Wal-Mart Takes On Canadian Retailers
Our Toronto results show a similar pattern of disengagement from the problem.
There is a good chance Wal-Mart will be very successful in Canada. The results of the 14th iteration of the Produce Business Wal-Mart Pricing Report are in, and we leave the United States for the first time to visit a Wal-Mart Supercenter and its competitors in Toronto, ON, Canada.
Our findings: Despite generous warnings given by Wal-Mart’s roll-out across the United States, Canadian supermarkets are, mostly, making the same mistake their U.S. counterparts did.
Wal-Mart Supercenter vs 4 Chains
Price Comparison — Toronto, CA
July 2007 – Prices Available To The General Public
| STORE NAME | WALMART | A & P | BRUNO’S | |||
|---|---|---|---|---|---|---|
| Produce Item | How Priced |
Regular Price |
Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Granny Smith | Lb | $0.97 | $1.69 | 74.23% | $1.69 | 74.23% |
| Apples – Red Delicious | Lb | $0.97 | $1.69 | 74.23% | $1.69 | 74.23% |
| Asparagus | Each | $2.97 | $3.99 | 34.34% | $3.99 | 34.34% |
| Bananas – Yellow | Lb | $0.47 | $0.69 | 46.81% | $0.69 | 46.81% |
| Beans – Green | Lb | $1.47 | $2.49 | 69.39% | $2.99 | 103.40% |
| Blackberries – 5.6 oz Clam | Each | $2.97 | $4.99 | 68.01% | $3.99 | 34.34% |
| Bok Choy | Lb | $2.16 | $1.99 | -7.87% | $1.99 | -7.87% |
| Broccoli | Lb | $1.17 | $1.99 | 70.09% | $1.49 | 27.35% |
| Cabbage – Green | Each | $1.27 | $1.99 | 56.69% | $1.49 | 17.32% |
| Cantaloupe – Whole | Each | $2.47 | $2.99 | 21.05% | $2.67 | 8.10% |
| Carrots – Whole | Lb | $0.58 | $0.89 | 53.45% | $1.29 | 122.41% |
| Celery | Bunch | $1.47 | $1.99 | 35.37% | $1.99 | 35.37% |
| Cucumbers – English | Each | $1.07 | $1.49 | 39.25% | $1.99 | 85.98% |
| Cucumbers – Regular | Each | $0.57 | $0.99 | 73.68% | $0.99 | 73.68% |
| Dips – (296-350 ml) | Each | $2.47 | $3.49 | 41.30% | $3.49 | 41.30% |
| Dressings – (350-385 ml) | Each | $3.77 | $3.99 | 5.84% | $3.99 | 5.84% |
| Eggplant | Lb | $1.97 | $1.99 | 1.02% | $1.88 | -4.57% |
| Garlic | Each | $0.97 | $1.25 | 28.35% | $0.89 | -8.25% |
| Grapefruit – Red | Each | $0.44 | $1.39 | 215.91% | $0.75 | 69.32% |
| Grapes – Green Seedless | Lb | $2.97 | $3.99 | 34.34% | $2.99 | 0.67% |
| Grapes – Red Seedless | Lb | $1.47 | $2.99 | 103.40% | $1.99 | 35.37% |
| Green Onions | Bunch | $0.47 | $0.89 | 89.36% | $0.69 | 46.81% |
| Honeydew – Whole | Each | $2.97 | $3.99 | 34.34% | $3.99 | 34.34% |
| Kiwi | Each | $0.33 | $0.50 | 50.76% | $0.69 | 109.09% |
| Lettuce – Green Leaf | Each | $0.97 | $1.99 | 105.15% | $1.49 | 53.61% |
| Lettuce – Iceberg | Each | $0.97 | $1.69 | 74.23% | $1.49 | 53.61% |
| Lettuce – Romaine | Each | $0.97 | $1.69 | 74.23% | $1.69 | 74.23% |
| Mangos – Red Large | Each | $0.97 | $1.97 | 103.09% | $1.29 | 32.99% |
| Mushrooms – White Packaged | 8 oz | $1.47 | $2.49 | 69.39% | $2.29 | 55.78% |
