Wal-Mart has enjoyed enormous growth in its U.S. grocery business, but hasn't made a serious foray into the food business in Canada. The theory is that buying Loblaw, a $16-billion company, would give the retailer dominant market share in Canada. One senior Bay Street banker who has worked in the grocery sector said: "Wal-Mart is definitely looking for a way into the food business in Canada, and they know they can't do it themselves." He added that Wal-Mart officials recently talked about a relationship with Sobeys Inc. grocery chain. He played down the possibility of a full-scale takeover of either grocery chain, suggesting that joint ventures were more likely. There were also rumors that Royal Ahold NV, Europe's largest food distributor, was eyeing Loblaw.
Moderator Comment: What effect would a Wal-Mart/Loblaw's or a Wal-Mart/Sobey's combination have on the Canadian retail market?
One of the more interesting aspects of a Wal-Mart and Loblaw's union would be how Bentonville built on the Canadian retailer's private label program. Loblaw's reputation is that it is a store brand innovator. That can not be good news for CPG brand marketers already nervous about Wal-Mart's private label intentions. [George Anderson - Moderator]