Loblaws purchase of T&T Supermarket a landmark in Canadian retailing

The $225 million (Cdn) acquisition on Friday of 17-store T&T Supermarket by Canada’s largest grocer and retail giant Loblaw (Loblaw Companies Limited, TSX: L) was big news in Vancouver, T&T’s home base. It may have garnered but a glance elsewhere, yet this is a very significant retail event for a number of reasons.

It marks further validation of Chinese-Canadian entrepreneurship and business leaders. CEO Cindy Lee, her partners and team are to be commended for building a well-run business that not only stands alone as a chain in its niche, but is luring Caucasian ‘newbies’ through its doors in Vancouver, Toronto, Calgary and Edmonton. Loblaws acknowledges T&T as the leader in Canada in serving the various Asian markets. It is multi-cultural Asian, not strictly Chinese.

This move by Loblaw hopefully signals a next-level maturation by traditional Canadian retailers in approaching non-western ethnicities. While many chains have vocalized their interest in serving this fast-growing segment, few have done more than pay lip-service. Trite campaigns translating English copy or crass tactics focused on special offers in other languages have been the norm, while the businesses behind these have claimed they “get” these “cultures”. With this purchase, Loblaw implicitly is saying “we have not got it right yet, but T&T does”. Good move by Loblaw to acquire that expertise. No doubt the learning they experience through T&T will transfer to other banners as well.

T&T’s leadership was bound to erode. It’s competition in the Toronto market is already significant. Asian-Canadians are shopping Superstore and Walmart for household staples. US-Korean H-Mart is slowing moving into Canada. Ms. Lee once again showed terrific instinct in selling at a high point, and at a place where deeper expansion with require a faster approach. Retail is a dynamic industry, with Darwinian evolution a continuous reality. It would be difficult for T&T would retain its unique position in 5-10 years even if it remains in the founders’ control.

There are closer synergies than many realize: While Caucasians see T&T as very low-price, Asian shoppers have already begun to notice many T&T prices on comparable products moving closer to “mainstream” value-based grocery chains (like Loblaw’s Real Canadian Superstore and No Frills). Traditional Asian grocers are still able to undercut on a regular basis, but they do not provide the increasingly desired “Western” shopping experience in terms of clean, well-lit stores, great display and wide aisles.

Conversely, T&T’s big opportunity is the Caucasian shopper. With little outreach, they have been attracting the more adventurous. The ‘foreign’ experience both delights many, but also leaves them confused about the foods and ingredients, and how to gauge quality. T&T’s great instincts about the Asian market have not translated to the non-Asian. And there is a justified, continued fear that too much shift might alienate their core. Loblaw might well be the vehicle they need to jump the chasm to the “white” mainstream.  Perhaps with a well positioned T&T private label?

While T&T has been looking at ways to become a greener store, it has focused (as have many others) on the operational waste reductions that boost the bottom line.  However, Loblaw is a long-time leader on Sustainability, at deeper levels of action.  No doubt there will be sharing of its eco-approach with the T&T team.