| Onions – Red Bulk | Lb | $1.97 | $2.49 | 26.40% | $2.59 | 31.47% |
| Onions – Sweet Bulk | Lb | $1.97 | $1.99 | 1.02% | $1.89 | -4.06% |
| Pears – Bosc | Lb | $0.97 | $1.69 | 74.23% | $1.79 | 84.54% |
| Peppers – Bell Green | Lb | $1.77 | $2.49 | 40.68% | $2.99 | 68.93% |
| Pineapple | Each | $3.97 | $4.99 | 25.69% | $4.99 | 25.69% |
| Potatoes – Red Bulk | Lb | $1.27 | $1.29 | 1.57% | $1.49 | 17.32% |
| Potatoes – White Bulk | Lb | $1.27 | $1.49 | 17.32% | $1.59 | 25.20% |
| Salad – Caesar 10 oz Bag | 10 oz | $3.97 | $3.99 | 0.50% | $3.99 | 0.50% |
| Salad – Garden 1# Bag | Each | $2.97 | $2.99 | 0.67% | $1.99 | -33.00% |
| Squash – Zucchini | Lb | $2.97 | $1.99 | -33.00% | $1.59 | -46.46% |
| Tomatoes – Grape – Pint | Each | $2.97 | $3.99 | 34.34% | $3.99 | 34.34% |
| Tomatoes – Hothouse | Lb | $1.47 | $2.49 | 69.39% | $2.99 | 103.40% |
| Tomatoes – Roma/Plum | Lb | $1.27 | $1.99 | 56.69% | $2.99 | 135.43% |
| Turnips | Lb | $0.79 | $0.99 | 25.32% | $0.97 | 22.78% |
| Yams | Lb | $0.99 | $1.29 | 30.30% | $0.98 | -1.01% |
| MARKET BASKET | $74.35 | $100.30 | 34.91% | $95.36 | 28.25% | |
| STORE NAME | WALMART | LOBLAWS | SOBEYS | |||
|---|---|---|---|---|---|---|
| Produce Item | How Priced |
Regular Price |
Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Granny Smith | Lb | $0.97 | $1.29 | 32.99% | $1.99 | 105.15% |
| Apples – Red Delicious | Lb | $0.97 | $1.29 | 32.99% | $1.69 | 74.23% |
| Asparagus | Each | $2.97 | $2.99 | 0.67% | $3.99 | 34.34% |
| Bananas – Yellow | Lb | $0.47 | $0.59 | 25.53% | $0.59 | 25.53% |
| Beans – Green | Lb | $1.47 | $1.99 | 35.37% | $1.49 | 1.36% |
| Blackberries – 5.6 oz Clam | Each | $2.97 | $2.99 | 0.67% | $3.99 | 34.34% |
| Bok Choy | Lb | $2.16 | $0.79 | -63.43% | $1.29 | -40.28% |
| Broccoli | Lb | $1.17 | $1.69 | 44.44% | $1.29 | 10.26% |
| Cabbage – Green | Each | $1.27 | $1.99 | 56.69% | $1.79 | 40.94% |
| Cantaloupe – Whole | Each | $2.47 | $2.99 | 21.05% | $2.69 | 8.91% |
| Carrots – Whole | Lb | $0.58 | $0.69 | 18.97% | $0.99 | 70.69% |
| Celery | Bunch | $1.47 | $1.99 | 35.37% | $1.79 | 21.77% |
| Cucumbers – English | Each | $1.07 | $1.49 | 39.25% | $1.29 | 20.56% |
| Cucumbers – Regular | Each | $0.57 | $0.79 | 38.60% | $0.99 | 73.68% |
| Dips – (296-350 ml) | Each | $2.47 | $3.49 | 41.30% | $2.99 | 21.05% |
| Dressings – (350-385 ml) | Each | $3.77 | $3.99 | 5.84% | $3.49 | -7.43% |
| Eggplant | Lb | $1.97 | $1.89 | -4.06% | $2.99 | 51.78% |
| Garlic | Each | $0.97 | $0.99 | 2.06% | $1.49 | 53.61% |
| Grapefruit – Red | Each | $0.44 | $0.99 | 125.00% | $1.29 | 193.18% |
| Grapes – Green Seedless | Lb | $2.97 | $2.99 | 0.67% | $3.99 | 34.34% |
| Grapes – Red Seedless | Lb | $1.47 | $1.99 | 35.37% | $2.99 | 103.40% |
| Green Onions | Bunch | $0.47 | $0.59 | 25.53% | $0.99 | 110.64% |
| Honeydew – Whole | Each | $2.97 | $2.99 | 0.67% | $5.99 | 101.68% |
| Kiwi | Each | $0.33 | $0.33 | 0.00% | $0.39 | 18.18% |
