Loblaw entering health food market

Loblaw Companies Limited (TSX:L) is preparing to enter the fast-growing health food market with a smaller format store.
Nutshell Live Life Well is a series of 10,000-square-foot urban stores that will stock organic foods, and health and wellness products.
A Nutshell is slated to open on Toronto’s King Street this fall, while it appears Calgary and Montreal may also receive pilot stores.
According to the company’s Twitter feed, the stores will provide “fresh and natural convenient food choices as well as a pharmacy” and will have a coffee and juice bar and a “seminar space for connecting with health and wellness gurus in the community.”
Nutshell also opened a Facebook account in June, but the page currently has no content besides a Toronto address and phone number.
Loblaw’s move appears to be a pre-emptive strike against Austin, Texas-based natural food retailer, Whole Foods Market. Whole Foods recently announced it plans to open 40 Canadian stores, according to a story in Canadian Grocer.
Health food lucrative
Certainly, the health food space is a lucrative one. The Canadian Organic Trade Association reports that 2012 sales of certified organic food and non-alcoholic beverages reached $3 billion. The value of the market has tripled since 2006, outpacing all other agri-food sectors.
Interestingly enough, those statistics are part of a market and consumer analysis that will be released this fall and which was funded in part by Whole Foods and Loblaw Companies.
For the second quarter of 2013, Whole Foods reported a 13 per cent increase in sales to $3 billion. Whole Foods currently operates 349 stores, totalling 13.3 million sq. ft.
John Mackey, co-founder and co-chief executive officer of Whole Foods, said in a statement: “The demand for fresh, healthy foods continues to grow, and we are leading the way as America’s healthiest grocery store with close to seven million customers visiting our stores each week.”
Len Kubas, chairman of Toronto-based retail consultants KubasPrimedia, said with the food sector increasing in competitiveness and Wal-Mart and Target moving heavily into the supermarket business, Loblaw is looking for something to differentiate itself.
Kubas opines the health food space is a good one for Loblaw to move into.

The unfinished interior of the Nutshell Live Life Well space in Calgary
“A big, booming market”
“It’s a big, booming market. As people get better educated and have a little bit more disposable income and want some of the finer things, they’re looking for non-hormone beef, for example.
“This is the kind of thing that I think Nutshell will be delivering for people who want quality produce, quality meats, quality bread, and everything like that.”
Alex Arifuzzaman, a partner with the Toronto-based retail consultancy InterStratics, said the Nutshell concept allows Loblaw to move into smaller spaces, giving it a larger set of locations to choose from with less overall cost.
He pointed out that while traditional grocery stores run on tight margins, the health and wellness sector has higher margins. “I think the thinking is possibly you can get the same volume of profits out of a smaller box by having this higher margin type of entry into the market.”
News of Nutshell started leaking out just about the same time Loblaw announced its purchase of Shoppers Drug Mart for $12.4 billion in cash and stocks.
In the news release announcing that deal, which is subject to regulatory and shareholder approval, Loblaw noted: “This strategic union will enhance the companies’ competitive positioning in an evolving retail landscape . . .” and that it would create more and better choice for customers through “Shopper Drug Mart’s footprint in the important and growing small-urban store sector.”
Shoppers Drug Mart’s operations include 1,242 stores across Canada, while Loblaw operates more than 1,000 corporate and franchised stores across the country.
Arifuzzaman pointed out many of the Shoppers locations are close to existing Loblaw stores, which could make them redundant. He suggested Loblaw might roll some of the Shoppers stores into the Loblaw retail outlets and then use the leftover spaces for a Nutshell.
Kubas suggests that rather than replacing the existing Shoppers with Nutshells, they would benefit from having a small Nutshell within the store.
“I wouldn’t think of replacing a Shoppers Drug Mart,” Kubas said, “because they are conveniently located.”
Overall, Kubas said he didn’t see any downside to the concept.
“It represents a relatively small share of the total. I think what they (Loblaw) wants to do is position themselves, so they’re not caught flat-footed should this be a market that takes off once the economy starts improving.”



Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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