Loblaw attracting shoppers with fresh foods and smaller format stores

Canadian grocery shoppers are not just looking for the lowest prices, they are looking for quality fresh food. To meet this growing trend, Loblaw is spending more on produce and opening smaller stores with better goods.

After the release of the company's quarterly results, Galen Weston, executive chairman and president of Loblaw, Canada's largest supermarket chain, said fresh produce and healthier options are leading purchasing decisions, reported CBC News.

"Early indications across the board suggest that when we put the right proposition in front of the customer, price is not the biggest determinant of what they choose to buy," Weston said.

Increased payment for quality produce is trending in all of the company's banners, including its discount chain, No Frills.

Loblaw has seen increasing competition in the industry as U.S. chains Target (NYSE:TGT), Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) enter into the Canadian market. Other domestic supermarket giants in Canada have added or expanded stores to compete. For instance, Sobeys bought Safeway Canada for $5.8 billion and Loblaw began the process of acquiring Shoppers Drug Mart. The deal is still underway as a number of locations need to be sold in order to get approval from The Competition Bureau.

Loblaw reported a $456 million loss in the last quarter, compared with a $177 million profit in the same quarter in 2013. But aside from the financial adjustments required by the Shoppers acquisition and other one-time buys, the company earned $301 million.

Loblaw will continue to reduce the square footage at its Real Canadian Superstores and open smaller locations with higher prices and better products. The company currently operates 19 stores that fit the new mold, and plans are underway to open about 50 more.

The idea to move to smaller, city-centered stores has even taken off this year in the United States. Just this week Target opened its first Express store, the retailer's first test run of a smaller store with an urban focus, and Walmart continues to grow its network of smaller formats as well, namely through the Neighborhood Market stores that launched in 2008.

For more:
-See this CBC News article

Related stories:
Ikea opens first city-center storefront
First TargetExpress opens in Minnesota
50% of shoppers shop more than one outlet
Conventional grocers are losing market share fast
Kroger creates '21st Century' digitized store