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The New York Times reports this morning on how Loblaw Companies, long the dominant retailing banner in Canada, “has lost its way.”

The Times writes: “Last year, a botched attempt at improving its distribution systems left shelves empty in many of the chain’s 1,100 stores, with inventory pile-ups at its 26 warehouses.

“The company has recently introduced food products that have not been a hit with shoppers, and its new nonfood items have fared even worse, leading to a write-down in inventories in December of 120 million Canadian dollars. In January, its expansion in Quebec through the purchase of a regional grocery chain resulted in a further write down of nearly 900 million Canadians dollars.”

Part of the problem, the Times correctly notes, is that Loblaw took its eye off the ball when Wal-Mart started expanding in Canada; it decided to try to compete on price in the nonfoods arena – and lost badly.

Also interesting is the fact that Loblaw has been down this road before – that some three decades ago, its food business was in such sad shape that there were some analysts suggesting that the company should simply sell it off. At the time, the innovation that rescued the company was President’s Choice, the upscale private label line that was created by company executive Dave Nichol that gave the chain a differentiated series of products that also were extremely profitable.

One analyst tells the Times that, essentially, Loblaw must find another way to do the same thing – to find a niche that is distant from Wal-Mart’s, because there is “no oxygen” for companies trying to compete directly.
KC's View:
In some ways, the food business has changed enormously in the past two or three decades. But it others, the fundamentals remain precisely the same, just as they are the same for every business – find the differential advantage and work it as hard as you can, and never stop looking for new ways to do business.