Sobeys to Supply Food for Target in Canada

STELLARTON, Nova Scotia — Sobeys [4] here said Friday that it has struck a deal to distribute food and grocery items for Target [5]’s expansion to Canada.

Minneapolis-based Target will begin opening stores in Canada in early 2013 with plans for up to 135 stores by 2014. Sobeys said it would use its existing distribution network to provide those stores with frozen, dairy and dry grocery products including national-brand and Target private-label products. The two companies have also agreed to leverage one another’s distribution networks as a means to reduce transportation expenses.

“We are pleased to welcome Target as a valued wholesale customer. The associated increased revenue, and supply chain efficiencies which will lower our costs, will continue to strengthen our competitive position,” Bill McEwan, chief executive officer of Sobeys, said in a statement.

Target officials have said that their Canadian stores would vary by location as to the amount of food they will offer. The retailer is expanding through the lease purchase and subsequent renovations of the Zellers chain of discount stores.

In related news, Target Friday said it finalized its $1.8 billion deal with Hudson’s Bay Co. for the Zellers stores, selecting 84 additional leases bringing the total number of leases selected to 189. Target in May completed the purchase of 105 Zellers leases, the majority of which will become Target locations.

Target said it would acquire leasehold interests in 29 of the 84 leases selected Friday, and would sell the remainders to other retailers or to landlords. This group includes the 39 leases Target agreed to transfer to Wal-Mart Stores in June. As part of that deal, Target acquired a vacant site from Wal-Mart that it intends to open as a new Target store.

Target said Zellers stores would continue to operate under that banner but that stores scheduled to become Target stores would close for six to nine months for remodeling. Target plans to announce the locations of its March 2013 store openings in the coming months.