Sobeys buys Canada Safeway chain

 Sobeys has a $5.8-billion deal to buy Canada Safeway.

It consolidates Sobeys number two position, behind Loblaws, in the supermarket industry, but it might also squeeze farm prices and profits.

Kevin Grier of the George Morris Centre says he expects this deal will spread price competition familiar in Ontario to Western Canada where Loblaws and Safeway and the Co-operative supermarket competitors have tended to tip-toe around each other.

“It has been a high-price region with grocers keeping their powder dry and not stirring each other up too much,” Grier told the Globe and Mail.

If Sobeys and Loblaws transplant their Ontario pricing strategies to Western Canada, it will bring some bargain prices for shoppers, but that also means the chains will be pressuring suppliers to lower their prices and they will push down on farmers who are a weaker link in the supply chain.

Sobeys will certainly use the increased buying volume it achieves with this deal to demand higher volume discounts and a range of discounts and allowances from suppliers.

Sobeys gets 213 stores in this deal, many of them in Winnipeg, Calgary, Edmonton and Vancouver, to add to the 1,300 stores it already either owns or franchises under banners such as IGA, Foodland and FreshCo.

Loblaws has sales of about $31 billion a year; the combination of Sobeys and Canada Safeway will be about $24 billion. Metro Inc. now becomes a distant third in Canadian market share.

Sobeys indicated it will sell Canada Safeway’s real estate to Crombie Real Estate Investment Trust for $1 billion, a company the Sobey family established to own Sobeys store properties.