H.Y. Louie is entering into a supply agreement with Overwaitea Food Group.
The deal, announced on Friday, will see Overwaitea supply grocery items to H.Y. Louie’s IGA franchise and corporate stores and Fresh Street Market stores in B.C.
In total, Overwaitea will supply grocery products to 30 of H.Y. Louie’s stores.
The agreement takes effect this July.
According to an internal email obtained by Canadian Grocer, H.Y. Louie will close all warehousing and distribution operations.
Mark McCurdy, general manager of marketing and brand development at H.Y. Louie, said the company has decided to move away from the wholesale business to concentrate on its retail operations.
H.Y. Louie used to operate three shifts per day at its wholesale division. That fell to two shifts per day, said McCurdy, and recently dropped to one.
“It’s been in talks for a while, and these things don’t come lightly for anyone,” McCurdy told Canadian Grocer. “We were looking at trying to find a way of moving off the wholesale business and the opportunity with OFG came up.”
Overwaitea recently opened a third-party warehouse near Edmonton, which means the company is “well-positioned to support [this deal] and future growth opportunities,” said Darrell Jones, president of Overwaitea.
Part of the reason for H.Y. Louie’s decision is due to the success of its Fresh Street Market banner, which launched in early 2013. H.Y Louie will continue to supply its stores with fresh options, while Overwaitea will supply all dry grocery products.
McCurdy says the mix in these stores is sill about 60% fresh and 40% dry groceries.
H.Y. Louie’s stores will not stock Overwaitea’s Western Family private label line. There has been no discussion for Overwaitea to supply H.Y. Louie’s sister company, London Drugs stores.
Two weeks ago H.Y. Louie announced it had sold three of its MarketPlace IGA stores in B.C.’s Lower Mainland to Overwaitea, which will turn the outlets into Save-On-Foods stores.
Last January, Overwaitea became the exclusive supplier for all of Alberta-based Freson Bros. 15 stores.