Canadian grocers expand online services after Amazon acquires Whole Foods chain

A Metro grocery store is seen in Montreal on Tuesday, Jan. 31, 2012. (Paul Chiasson / THE CANADIAN PRESS)

VANCOUVER -- Metro Inc. is looking to expand its online grocery offerings to Ontario next year, making it the latest Canadian retailer to ramp up its e-commerce options in the face of potential competition from Amazon.

Metro CEO Eric La Fleche said Wednesday the grocer already offers "click and collect" in seven stores in Quebec and home delivery service in Greater Montreal, Quebec City and Gatineau, Que., covering 60 per cent of the population of Quebec.

"We are pleased with the way we have set it up so far and we're going to start the same way in Ontario," La Fleche said on a conference call to discuss the company's latest financial results.

Canadian grocers have been increasing their e-commerce offerings following Amazon's acquisition of Whole Foods which sparked speculation about its ambitions to grow food delivery in Canada.

"We've seen lots of companies start to say, 'OK, let's test the waters,"' said Michael von Massow, an associate professor at the University of Guelph's food, agriculture and resource economics department.

La Fleche said Metro's plan is to launch its online grocery business in Ontario late in the company's 2018 financial year, which began Oct. 1, or early in its 2019 financial year.

The move followed an announcement last week by Loblaw Companies Ltd. (TSX:L) which has partnered with Instacart to launch home delivery in Toronto starting Dec. 6 and Vancouver starting in January. The grocery chain has promised to expand the service next year as well as its click and collect option which is already offered at nearly 200 stores.

Walmart will also grow its home delivery service to cover the Greater Toronto Area and nearby markets, said spokesman Alex Roberton in an email, adding pick-up services will be expanded to Montreal-area stores.

Canadians have been slower than their American or European counterparts to adopt online shopping, including for food. In August, online sales accounted for 2.3 per cent of total retail trade in the country, according to Statistic Canada's most recent figures.

Von Massow reasoned the low demand indicated it didn't make sense for Canadian grocers to offer the service. Loblaw previously said it had no plans to begin home delivery services due to lack of customer demand.

However, things changed when Amazon acquired Whole Foods, including its 13 Canadian locations, in August. Additional competition has also emerged from an abundance of meal kit services, like Chef's Plate, which send packages filled with recipes and ingredients to consumers, who then cook the meals at home.

There's also a benefit to being the first retailer a customer shops online with, von Massow said, because it's unlikely a customer will switch grocers after becoming comfortable with a store's online platform.

However, online sales remain a small component of the grocery business in Canada, at least for now.

Loblaw CEO Galen G. Weston called it "a premium service" targeting a niche clientele, while Metro CEO Eric La Fleche acknowledged e-commerce is showing good growth, but "is still small, in relative terms, for the company."

Von Massow said it's unlikely to lead to the end of physical grocery stores in the near future.

"We're getting a little bit of traction and we will see a little bit of growth," he said, "and maybe having ... both increased and improved options might accelerate that a little bit."

Metro's announcement came as it reported a fourth-quarter profit of $154.9 million or 66 cents per diluted share, up from $145.0 million or 60 cents per diluted share a year ago.

Sales in the quarter ended Sept. 30, which included an extra week compared with a year ago, totalled $3.23 billion, up from $2.93 billion, while same store sales gained 0.4 per cent.

Excluding the extra week and $2.5 million before taxes related to its acquisition of Quebec-based pharmacy chain Jean Coutu Group Inc. and the modernization of its distribution network in Toronto, Metro says its earnings would have been similar to last year, while diluted net earnings per share would have been up 1.7 per cent.