Target targets the fresh food market
7:38 AM, E.T. | July 11, 2011
Grocers in Canada will soon have a savvy new competitor at their doorstep.
U.S. discounter Target Corp. (TGT-N) will carry some fresh food when it arrives in Canada in 2013 with as many as 150 stores, Tony Fisher, president of Target Canada, confirmed.
“Food, as it is in the U.S., will be a critical part of our assortment [of offerings],” Fisher said in an interview on Sunday before cheering on Target-sponsored drivers at the Honda Indy race in Toronto. “I can be confident we will have some of that fresh food.”
Target will not bring its huge SuperTarget stores to Canada, Fisher added. Those outlets have full supermarkets along with the chain’s conventional general merchandise aisles.
The advent of Target stocking an array of foods such as fresh vegetables and fruit will inevitably pinch incumbent grocers, which are already feeling stretched from heavy competition. Discount heavyweight Wal-Mart Canada Corp. already is racing to add full grocery sections to its Supercentre stores, while other retailers, such as Shoppers Drug Mart, are expanding their food offerings.
Until now, Target executives were unclear about whether they would carry fresh food. However, the Minneapolis-based retailer provided a signal that it would do so in late May when it gave Canadian journalists a tour of its so-called p-fresh format store in Chicago. The p-fresh outlets have an edited choice of fresh fruit and vegetables. On Sunday, Fisher finally gave a clear signal about Target’s food intentions in this country.
The grocery business in Canada is significant, worth $111.8 billion, or 38 percent of the $294.3 billion of non-automotive retail sales in 2010, according to Colliers International. By 2013, Target will be a big presence here following its $1.8-billion deal with Hudson’s Bay Co. earlier this year to buy leases of up to 220 Zellers stores and convert them to the Target name. The U.S. chain expects to ultimately roll out 200-plus outlets in Canada, hitting $6 billion in annual sales by 2017.
Fisher said the average store that Target is buying from Zellers is 100,000 square feet, smaller than the average 135,000-square-foot Target outlet in its U.S. home base. Nevertheless, Target is also looking for other sites to build new stores in Canada, which could be closer in size to the U.S. outlets, he added.
“Food will definitely be part of our assortment,” he said. “The breadth of our food assortment will vary by market … We’re not a grocer. We don’t try to be a grocer.” But perishable food will be part of the offering in Canada, he said.
Analysts have warned that Target’s food initiatives are bound to steal business away from Canadian rivals.
“The issue for Canadian supermarkets will be new food square-footage entering the playing field – any new square-footage is bad square-footage,” Perry Caicco, retail analyst at CIBC World Markets, said in a recent report. “Just as we saw with Wal-Mart’s Supercenters, the weaker competitors will suffer most. “
Fisher did not provide details of how Target will source its food in Canada. Analysts have suggested that the retailer will need to team up with a domestic grocer. Known as a destination for affordably stylish fashions and home goods, Target isn’t as well-recognized for its food.
Fisher, who is moving to Canada from the U.S. in two weeks with his family, said that Target will hire 100 staff for its new head office in Mississauga, Ont., by the end of 2011. He said 90 percent of the employees will be Canadian.