Following Loblaw's Lead, Metro Buys Ethnic Retailer

MONTREAL — In a move that parallels one made by rival Loblaw Cos. [4] two years ago, Metro Inc. [5] here last week said it has acquired a 55% stake in Marché Adonis — a small, ethnically oriented food retailer — and its distributor, Phoenicia Products.

Specific terms of the investment were not disclosed.

Marché Adonis operates three retail stores in Montreal and one in nearby Laval, all known for their Mediterranean specialty offerings and expertise in perishables, especially meats and cheeses, analysts said. It has a fifth store slated to open this fall in a new retail development in Brossard, Quebec, also near Montreal, and has reportedly been eying expansion into the Toronto market.

Marché Adonis will continue to be operated by its founders, who retain a 45% stake in the company, Metro said.

“This partnership will allow us to better meet the needs of the various cultural communities and increase our market share in the fast-growing ethnic foods category,” said Eric LaFleche, president and chief executive officer, Metro, which operates a network of 600 supermarkets in Eastern Canada.

Irene Nattel, a Toronto-based analyst with RBC Capital Markets, said the Marché Adonis banner is well known locally and draws from a diverse demographic customer base. One of the benefits of the acquisition for Metro, she said, could be access to Adonis' expertise in ethnic product sourcing. The Phoenicia distribution business imports and distributes Middle Eastern product under the Phoenicia and Cedar brands, and operates a 165,000-square-foot warehouse in Montreal and a 70,000-square-foot warehouse in Toronto. The company also distributes through specialty channels with warehouses in 10 states in the U.S.

“In our view, the addition of the import business should be a value-add that [Metro] can leverage across the [store] network,” Nattel said.

In 2009 Loblaw acquired T&T Supermarkets, a then-17-store chain specializing in Asian products, and has since cited the acquisition as bolstering its expertise in product sourcing.

“What Loblaw found with its T&T acquisition was that sources of supply for products popular with ethnic clientele are quite different from their traditional sources,” Nattel said. “The real upside in this kind of transaction is less in the direct contribution of acquired stores, and more in the value-added it can provide to the existing store offering/customer base.