In Canadian retail, Metro and Pharmacie Jean Coutu are friends who swear they are only friends, while everyone else around them is saying, “You two should get married.” Well, it is finally happening. The familiar rationale is out there: Loblaws has Shoppers and Metro needs to grow and diversify as well. Both companies are Quebec champions and voilà, its wedding bells.
Why do grocery chains want pharmacies? There are a couple of reasons:
- The pharmacy sector has been more profitable and faster growing than both the grocery and mass merchandise sectors for the past decade, and that trend will continue.
- Pharmacies are practically becoming grocery stores. Grocer’s value having vastly more outlets for their products, and want to grab a larger share of consumers’ spend.
What will happen now?
Metro will follow the path of Loblaws by enhancing and expanding the Jean Coutu stores, while adding more fresh products and Metro private label goods. Jean Coutu might even pop up in a few Metro stores throughout Ontario. However, retail today is more about customer information than just selling products. A big question in my mind is whether Metro will stick with Air Miles or launch its own program to learn more about its shoppers’ habits, controlling more of their data.
This sounds like a win-win for everybody, right? Sobeys, the loser in this story, is not even mentioned. The struggling chain is still suffering from the Safeway acquisition hangover, and is now two notches behind its biggest rivals with no significant pharmacy partner—and none left to buy—and no discount offering out west.
Grocery in Canada is about to get slammed ever more by e-commerce and home delivery, as well as the pending arrival of hard discounters like Aldi and Lidl, and Wal-Mart’s continuing expansion of its food offering. The clock is ticking for Sobeys to make a big move—the problem is that there are very few big moves left on the Canadian retail chess board
I’ll throw a crazy idea out there—merge with Canadian Tire Corp. Canadian Tire gets a grocery offering, enabling it to grab more shares of consumers’ wallets and the ability to transform its loyalty program from cash-back to modern customer analytics. The two of them can rationalize retail and supply chain space to drive more traffic and higher sales per square foot. Hey, why not go grocery shopping while you wait for your car to be fixed? Oh, and by the way, guess where Sobeys new CEO used to work? Now let the rumour mill take over…