THE OSHAWA GROUP LIMITED History

Address:
302 The East Mall
Etobicoke
Ontario
M9B 6B8
Canada

Telephone: (416) 236-1971

Public Company
Incorporated: 1957 as Oshawa Wholesale Ltd.
Employees: 19,000
Sales: C$4.27 billion (US$3.58 billion)
Stock Index: Toronto Montreal

Company History:

The Oshawa Group is one of Canada's largest suppliers of food, operating in both the wholesale and retail sectors. The company runs 102 supermarkets under a variety of banners, including Food City, IGA, and Dutch Boy. It is also the largest wholesale supplier to independently owned IGA stores in Canada. Oshawa is active in the general merchandise and pharmaceutical market as well, running 39 Towers department stores in Ontario, nine Bonimart stores in Quebec, and 156 drugstores under the Pharma Plus, Drug City, and Metro Drugs chains. The company also operates 25 pharmacy units throughout its department stores and supermarkets.

The Oshawa Group has experienced steady growth since it was established in 1957. It registered record sales and earnings for the 12 consecutive years preceding 1989--a remarkable feat considering the generally cyclical nature of its primary industry--and the company is well positioned to continue its progress.

The company was originally incorporated in Ontario on June 18, 1957 as Oshawa Wholesale Ltd., and operated as a distributor to grocery stores during its first few years. But as the company grew in the early 1960s, it quickly began to diversify. In 1963 Oshawa purchased a controlling interest in the Dominion Mushroom Company, a large mushroom growing and packing concern. Earnings surpassed $1 million in 1963, and Oshawa soon invested heavily in supermarkets. In September, 1964 the company acquired full control of the Independent Grocers Alliance (IGA) Distribution Company. Two months later it purchased the eight units of Bassins Food Chain located in Toronto and Ajax, Ontario, and transformed them into IGA stores. Throughout the rest of the decade the company built a formidable chain of supermarkets through acquisition.

Oshawa diversified into general merchandise retailing in January, 1966 when it purchased a 75% interest and took over management of the six-store Rite-Way Department Store chain, which operated throughout Ontario. A year later the company acquired the rest of Rite-Way's shares and purchased Allied Towers Merchants Ltd., another department store chain, combining the operations of the two under one management group.

Oshawa continued its diversification into other businesses and new geographical areas in the late 1960s. In July, 1968 the company purchased Kent Drugs Ltd. The acquisition added about $7 million to Oshawa's annual sales, and Oshawa President Ray D. Wolfe announced the company's plans to put Kent Drug store units in new Towers Department stores. Also in 1968 Oshawa purchased Rockower of Canada Ltd., a firm which operated the men's and boys' departments in 26 of Oshawa's Towers stores. Oshawa's food distribution unit was greatly expanded late in the year by the purchase of Shop & Save Ltd., an IGA supplier in Quebec. The company branched into Canada's maritime provinces when it acquired Bolands Ltd., which as supplier to 45 IGA stores in that region had accounted for about $27 million in sales the previous year. By the end of its shopping spree Oshawa was the supplier to 325 IGA stores in five provinces and had become well diversified in the general merchandise and drug store markets.

In the 1970s Oshawa became more involved in real estate dealings. In mid-1970 the company purchased an interest in Baxter Estates, a real estate partnership which owned an apartment building in Winnipeg and a shopping center in Calgary. (The company sold its interest in Baxter three years later for a nearly 100% profit).

In November, 1971, three months after it changed its name to The Oshawa Group Ltd. to reflect its diversity, the company purchased the rest of Marchland Holdings Ltd., a real estate developer it already half-owned. At the time of the acquisition Marchland owned four Towers-Food City shopping centers and a commercial complex in Sudbury, Ontario that included a shopping mall, hotel, office center, theater, and parking garage. Oshawa also purchased the remaining third of the modular home developer Systems Construction Ltd. of Ontario.

In early 1972 Oshawa moved into western Canada by acquiring Codville Distributers Ltd. Oshawa's bid was accepted over the competing bid of Westfair Foods Ltd., a subsidiary of George Weston Ltd., because Oshawa's offer was more attractive to Codville's minority stockholders.

In October, 1973, Harvey S. Wolfe succeeded his brother Raphael Wolfe as president of Oshawa; Raphael became chairman and CEO. In 1976 Oshawa bought out its partners in the Decairie Square shopping mall in Montreal. In December, 1977, Norman S. Lipson, former president of Oshawa's Tower Department Stores unit, pleaded guilty to four counts of fraud which involved kickbacks of $411,000. Lipson had resigned from his position in late 1976. He was sentenced to two years' imprisonment and fined $30,000.

In the late 1970s the Wolfes began to slim Oshawa's operations a bit. The company shed its 50% interest in the Consumers Distributing Company, Ltd. in 1978. Consumers Distributing sold brand-name general merchandise at reduced prices in large, no-frills showrooms; Oshawa had entered into a joint venture with the limited-service retailer, providing capital for the chain's expansion eight years before. Oshawa also sold its 90% interest in Coinamatic Laundry Equipment in late 1978.

The early 1980s saw Oshawa emphasize its core businesses--food wholesaling and retailing. In 1983 group sales surpassed $2 billion. In 1985 the company strengthened its presence in the Atlantic provinces when it acquired nine supermarkets and a distribution center in Nova Scotia from Dominion Stores Ltd. and bought 22 Canada Safeway supermarkets in the Toronto-Hamilton area. In 1986, as group sales passed the $3 billion mark, Oshawa divested its Dominion Mushroom farm due to both erratic earnings and the unit's need for a major capital reinvestment, and sold its Decairie real estate in Montreal and its Sudbury shopping center.

In the late 1980s Oshawa took bold steps to improve its food retailing business. Oshawa's corporate-owned Food City stores took on a new "streetscape" look. The store layout was intended to resemble an old-fashioned sidewalk merchant atmosphere, and at the same time appeal to young urban professionals as well as retirees. Oshawa targeted upscale consumers wherever possible with specialized services and fancy merchandising. For example, in 1987 the company's Thornhill, Ontario Food City superstore added a kosher deli, bakery, and meat department to appeal to the community's large Jewish population. By specializing wherever possible, Oshawa commanded beefier margins on premium products and services.

In 1988 Oshawa tripled its drug store chain by acquiring the 109 retail units of Boots Drug Stores for C$45 million. The stores were renamed Pharma-Plus Drugmarts and joined the 34 Kent Drugs and 12 Metro Drugs units in operation. The addition helped Oshawa sales to top $4 billion in 1989.

The Oshawa Group's aggressive management has produced excellent results for a number of years, and the company intends to concentrate on what it calls the mainstream of the market, rather than change store formats to superstores or specialty stores. Although the trend in Europe and the United States has been toward increased size and cross-merchandising between food and nonfood retail stores, Oshawa does not anticipate similar trends in Canada. Instead the company plans to focus on retail presentation in its department stores and drug stores and broader product lines in its existing supermarkets.

Principal Subsidiaries: Bolands Ltd.; Codville Distributors; Dutch Boy Food Markets; Elliot Marr and Company Ltd.; Fieldfresh Farms Inc.; Hudon et Deaudelin Ltee; Oshawa Foods; The Ontario Produce Company; The White and Company; Hickeson-Langs Supply Company; Langs Cold Storage; Model Uniform Rental Services Ltd.; Kent Drugs Ltd.; Pharma Plus Drugmarts Ltd.; Towers Department Stores Inc.

Source: International Directory of Company Histories, Vol. 2. St. James Press, 1990.

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