Shoppers Drug Mart (SDM) is on the path of the bold and fearless. The merger with Loblaw Companies (Loblaw) creates the unchallenged food and health retail leader in Canada. It could also foreshadow a broader retail trend, if the merger can deliver against the perceived synergies. Management is clearly focused on the integration of the brands to ensure a 1 + 1 = 3 merger. Today, the merger plays out in-store with PC products adorning end-aisle displays in Shoppers and Life products featured in Loblaws. The big question is: What’s next? We’ve seen Amazon, Target, Costco and Walmart waltz up north and dramatically change the Canadian mass retail segment. Canadian Tire had to reimage itself as a result, and struggling retailers such as Zellers simply disappeared. Could a combined Loblaw and SDM – with the help of respective sub-brands Joe Fresh, President’s Choice and Life – fight back as the new Canadian super retailer? Large format SDM/Loblaw stores could certainly provide true one-stop shopping. But it’s the existing network of smaller, more urban SDM locations that would be this new super-brand’s true point of differentiation – for the simple reason that Canadian Tire, Target and Walmart do not fit easily into urban spaces. SDM/Loblaw could build thousands of smaller format stores in densely populated centres well before the competition finishes one hundred. The combined company’s ability to service the different needs of the urban and suburban customer, coupled with a new online offering, could defend against the U.S. intruders and redefine the retail landscape – here and abroad.
Percentage change based on 2012 valuation