In what is probably the highest profile merger in Canadian retail history, grocery giant Loblaw Cos. Ltd. has announced it will be taking over drugstore giant Shoppers Drug Mart Corp. The $12.4-billion acquisition will create the first real competition for big box U.S. retailers like Walmart, Costco and Target. Both stores will retain their current image, but this mega-merger means there will be some changes coming to these familiar retailers. Here’s what customers can expect.
The biggest and most obvious change will be Shoppers Life Brand products will be sold on Loblaw's shelves, and Loblaw's President's Choice products will be available at Shoppers Drug Marts across Canada. As well, Loblaw will add Shoppers Drug Mart stores to its more than 1200 locations across Canada. This includes retailers Loblaws, No Frills, Fortino’s, Valumart, Atlantic Superstore and T&T Supermarket.
Loblaw and Shoppers Drug Mart stores have popular loyalty programs. By all accounts the PC Points and Shoppers Optimum cards will remain the same and the merger should not affect collectors. But what the merger will mean is the company will have greater access to data detailing spending habits of its customers and be able to target marketing more effectively. By using information gathered from both cards they will know more of what each customer wants and that is invaluable to a retailer.
Often during a merger the company being acquired often sees an uptick in its stock price. In this case Shoppers Drug Mart shares rose by more than 24% on the news it would be taken over by Loblaw. As an added bonus investors liked the deal, which sent Loblaw's stock up more than 5% the day the deal was announced. The reaction is this merger is good for business, and anyone holding the stock of these two companies can celebrate some big gains.
The immediate message is that this merger will be good for consumers and their pocket books. By combining these two colossal retailers, they can offer better deals to shoppers and deeper discounts. That is why Walmart is able to keep its prices so low; it purchases products in high volume at the lowest price.
Since the push of big box American stores in Canada there has been a concerted effort by Canadians businesses to join forces to create more competition and keep market share. In June, Sobeys Inc. reached a deal to buy more than 200 Safeway stores for a more than $5 billion. This latest merger of Loblaw and Shoppers could encourage other large Canadian retailer to look at ways of growing their business through market share.
What do you think of the Loblaw / Shoppers merger? Are you happy to see two of Canada's largest retailers join forces? Let us know!