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Metro forges into ethnic food market with stake in Marché Adonis

Supermarket giant Metro Inc. (MRU.A-T50.221.272.59%) is establishing a beachhead in Canada's fast-growing, multibillion-dollar market for ethnic grocery stores.
Montreal-based Metro is acquiring a majority stake in Marché Adonis, one of Quebec's biggest ethnic-food retailers -specializing in Mediterranean fare - in a move to grab a bigger piece of a market that's expanding by leaps and bounds.
Metro, which will buy a 55-per-cent position in Adonis for an undisclosed sum, is the latest to join the trend of retailers buying ethnic supermarkets.
Two years ago, Loblaw Cos. Ltd. bought Canada's biggest Asian food retailer, T&T Supermarket Inc., for $225-million.
"We expect to see some interesting growth by partnering with Adonis," said Metro president and chief executive officer Eric La Flèche.
Metro's deep pockets will help accelerate Adonis's expansion plans while Metro will benefit from Adonis's expertise and supplier networks in further developing its ethnic food retailing in its own stores, he said.
Expansion into Ontario is also a possibility, he added.
"It's a brilliant move," said John Scott, president of the Canadian Federation of Independent Grocers.
While grocery chains may know they have to go after the ethnic segment for growth, many don't understand it or know how to go about it, he said. Metro, on the other hand, is acquiring Adonis's "expertise, an element they don't already have," Mr. Scott said.
Founded in 1978, Adonis has built a local reputation for its service and offerings, including a wide variety of fresh vegetables, prepared meats and specialty dishes from Lebanon, Greece, Turkey, Syria and elsewhere.
It operates four large stores in the Montreal and Laval regions and is building a fifth in South Shore Brossard. It also has an import-export unit, Phoenicia Products, which distributes exclusive Phoenicia and Cedar brand products.
"With this transaction, we will be able to speed up plans to open new stores and do it more efficiently, with access to Metro's expertise," Adonis spokesman Moise Moghrabi said.
Adonis's founders will retain a 45-per-cent stake in the company and continue to manage both the retailer and the distributor.
"Our culture, our working methods, our range of products and most importantly our employees, will remain in place to continue to serve our highly loyal customers," Jamil Cheaib, one of the three founders and owners, said in a news release.
"In our view, the addition of the import business should be a value-add that [Metro] can leverage across the network," analyst Irene Nattel of RBC Dominion Securities said in a research note.
The deal is unlikely to be material to Metro's financial results in the near term, she added.
Citing the Loblaw acquisition and how such deals provide the buyer with access to new sources of supply for ethnic food, she 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."
Metro has annual sales of more than $11-billion and 65,000 employees. Its network includes more than 600 stores under such banners as Metro, Metro Plus, Super C and Food Basics. It also has over 250 drugstores under the Brunet, the Pharmacy and Drug Basics banners.

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