The Canadian government is seeking out discount grocers but so far seem to have had no success. The reasons are varied. One big one is that there are far more dominant grocers here and they have been found to price fix with help from suppliers such as bakeries. Dempsters was recently fined $50 million over this but it took 13 years of investigation and no further actions were contemplated. Another investigation into meat prices is underway but it is anyone's guess how long that takes. Likewise, there is an investigation about property being used to keep competitors out but if it takes a decade to decide, it doesn't encourage companies like Aldi who see the roadblocks.
Alternatively, Aldi has bought grocers in the United States including some big ones such as Winn-Dixie and Trader Joe's. In Canada, there are enormous food groups where there is very little in the way of sellers. It is quite possible that a company like Aldi might make an offer on a group like Giant Tiger. However, they are not going to come to Canada if they feel the fix is in. Everyone is well aware of the fiasco of Target. Most of the other food ownership groups are massive. Even the Save on Foods group in the west is buying U.S. grocers so there are no easy entries for newcomers.
Corporate concentration has always been a problem in Canada but the Sobeys takeover of Safeway often left two stores of the same company across the street from one another. Not much competition if both have the same advertised sales. While some stores were forced to be sold, there were no price leaders. For example, Red River Co-Op that purchased some stores does not lead as a price leader on gas or groceries. It hopes that cash dividend is enough to attract shoppers but the starting price point can be high. Save on Foods moved into the Winnipeg area and while they offer different grocery experiences, the price point is a higher one than say Superstore or Walmart.
Some Safeways and Sobeys have become franchises of Freshco. They have owners but are part of the supply chain of Safeway/Sobeys. They can be cheaper and offer some local selection but there are not enough of them and they still remain part of large food group organizations. Likewise, No Frills are too few to really make a difference and are part of the Loblaw's/Superstore food organization. Local ownership of these stores does not make them similar to a true discount store with their own supply chain.
We actually have some locally owned stores in Winnipeg such as Foodfare and Family Foods. They fulfill important roles in having stores where others don't have them such downtowns or smaller stores than the typical Safeway and the like. Specialty stores and ethnic stores are also important in having different supply chains from Africa, Asia and Europe. Most of the small stores are simply not located where a discount store like Aldi needs them.
Aldi likes to be where the other stores are. They are not afraid of Walmart, Costco or any other grocer. They are 15% less than those grocery stores. Ideally for Aldi, they would be able to get a place in the big box store malls close other grocery retailers. The problem is as has been described by those who follow this is that big grocery groups in Canada take holding positions in real estate for these big malls and ensure that no other competitor can come to that mall. That is inherently anti-competitive and is being looked at as something that has to be remedied. But how long that takes is anyone's guess. In the U.S. I suspect the Justice and Commerce department's would be engaging anti-trust right away.
Aldi started in 1961 in Germany and actually is two different companies from two brothers who operate under same name with slightly different logos. They first opened in the U.S. in 1976 in Iowa and have been flying below the radar until recently. They are opening hundreds of stores a year in the U.S. now and have reached 2,000 stores. A typical Aldi carries mostly it's own brands. They are about 18,000 square feet and carry around 1,600 products but no fresh meat, bread of cheese. Other grocery competitors are 35,000 square feet or bigger and have 40,000 products.
Aldi does have a world rival modelled after itself and now larger world-wide. It is Lidl, also of Germany. They are rapidly expanding in the U.S. but will have a long way to go to catch up. They have as wide a reach all over the world as Aldi. Alas, Canada is not on their horizon. With a population of 41 million and growing, Canada is not a tiny market nor a mature one. There is room for a discount grocer.
Aldi started in a small state. Perhaps it is time they looked at a small province and got things started in Winnipeg.
No comments:
Post a Comment