Marketing in the News!!

Marketing Grocery Price Wars:

Here is an article from the Toronto Star (October 2, 2009) on Loblaw and Wal Mart and competing in the Grocery business:

  

Dana Flavelle

Business Reporter

Loblaw Cos. Ltd. is taking direct aim at Wal-Mart’s price claims in the Ontario market, saying the food prices in its Real Canadian Superstores are now on par with the world’s biggest discounter.

To drive home the point with consumers, starting Friday, the flyers for the Ontario Superstores will be advertising new prices on some 2,000 items, roughly 10 per cent of the food in Superstores.

The program, called “rounding down,” takes those prices down to the nearest dollar, or in some cases down several dollars, Loblaw’s chief operating officer Dalton Philips said in an interview yesterday.

“It’s a very aggressive price campaign,” Philips said.

“We’re going head-to-head with Wal-Mart.”

Wal-Mart countered later in the day, saying it stands by its commitment to provide “unbeatable prices” on a basket of goods.

“Anybody can at any given point in time lower the price on a specific product, but our commitment is unbeatable prices on a whole basket,” Wal-Mart spokesperson Andrew Pelletier explained.

Wal-Mart Canada has been running its own price promotion campaign since early September, Pelletier noted, discounting both food and general merchandise items across the store to celebrate its 15th anniversary.

The move comes as glum economic news has more consumers shopping around for bargains, trading down to cheaper products and checking flyers for the best deals.

“The consumer has become very promiscuous,” Philips said, referring to the lack of customer loyalty to a particular store or brand.

The question is whether its Real Canadian Superstores in Ontario have been reaping any of those benefits.

Built to compete with Wal-Mart as the global giant entered Canada’s supermarket business three years ago, Loblaw’s Superstores contain food and general merchandise.

The Ontario stores are modelled on a format that had been highly successful for the company in western Canada for more than 25 years.

But the concept hasn’t translated well. Indeed, one of Galen Weston’s first decisions after taking the helm at Loblaw in September 2006 was to stop building more Superstores in Ontario until the company got the format right.

(It has since opened one in Milton and one in Peterborough, but they were both already in the pipeline.)

There’s a total of 37 now in Ontario.

Meanwhile, Wal-Mart has opened 42 combined food and general merchandise “supercentres” in Ontario and has plans to open or expand another 25 to 30 existing stores across the country this year.

Weston also acknowledged one of the company’s problems was that consumers perceived its stores to be more expensive than rivals, whether it was a Loblaw store competing with Sobeys, or a No Frills up against Food Basics.

The company has since invested millions in lowering prices, first in discount stores and then in its conventional stores.

Now, it’s tackling the Superstores in Ontario.

The big behemoths present a particularly difficult challenge in this market, analysts said. Unlike western Canada, where Loblaw didn’t operate any No Frills stores until recently, the Real Canadian Superstores were already the price leaders long before Wal-Mart entered the food business.

But in Ontario, the perception is No Frills is the price leader in food while Wal-Mart is ahead of the pack in general merchandise, leaving the Superstores without a strong image.

Pricing is just one of the areas Loblaw is addressing in the Superstores, Philips said.

The company is also adding more ethnic food and club packs to those stores in a bid to appeal to a wider customer base and help families shop on a budget, he said.

It’s also launching bulk bins, where customers can scoop up basic ingredients cheaply, as more consumers resort to cooking from scratch to cut costs, Philips explained.