The Confrontation: North West Company and SpartanNash are both grocery retailers, but is one company better positioned than the other?
North West net income increases 9%
For those of us who have had the college or university experience, the words instant noodles, frozen pizza, and cheap booze are all too familiar. In fact, all three items are often consumed within 24 hours. For residents of Nunavut, however, the word cheap can hardly be used to describe frozen pizza, which recently appeared in a NorthMart flyer for $ 11.99 apiece.
NorthMart is a chain of grocery stores owned by the North West Company. Through its subsidiaries, North West sells food and everyday products and services to communities in Canada, Alaska, the South Pacific and the Caribbean.
In its third quarter fiscal 2021 results, North West reported revenue of $ 554 million, up from $ 553 million the year before. Overall net income for the quarter was $ 39 million, up from $ 36 million in 2020, thanks to a reduction of $ 7 million in selling, operating and administrative expenses.
Kelleen Wiseman, Director of the Food and Resource Economics Masters Group in the Faculty of Land and Food Systems at the University of British Columbia, studies consumer behavior and choices in the food industry.
Wiseman notes two major trends in consumer behavior: a change in consumer expectations and the way people buy their groceries. âWe got used to the globalized food supply chain like grapes in winter, mangoes at Christmas and oranges all year round,â Wiseman said. Consumers have also become accustomed to the variety, high quality, and relatively stable prices 12 months a year.
In addition to consumer expectations, the way people buy their groceries has also changed. This has “put pressure on the food supply chain,” Wiseman said, adding that “a year and a half ago you and I might have known people who shop online, but now it is. (very usual)”.
SpartanNash profits drop 24%
North West’s counterpart based in the United States, SpartanNash is a grocery distributor and retailer headquartered in Grand Rapids, Michigan. In addition to its distribution and retail division, the company sells and distributes grocery products to military bases around the world.
In its third quarter fiscal 2021 results, the company reported revenue of $ 2.073 billion (US), up from $ 2.061 billion the previous year. Overall net income decreased to $ 15.2 million from $ 20 million due to an increase of $ 18 million in selling, general and administrative expenses.
Tony Sarsam, CEO, was pleased with the third quarter results despite pressures on labor, inflation and the supply chain. Sarsam intends to focus on increasing operational efficiency. âWith the initial investments we are making as part of our supply chain transformation initiative, we will be in a better position for long-term sustainable and profitable growth,â he said.
As for the resilience of the Canadian grocery supply chain during the pandemic, Wiseman notes that âthe past 18 months have proven to be incredibly efficient and robust. If we can’t move (directly) the (products) from east to west, we (re-route) them north or south. If something happens in Florida, we get (products) from California or Mexico. There is continuous optimization.
As the truck driver shortage is an ongoing crisis in Canada’s grocery supply chain, Wiseman says there are other ways to achieve efficiency. âAcross the transport space, there are a lot of efficiencies in work robotics. We see it at Costco. When things arrive at Costco, they don’t come in different packages; there is a standard size. If you have more stuff related to that, you have a greater capacity to have robotic manpower, robotic shipping, and robotic loading and unloading. “
At the end of the line
With revenues only a fraction of grocery giants such as Loblaw in Canada and Kroger in the United States, North West and SpartanNash have chosen to focus on their respective niches, with decent results. North West has a strong presence in rural communities and urban neighborhoods, while SpartanNash has made a name for itself serving military bases around the world. With a net profit margin of seven percent, compared to less than one percent for SpartanNash, North West had the best third quarter. The thumbs up goes to the Northwest this week and its role in Canada’s grocery oligopoly.