Why Consider Canada? Part 2: Navigating Retailer Negotiations  1/5/2016

In Part 1 of this series about doing business in Canada, I gave an overview of the Canadian market, and the opportunities it presents due to its close proximity to the U.S., the volume of goods it imports, and the fact that five retailers represent about 85 percent of its grocery sales.

These retailers include Loblaws, Sobey’s, Metro, Costco Canada, and Walmart Canada, and in this column, we’re going to focus on these top five, and the best ways for U.S. suppliers to engage them.

Toronto-based Loblaws operates 15 banners across Canada, and represents about 32 percent of the Canadian grocery market. It also owns the Ace Bakery brand. Loblaws is all about innovation, particularly with private label. 

Bring them your best and better than your best, and you will get their attention. The retailer launches its private label products based on international trends before the national brands have even finished their research. Its President’s Choice is the benchmark for many US retailers in store brand innovation.

Sobey’s, based in New Brunswick, also operates multiple banners – with IGA being the largest -- and can also be found across the country. It purchased Safeway Canada in 2014, which helped to greatly increase its market share. 

Many suppliers consider Sobey’s their most well liked account – it’s a well-run, low profile company that employs respectful merchants looking for successful partnerships. Although the head office is in New Brunswick, there are several regional buying offices to accommodate local preferences. However, private label procurement is all handled in Toronto.

Metro is the third largest grocery retailer in Canada, and operates in only Ontario and Quebec under three banners: Metro, Super C and Food Basics. In 2014 it purchased a 75 percent share of Premiere Moisson Bakery – a move similar to Loblaws’ purchase of Ace Bakery. 

Metro is probably the toughest account with whom to negotiate because of steep slotting and inside program fees in relation to the retailer’s size. That said, they remain a powerful player in both the Quebec and Ontario marketplaces, which represents 60 percent of the Canadian market.

Costco Canada
Costco Canada has 89 warehouses across Canada with two buying offices, one for the Western Canadian Region in Burnaby, BC and one for the Eastern Canadian Region based in Ottawa, Ontario and which represents about 70 percent of total Costco Canada volume. As a side note, in Quebec, the loyalty of Costco members is almost cult-like.

Costco Canada is well respected retailer looking for innovation for its members – pretty much the same as its U.S. parent. The two buying offices operate independently to facilitate regional preferences. The Western office was originally the Price Club head office, a brand which Costco purchased in 1993. Its Kirkland private label products, however, are all negotiated in its corporate headquarters in Issaquah, Wash.

Walmart Canada
Walmart, which entered Canada in 1994 with the purchase of Woolco Stores, operates 294 supercenters and 102 discount stores across Canada and continues its expansion with Super Stores – both renovating existing stores and opening new locations. Its head office is based in Toronto.

Walmart Canada operates similarly to Walmart U.S., but there is a specific focus on growing its food category. Contrary to the success in the U.S. of Sam’s Club, Walmart Canada closed its six Sam’s Club stores in 2009. Although overall sales in 2015 were down almost 15 percent for the retailer, Walmart Canada managed to see sales growth in “a low growth economic environment,” with comparable sales driven by “strong performance” in food, health and wellness, home and toys, according to Canadian Grocer.

Stay tuned for Part 3 of the series, in which we’ll discuss getting your product on the shelf – labeling and exporting issues.

(This column was written with additional input from Andre Gelinas, CEO of RSVP Solutions Group)

Andrea Leiser

RSVP Solutions Group

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