BUSINESS

Loblaws, Shoppers Drug Mart Plan Major Changes After Merger

05/02/2014 01:20 EDT | Updated 05/03/2014 03:59 EDT
CP

With the Loblaw Cos. purchase of Shoppers Drug Mart completed, Canada’s largest retailer has begun the process of integrating the two brands, and has announced changes it hopes will revolutionize its retail operations and allow it to thrive in a cutthroat competitive market.

Shoppers Drug Mart could soon start selling fresh food, Loblaw chairman Galen G. Weston said this week.

The pharmacy chain, which has already been selling non-perishable and refrigerated foods in some of its locations, will run a pilot project at six Toronto locations selling ready-to-go meals and fresh foods such as fruit, Canada.com reports.

At the same time, Loblaws is preparing to go toe-to-toe with retailers like Amazon and Walmart by launching an online food store, the Globe and Mail reports.

Amazon launched a Canadian online grocery store last fall, while Walmart has announced plans for 35 new supercentres across the country, which have a large grocery section on top of the household goods and clothing the retailer sells at other locations.

Loblaw says later this year it will launch a test website that will offer “click and collect” services. Shoppers will be able to order groceries online, then pick them up at a nearby Loblaws location — or a Shoppers Drug Mart location.

When the Loblaw buyout of Shoppers was announced last year, analysts said the supermarket chain would use Shoppers Drug Mart’s presence in city cores and small neighbourhoods to expand into areas where it can’t easily build large supermarkets.

The introduction of fresh foods to Shoppers locations and the use of Shoppers locations for the “click and collect” program suggest this is what Loblaws is now doing.

“You could imagine a product would get picked up in a Loblaw supermarket hub and brought to a Shoppers Drug Mart location,” Weston said.

“So instead of the Canadian consumer taking the 20-minute drive to one of our stores, they could take a five-minute drive, or perhaps even walk, to the Shoppers Drug Mart store to pick up a full extended assortment of groceries.”

Loblaw’s move comes as Canadian retailers struggle through a period of intense competition, spurred by the arrival Target and the aggressive expansion of retailers like Walmart and Amazon.

Loblaw saw a 40-per-cent decline in profit in its latest earnings report, released this week, but revenue was actually up 9.1 per cent.

“Looking ahead in our core grocery operations, we see very little relief from the intensely competitive environment in which we operate,” Loblaw Companies president Vicente Trius said.

Also on HuffPost

Loblaws To Buy Shoppers Drug Mart - Twitter Reacts