| Lettuce – Green Leaf | Each | $0.97 | $1.29 | 32.99% | $1.29 | 32.99% |
| Lettuce – Iceberg | Each | $0.97 | $2.49 | 156.70% | $1.69 | 74.23% |
| Lettuce – Romaine | Each | $0.97 | $1.29 | 32.99% | $1.49 | 53.61% |
| Mangos – Red Large | Each | $0.97 | $1.29 | 32.99% | $0.99 | 2.06% |
| Mushrooms – White Packaged | 8 oz | $1.47 | $2.29 | 55.78% | $1.49 | 1.36% |
| Onions – Red Bulk | Lb | $1.97 | $2.49 | 26.40% | $2.49 | 26.40% |
| Onions – Sweet Bulk | Lb | $1.97 | $1.99 | 1.02% | $1.49 | -24.37% |
| Pears – Bosc | Lb | $0.97 | $1.29 | 32.99% | $1.79 | 84.54% |
| Peppers – Bell Green | Lb | $1.77 | $2.49 | 40.68% | $2.99 | 68.93% |
| Pineapple | Each | $3.97 | $4.99 | 25.69% | $4.99 | 25.69% |
| Potatoes – Red Bulk | Lb | $1.27 | $1.49 | 17.32% | $1.29 | 1.57% |
| Potatoes – White Bulk | Lb | $1.27 | $1.49 | 17.32% | $1.79 | 40.94% |
| Salad – Caesar 10 oz Bag | 10 oz | $3.97 | $2.99 | -24.69% | $3.79 | -4.53% |
| Salad – Garden 1# Bag | Each | $2.97 | $1.99 | -33.00% | $1.99 | -33.00% |
| Squash – Zucchini | Lb | $2.97 | $1.49 | -49.83% | $1.49 | -49.83% |
| Tomatoes – Grape – Pint | Each | $2.97 | $2.99 | 0.67% | $3.99 | 34.34% |
| Tomatoes – Hothouse | Lb | $1.47 | $1.99 | 35.37% | $1.49 | 1.36% |
| Tomatoes – Roma/Plum | Lb | $1.27 | $1.69 | 33.07% | $1.79 | 40.94% |
| Turnips | Lb | $0.79 | $0.69 | -12.66% | $0.79 | 0.00% |
| Yams | Lb | $0.99 | $1.29 | 30.30% | $0.99 | 0.00% |
| MARKET BASKET | $74.35 | $83.80 | 12.71% | $92.56 | 24.49% | |
They are allowing Wal-Mart to establish a reputation as the low-price leader on fresh produce. There are exceptions, of course, but in general, the practice in the United States when Wal-Mart came to town could best be described as “Do nothing until forced to” — certainly on price.
Consumers would visit the Wal-Mart Supercenter and note significantly lower prices. Perhaps the consumers wouldn’t shop there regularly — Wal-Mart might have been too far from their home or inconvenient to their office. But with each visit, consumers would notice value.
The dynamic was well established. Wal-Mart would open one or two Supercenters in a town. With only a few stores, Wal-Mart was not yet a major competitive threat.
This is similar to the situation in Canada where, after all, Wal-Mart only has seven Supercenters. If a chain lowered its price points in all its stores to be within shooting distance of Wal-Mart, it would cost the chain a fortune. So in market after market, local retailers did not go after Wal-Mart in pricing and went for the short-term money by continuing to offer their customary line of higher-priced produce.
In the meantime, consumers would visit the Wal-Mart Supercenter and note significantly lower prices. Perhaps the consumers wouldn’t shop there regularly — Wal-Mart might have been too far from their home or inconvenient to their office. But with each visit, consumers would notice value.
