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Posted Aug 30, 2006, 6:49 AM
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Join Date: Jun 2006
Location: Coquitlam
Posts: 40,137
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Quote:
Wal-Mart's next battlefield
For more than a year, Wal-Mart has been trying to get into Port Elgin, a burgeoning Ontario town on the shores of Lake Huron.
The world's biggest retailer likes the spot and the wider community of Saugeen Shores, with its population of about 12,500 — 7,000 in Port Elgin alone and up to 40,000 in summer when cottagers settle in. The local market is well-heeled, and its numbers are forecast to jump by about 55 per cent over the next two decades. The nearby Bruce Power nuclear station is being revived, attracting hundreds of workers and boosting demand for housing and retailing in the area.
Best of all, fast-growing Port Elgin is home to only one supermarket, a Your Independent Grocer owned by Loblaw Cos. Ltd.
But for Wal-Mart and its Canadian real estate partner, SmartCentres, that's just where the challenge begins: Loblaw is opposing SmartCentres' rezoning application, joining a number of local groups to run its rival out of town.
The company may not be able to keep Wal-Mart out of Port Elgin forever, but it seems to know that in the competitive retail market, a battle delayed is a battle not lost.
“The longer the delay, the more the benefits,” says Dennis Wood, a lawyer for SmartCentres.
Welcome to the front lines of Canada's testiest retail war, where Wal-Mart, Loblaw and Zellers are duking it out over small communities and growing suburbs. But instead of using price cuts and two-for-one coupons, they're attacking each other with phalanxes of lawyers, planners and consultants.
In a handful of towns across Canada, Wal-Mart's latest ambitious expansion plans — especially to add grocery aisles — have met opposition from the entrenched players who say there isn't room for more.
“Everyone is trying to protect their turf, which is a natural thing to do,” says John Gray, Mayor of Oshawa, Ont. where a proposed Wal-Mart expansion is under attack. “If you're in a good competitive position, why undermine it by letting somebody else come in?”
For Loblaw, the stakes are especially high. It is racing to recover from its faltering expansion into non-food offerings in its bid to take on Wal-Mart.
But Loblaw spokesman Geoffrey Wilson says the grocer doesn't object just for the sake of objecting. Rather, it objects to a rezoning application in markets where it operates if it believes there aren't enough sales opportunities for “supermarket-type merchandise,” he says. Or it objects if there is no food retailing study accompanying an application.
“We will do that as a matter of course to protect our business,” he says.
Andrew Pelletier, a Wal-Mart Canada Corp. spokesman, disagrees: “We find it very unfortunate that they would resort to these tactics to try to maintain what amounts to monopolies in these markets. They're ultimately trying to limit competition.”
In small-town Port Elgin, local politicians can't get enough of this sort of attention. They're keen to attract more retailers, and new tax revenues. Townspeople already drive 45 minutes to shop at Wal-Mart stores in nearby towns, says Mayor Mark Kraemer of Saugeen Shores. While away, the residents are patronizing other businesses too. “We need the dollars retained in our community,” he says.
Such logic helped catch the eye of SmartCentres, which was formerly named First Pro and has been a close ally of Wal-Mart's since the U.S. giant arrived in Canada 12 years ago. Sobeys Inc. also sees the opportunities, with plans for its own supermarket in Port Elgin.
Joshua Kaufman, director of land development at SmartCentres, spent months in early 2005 studying the Port Elgin market. He drove around town, browsed its stores and chatted with local townspeople. He spoke with municipal engineers, planning officials and the local Chamber of Commerce representative. He observed people's driving and shopping habits.
He made the inquiries using his own name, not that of SmartCentres, because he didn't want to attract attention. SmartCentres is so closely identified with Wal-Mart that just using the corporate name could raise the bidding price of a property. “We didn't know who Mr. Kaufman was and who he was representing,” says Ron Brown, Saugeen Shores's chief administrative officer. “That's quite common. He said he was interested in a big retail development . . . But we did the research. We assumed it was Wal-Mart.”
By April of that year, Mr. Kaufman sealed a deal for a parcel of land on Highway 21 at the south end of Port Elgin, at one of its entry points. Then he focused on getting closer to the community. He contacted town councillors and the mayor. He joined the Chamber of Commerce.
On Dec. 5, the developer submitted its formal application for a zoning change to allow for a larger retail space than was permitted on the site. The application was supported by five SmartCentres-commissioned studies on the retail market, traffic patterns, planning issues, public services and an archaeological assessment.
The developer spends an estimated $1-million a month just on outside advisers for these types of applications, observers say. The more opposition it anticipates, the more consultant reports it orders. Along with that, SmartCentres employs an in-house team of about 80 specialists who work on applications — engineers, architects, financial analysts, lawyers, leasing and project managers.
In Port Elgin, town staff reviewed the developer's application, asked for some revisions, but were not concerned about the Wal-Mart store and its food section. Staff recommended that the project get a green light, and a public meeting was called for April 6.
Loblaw got into the action weeks before the meeting. Its lawyer called town officials, gathering information about the application. On April 3, the lawyer submitted a letter expressing Loblaw's concerns, and advised that it had hired its own consultant to review Wal-Mart's market analysis. The consultant, Hermann Kircher, warned that the town may be setting itself up for an overabundance of grocery-store uses in the area.
Mr. Kircher argued that Wal-Mart's consultant had underestimated the potential grocery sales at the discounter's proposed Port Elgin outlet. Moreover, he said existing Wal-Mart outlets in three nearby towns could soon be carrying more food. And he said that Loblaw's own supermarket in town may expand.
Because of the uncertainties, the municipality should commission an independent study or — at the very least — limit the amount of food that the proposed Wal-Mart could sell, Eileen Costello, Loblaw's lawyer, said in the letter.
Council members may have anticipated objections to Wal-Mart from some local residents, but several were taken aback by Loblaw's stance. “It's unrealistic to presume that you can retain a monopoly in a community forever,” Mayor Kraemer says. “It's nothing but a delay tactic to keep them [Wal-Mart] out as long as they can.”
Only Councillor Judy Ashbee voted against the Wal-Mart project, feeling the process had been too rushed. Loblaw had every right to challenge the proposal, she says, although “competition is not a reason for developments to be denied.”
The community itself is split on the prospect of Wal-Mart coming to town. But even many anti-Wal-Mart stalwarts would welcome more grocery stores. “It is true that we need more shopping,” says Margaret Grottenthaler, a Port Elgin cottager who is among those fighting the new development.
Despite the mixed feelings, the town council approved the zoning changes for the development on April 10 and, soon after, they were endorsed by the local county. But the final go-ahead could be months, if not years, away. That's because Loblaw, along with nine special interest and residents' groups, have appealed the zoning amendment to the Ontario Municipal Board. No hearing has been set.
Loblaw isn't alone among competitors to raise objections. In Oshawa, where SmartCentres has proposed a mall with a Wal-Mart super centre, two other opponents emerged: Zellers and a nearby shopping centre, which is owned by landlord heavyweight Ivanhoe Cambridge. (Loblaw recently withdrew from the fight.) The City of Oshawa commissioned its own consultant's report on the proposal. It found that the combined sales of the four Zellers stores in the city fall short of total sales at the single Wal-Mart at the other end of Oshawa.
David Baffa, director of development at Ivanhoe Cambridge, says he has to protect his tenants against a potentially overzealous competitive onslaught. His tenants include Zellers and the Bay.
“I don't think anyone expects us to just sit idly and say, ‘Great, just keep stretching the amount of retail space as far as possible,'” Mr. Baffa says. “What we're saying is: ‘Control the growth.'”
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