some analysts expect Sam's could open as many as 60 outlets in Canada. Costco, the only warehouse club chain in the country, has 61.

Pelletier said Wal-Mart has no specific number in mind, and no decision has been made about whether or not Wal-Mart's supercenters are coming to Canada.

"They sound like they're serious, and I believe they will build out way beyond the four to six stores in Ontario," said analyst David Rowen of Dlouhy Merchants, Montreal. "Specifically for food, [Loblaw IGA, A&P and Costco] will be impacted, but not hugely.

"It will force people to look over their shoulders, and if they're successful, they may bring in their supercenters," he added.

By contrast, Perry Caicco of CIBC World Markets here, said Wal-Mart is highly unlikely to bring supercenters to Canada because the unique structure of the Canadian food market -- geographically concentrated with strong discount chains and private-label programs -- would make it difficult to succeed. And, based on the penetration of warehouse clubs in the United States, Caicco figures there is only room for about 14 more club stores in Canada, a total he expects will be split between Costco and Wal-Mart.

He predicts Sam's share of the Ontario discount food market could reach a maximum of 2.7% by 2006, or 0.7% of the total food market in the province.