In time, Wal-Mart built more Supercenters. And by that time, the consumers had become predisposed to the notion that Wal-Mart offered good value on fresh produce.
At that point there was always a mad dash to get competitive — but it was usually too late. Only the biggest, strongest chains with the capital to reorganize and reformat generally survived.
Loblaws Comes Closest To Wal-Mart Pricing
Our Toronto results show a similar pattern of disengagement from the problem: All the dollar figures, of course, are in Canadian dollars.
Our experience has been that in many cases it is not necessary to beat Wal-Mart on pricing. Obviously, many other things matter, but 5 percent is one thing, 10 percent might be possible,but at 34.9 percent, A&P will not be competitive for the great middle class.
But it is the percentages that are striking. Metro bought A&P’s Canadian division and seems to feel no compunction to be competitive.
With a price level almost 35 percent higher than the Wal-Mart Supercenter, it is simply not in the ballpark. In fact, A&P was the second most expensive supermarket we have ever studied compared to Wal-Mart. Only a Winn-Dixie beat it out — and that chain promptly filed for Chapter 11 protection.
How They Stack Up Against Wal-Mart Supercenter
| Region | Store | % Over Wal-Mart | Store | % Over Wal-Mart | Store | % Over Wal-Mart |
|---|---|---|---|---|---|---|
| Connecticut | Super Stop & Shop | 23% | Shaws | 34% | Big Y | 36% |
| Salt Lake City, UT | Harmon’s | 2% | Smith’s | 6% | Albertson’s | 12% |
| South Florida | Super Target | 22% | Publix | 31% | Winn-Dixie | 52% |
| Dallas, TX | Albertson’s | 23% | Brookshires | 7% | Kroger | 19% |
| Neighborhood Market | -1.2% | Tom Thumb | 27% | |||
| Portland, OR | Albertson’s | 30% | Fred Meyer | 22% | Haggen | 27% |
| Safeway | 37% | |||||
| Phoenix, AZ | Albertson’s | 22% | Bashas’ | 25% | Fry’s | 15% |
| Safeway | 17% | |||||
| Palm Springs, CA | Albertson’s | 19% | Jensen’s | 60% | Ralphs | 16% |
| Vons | 20% | |||||
| Detroit, MI | A&P Food Basic | -17% | Farmer Jack | 24% | Kroger | 28% |
| Meijer | 3% | |||||
| St. Louis, MO | Dierbergs | 22% | Schnucks | 14% | ||
| Houston, TX | HEB | 15% | Kroger | 30% | Fiesta Mart | -0.3% |
| Atlanta, GA | Harry’s | 18% | Ingles | 16% | Kroger | 25% |
| Publix | 13% | Target | 3% | |||
| Denver, CO | Albertsons | 16% | King Sooper | 21% | Safeway | 25% |
| Portland, OR | Albertsons | 32% | Fred Meyer | 21% | QFC | 54% |
| Safeway | 30% | |||||
| Toronto, Canada | A&P | 35% | Bruno’s | 28% | Loblaws | 13% |
| Sobeys | 45% |
Our experience has been that in many cases it is not necessary to beat Wal-Mart on pricing. Obviously, many other things matter, but 5 percent is one thing, 10 percent might be possible, but at 34.9 percent, A&P will not be competitive for the great middle class.
Neither will Bruno’s nor Sobeys, coming in at 28.25 percent and 24.49 percent over Wal-Mart, respectively. It is hard to understand how these chains can just be indifferent to their consumers, who must start to perceive these chains as high priced.
Only Loblaws has a shot — coming in at 12.71 percent over Wal-Mart’s prices, Loblaws is at least approaching a range where superiority in service, convenience, assortment and other factors can compensate for higher prices — although Loblaws should aim to get the differential below 10 percent.
Of course, many retailers successfully co-exist with Wal-Mart. Like Whole Foods, they don’t so much compete with Wal-Mart as get out of its way.
But the numbers don’t lie. If Canadian supermarkets don’t respond more aggressively to remain competitive with Wal-Mart, there will soon be not seven Supercenters but 300.
Forewarned is forearmed.