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When Wal-Mart comes to Quebec

Wal-Mart officials are confident that the Quebec food market is ripe for its Supercentres, three of  which will open in the Montreal area this summer. But some retail analysts think the global discount giant will get a run for its money competing against established competitors in as mature and distinct a fresh-food market as la belle province.

The move is part of plans that Wal-Mart Canada announced in January to open 40 Supercentres across the country over the next year. Notably, the service will be introduced to Quebec and Manitoba, meaning that all provinces west of the Maritimes will have Supercentres just five years after the concept was first brought to Canada from the U.S.

Wal-Mart Canada to open 40 Supercentres across the country

According to Wal-Mart, three existing stores near the regional headquarters in Laval will be expanded to feature full-service supermarkets that sell meat and poultry, baked goods, delicatessen, frozen foods, dairy products and fresh seafood. The service will be gradually extended to all 54 Wal-Mart stores in the province, all of which already offer pantry sections, and 52 of which have freezers and fridges that offer milk and organic products. “It’s all very exciting, but we’re going one step at a time,” says Alex Roberton, Wal-Mart’s director of corporate affairs in Quebec.

That first step is to line up enough suppliers to meet the company’s global sustainability pledge of buying 30% of fresh foods locally, says Roberton. Quebec food manufacturers of all stripes and sizes responded to Wal-Mart’s public calls for submissions in January. Though many of those companies would be able to supply only a few stores, he believes they will enable Supercentres to meet the needs of Quebec food shoppers.

“Food in Quebec is central to social gatherings, which can last for hours,” Roberton notes. “So there may be different selections than in other Canadian markets, like different cuts of meat and types of coffee. The key, he added, “is to have high-quality produce at prices our customers expect.”

Some Quebec food analysts, however, wonder if and how the global discount giant can meet its offering goal of 30% made-in-Quebec fresh foods. “Everyone’s for the virtue of buying locally,” said Jean-Claude Dufour, a professor with the department of agricultural economy and food sciences at Université Laval and an expert on food distribution and retailing in Quebec. “But the question is, how much is Wal-Mart willing to pay for fresher and better made foods like we produce here?”

Dufour believes the company will have a tough time building a local supply network. Wal-Mart also faces homegrown competitors who know the Quebec market in and out and what Québécois food shoppers expect. Unlike every other province in Canada, where the majority of grocery store sales are controlled by chains, in Quebec more than 60% of the grocery business is through independents. These owneroperators are nimble and able to strike deals quickly with local suppliers.

Most also benefit from association with the bigger chains, who are hardly ignoring the new kid on the block. Metro, for example, is gearing up to fight the competition with tighter controls over transportation and warehousing–and a new loyalty program, Metro & Moi, that has signed up 900,000 members since last year.

The key is high-quality produce at prices our customers expect

Similarly, just three months after it launched a new Air Miles reward program with MasterCard and IGA, Sobeys Quebec is beginning construction of a half-million-square-foot automated distribution centre near Montreal that will service IGA stores across the province.

“We are doing everything we can to meet the competition and provide our retailers and their customers with the best food offering and distribution network in Quebec,” says Anne-Hélène Lavoie, Sobeys’ spokesperson in Quebec. Kevin Grier, senior analyst at the George Morris Centre, thinks Wal-Mart’s move into fresh food sales in Quebec won’t affect the industry there immediately. “Its actual presence in terms of grocery is not great right now, it’s all potential,” said Grier.

However, Wal-Mart’s expansion, at a time when U.S. giant Target is coming to Canada, bodes ill for food retailers. “Target is coming here for the same reason Wal-Mart did–for low-hanging fruit in the form of market share. The last few years everybody has kept their powder dry and made good margins. But I think the good times are over in Canadian grocery,” Grier says.

Either way, keep in mind that Wal-Mart gets counted out just about every time it enters a “different” market. Expect both sides to battle hard.

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