Price competition still strong: Metro CEO

• Several years of above-average grocery square footage growth has finally abated in Metro Inc.’ s key markets of Ontario and Quebec, but stiff competition from the likes of Loblaw and Walmart means the supermarket is still locked into a pricing war with its rivals.

The level of merchandise sold on promotion continues to be high, even though food price inflation has helped grow sales, chief executive Eric La Flèche told an analysts’ day for Canada’s third-largest grocery chain.

“Although some prices are going up, the fact that promotions are also going up is having an impact — to hold inflation lower than the CPI numbers that you tend to see,” La Flèche said. He added Metro’s management predicts inflation will begin to decelerate this year. In the second quarter, Metro reported a 15.2 per cent rise in net profit, the Montreal-based company said last month. Same-store sales, an important measure tallying volume at stores open for more than a year, rose 4.5 per cent.

A surge of food square-footage growth occurred in the early part of this decade as grocers preparing for Target’s entry and the rollout of the mass merchant itself — an average rise in Ontario of 2.3 per cent per year between 2010 and 2014 and two per cent in Quebec during the same period, Metro noted. This year, industry square footage is up just 0.8 per cent in Ontario and 1.2 per cent in Quebec.

Loblaw Cos. Ltd. also reported stronger sales in its most recent quarter due in part to inflation, particularly in its fresh food business. Grocery chains are allocating more space to fresh and less to packaged goods, CIBC analyst Perry Caicco said in a recent report, reflecting a shift in consumer tastes to healthier eating and higher margin, higher-ticket goods.

With all grocers pursuing a fresh-food agenda, Carmen Fortino, senior vice-president of Metro in Ontario, said the retailer is able to stand out by figuring out how to be the freshest.

For example, packaged Dole salad has an average of nine days’ life. At grocers without a quick turnaround, it can take one or two days to get the salad from the supplier to the grocer’s warehouse.

“If you don’t have good flowthrough, it will sit around for a couple of days (in the warehouse) to get to the store and take a couple of days to get on the shelf, and then you will be ready to reduce it, because it has only got a couple of days of life left,” Fortino said.

Metro chose to work with vendors of highly perishable items such as juice, yogurt and produce to speed up the process, giving fresh goods an optimum shelf life.

“There are things that we can do to leverage our system so that we are feeding our stores properly and we are getting (fresh food) on to the shelf so that customers can put it in their buggy as quickly as possible. We are not creating stock in a backroom fridge.”