Metro prepares to face stiff competition

In the context of the Canadian retail trade, the Metro grocery store (TSE: MRU) acknowledges the strong pressure from the market and from its competitors.

Indeed, important challenges such as new rivals and the minimum wage increase are important issues ahead. According to Éric La Flèche, Metro’s CEO, these challenges exert “constant pressure on [their] business model”. In fact, the minimum wage has risen to $CAN 14 in Ontario since the beginning of the year, forcing them to offset this cost increase by increasing the selling price of food. In addition, new competitors such as Amazon-Whole Foods and the European company Aldi and Lidl may gain market share in Canada.

Therefore, Metro needs to elaborate a solid and competitive growth plan in order to deal with these threats. On May 11, Metro acquired Jean Coutu for $CAN 4.5G with the main goal of diversifying the offer to consumers. Indeed, it is possible to observe the increase of Jean Coutu’s food sale and health-beauty products sale at Metro, or the expansion of the private label offering in both networks. In addition, in order to acquire a deeper understanding of their customer base and especially their regular customers, Metro has set up the Metro and me program, and will soonly implement the partnership with Jean Coutu’s Air Miles.

In short, with these impressive changes within the firm, it will be interesting to closely monitor its  performance in the following month. The new competitors will most probably strategically choose to conquer the American market before investing in Canada, because of the much larger market. As a result, Metro will have time to prepare its strategy for their arrival. It remains to be seen if Metro will succeed in continuing their expansion despite those big challenges.

Bibliography

Le Devoir. (August 16, 2018 La guerre tarifaire touchera les paniers d’épicerie, prévient Metro.  [Online]. Available https://www.ledevoir.com/economie/534587/alimentation-la-guerre-tarifaire-touchera-les-paniers-d-epicerie-previent-metro

Les Affaires. (August 10, 2018). Pharmaprix se lance dans la vente de fruits et
légumes [Online]. Available https://www.lesaffaires.com/secteurs-d-activite/commerce-de-detail/pharmaprix-vendra-des-produits-frais/604253

Les Affaires. (May 14, 2018). «On se fait attaquer de tous côtés», indique le
PDG de Metro.  [Online]. Available : https://www.lesaffaires.com/bourse/analyses-de-titres/on-se-fait-attaquer-de-tous-bords-tous-cotes-eric-la-fleche-pdg-de-metro/602674

Les Affaires. (August 16, 2018). À surveiller: Metro, BRP, Canopy.  [Online].
Available https://www.lesaffaires.com/bourse/analyses-de-titres/a-surveiller-metro-brp-canopy-/604339

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