Walmart, Sobeys sink millions in huge Metro Vancouver distribution centers
With food supply chains under pressure and inflation spiraling out of control, the good news for consumers is that grocers have pumped billions of dollars into making their operations more efficient.
Walmart spent $175 million building a 300,000-square-foot distribution center that opened in April in the Campbell Heights industrial area of Surrey.
That spending is part of Walmart’s projected $3.5 billion in infrastructure and efficiency upgrades across Canada between 2020 and 2025.
Competitor Sobeys didn’t put a price tag on its nearby 530,563-square-foot warehouse and distribution center that opened in 2020, but the project likely ran into the hundreds of millions of dollars.
“Both the Sobeys deal and the Walmart deal were contracted and committed well before COVID-19,” Beedie’s president of industrial, Todd Yuen, told BIV.
He said the pandemic has significantly increased the demand for groceries and grocery delivery.
“There’s a good chance you’ll see even more demand [for warehouses] from grocery groups and groups that want to deliver groceries to your home in the near future.”
Indeed, Sobeys’ parent company Empire Co. Ltd. announced plans in February to build a new customer fulfillment center somewhere in Metro Vancouver that would open by 2025.
The supermarket distribution centers supply stores, while Empire’s fulfillment center would send the orders directly to customers.
The direct-to-customer grocery delivery market is becoming increasingly competitive, with start-ups such as Vancouver-based Tiggy rapidly expanding its geographic footprint. Tiggy aims to deliver groceries to customers within 15 minutes of placing the order.
Amazon.com Inc. has estimated its investment in BC at over $3 billion over the past decade.
Last year, the company opened five branches on the lower mainland that were either fulfillment centers, delivery stations or sorting centers.
The actions intensify grocers’ battle for consumer food budgets as new investments help them get products to stores faster, guaranteeing fresher food and lower transportation costs.
Walmart’s first foray into grocery delivery in BC came in 2018, when it sublet about half of a 74,000-square-foot Food-X Urban Delivery-run warehouse in Burnaby to provide e-commerce deliveries to consumers.
The company ended that arrangement in 2020, when it switched to having pickers filling orders at Walmart’s 45 BC stores. Drivers then brought the food to the consumer.
A big part of the $3.5 billion investment in Canadian operations is upgrading infrastructure and technology to improve store efficiency, John Bayliss, Walmart Canada’s executive vice president of Transformation, told BIV.
“Having 65 percent of Canadians living within 10 minutes of a Walmart is a really big advantage for us,” he said.
Part of the value in the new distribution center in Surrey will come from reducing transportation costs and delays in first shipping to a facility near Calgary for repacking and shipping back.
Bayliss said all of the beef Walmart sells comes from Alberta, and the company tries to source as much Canadian produce as possible, but the previous practice has been to receive some products and other items from California and Washington State at its warehouse in Calgary. Workers there would repackage the items to be sent to stores in Vancouver.
The products are now shipped directly from the west coast of the US to Surrey for distribution in BC, saving countless transport hours, he said.
Sobeys similarly supplied BC stores from an Alberta distribution center before opening its Surrey facility.
Despite Amazon spending $13.7 billion to buy Whole Foods Market in 2017, it’s late in delivering food.
Whole Foods BC stores do not have ecommerce order. Customers can purchase products in-store and have the third-party Eeko Couriers deliver the products to their homes, a Whole Foods customer service representative explains to BIV.
Amazon spokesperson Dave Bauer confirmed that the company’s deliveries to customers come from Amazon fulfillment centers and are shelf-stable products.
“I can’t give details about future product launches or diversions until we’re ready to make an announcement,” he told BIV.
Other grocers with BC stores have long had Metro Vancouver distribution centers.
Loblaw Co. Ltd. opened a 410,000 square foot distribution center in South Surrey in 2010. That facility processes frozen and perishable foodstuffs that are shipped to the stores of Real Canadian Superstore, No Frills, Your Independent Grocer, Shoppers Drug Mart and T&T Supermarket.
Save-On-Foods operates two Langley distribution centers that opened in the early 2000s and together have approximately 800,000 square feet.
Those locations deliver food to stores, where pickers process customer orders that the company delivers with its own trucks.
HY Louie of the Louie family recently rebranded her food business as Georgia Main Food Group.
No one at the company was available to discuss logistics for the IGA Marketplace and Fresh Street Market store banners. †