Merger And Acquisition
1. Grocery Business and the Oshawa Group
The grocery business in Canada is a mature industry but is still very competitive. A few grocery giants account for more than half of the grocery market in Canada and are getting stronger and stronger. According to Market Share Report-2003 , the biggest grocery store was Loblaw Cos.Ltd., which had 35% of Canadian market shares. Sobeys Inc ranked in the second with 20%, followed by Canada Safeway 9%, Metro Inc 7%, A&P Canada 6%, and Overwaitea Food Group 4%. It is worthwhile mentioning that Sobeys has grown up to the second Canadian supermarket chain over only five years since 1996. It made up just 7% of market shares with ranking at sixth in 1996 . The competition for Canadian grocers is not only from local competitive but also from the south border. The greatest threat now faced by Canadian grocery stores is the possible expansion of Wal-Mart's supercentre.
The most popular strategies for Canadian grocery giants to lead in the category are price-cutting and store expansion. Since 1998, the two grocery giants have led the consolidation trend in Canada. Loblaw, an Ontario-based grocer, conquered into the Maritimes and Quebec and acquired Montreal-based Provigo, which was third market holder and controlled 40 per cent of the Quebec market . Sobeys was expanding from Atlantic Canada into Ontario and Quebec. In the meantime, independent small grocers couldn't compete against corporate colossuses because large supermarket chains had the ability to sell below cost, and could use profits from wholesaling to subsidize the continuous price wars they fired up.
The Oshawa Group Ltd was a food retail, wholesale and distribution company. In 1997, it was the second Canadian grocery chain with 16% of market shares. Its strategy in 1998 was to focus on its retail and foodservice business through merger with food related business and sell-off its non-core business like drug store operation and real estate. For...
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