Empire Company, the Canadian grocery giant that owns Longo's, has struck a deal to acquire nine in-store pharmacies currently operated by Morelli's at Longo's locations across Ontario. The company announced the agreement on Tuesday, with plans to rebrand the counters as Longo's Pharmacies once regulators give the green light.
The transaction is still subject to approval from the Ontario College of Pharmacists, the provincial body that licenses and oversees pharmacy practice. Empire expects the deal to close in the second quarter of its fiscal 2027, which would fall sometime between August and October 2026. Financial terms were not disclosed.
Why pharmacies matter to grocers
On the surface, nine pharmacy counters might not seem like a major expansion for a company with hundreds of stores across Canada. But pharmacies are a strategic piece of the grocery business for a few reasons.
First, they drive frequent foot traffic. Customers typically visit a pharmacy far more often than they do a grocery aisle for a big weekly shop, especially if they need regular prescription refills. That repeat business can boost sales of other items in the store, from snacks to household goods.
Second, pharmacies offer higher-margin products and services compared with many grocery staples. Over-the-counter medications, personal care items, and health consultations tend to carry better profit margins than, say, fresh produce or packaged foods. For grocers, adding or expanding a pharmacy can be a way to improve overall store profitability.
Third, the move fits a broader trend in Canadian retail. Grocers have been increasingly looking to add services like pharmacies, financial products, and even telecom offerings to deepen their relationship with customers and create new revenue streams. This is similar to how some U.S. retailers have leaned into health services, though the specifics vary by market.
What the deal means for Longo's and Morelli's
Longo's is a premium grocery chain in the Greater Toronto Area, known for its fresh produce, prepared foods, and higher-end offerings. It operates more than 35 stores, many of which already have a Morelli's pharmacy counter inside. Morelli's is a family-run pharmacy business that has been operating in Ontario for decades, and its counters are a familiar sight in Longo's locations.
By bringing these pharmacies in-house, Empire gains direct control over the pharmacy operations and the customer relationships that come with them. Instead of sharing the revenue with a third-party operator, Empire will capture the full benefit of prescription sales and related services. It also allows the company to integrate the pharmacy more closely with its loyalty programs and digital app, potentially offering a more seamless experience for shoppers.
For Morelli's, the sale represents an exit from the in-store pharmacy business, at least at these nine locations. The company will still operate its standalone pharmacies, but it's giving up a significant chunk of its presence inside Longo's stores. The deal is pending approval from the Ontario College of Pharmacists, which reviews changes in pharmacy ownership to ensure they meet regulatory and professional standards.
What it means for investors
For everyday investors, this deal is a modest but telling signal about Empire's strategy. Empire is one of Canada's largest grocers, with banners that include Sobeys, FreshCo, and IGA, in addition to Longo's. The company has been focused on improving efficiency and growing its higher-margin businesses, and pharmacies fit neatly into that plan.
Adding nine pharmacies won't move the needle much on Empire's overall revenue, which runs into the tens of billions of dollars annually. But it's a step toward building a more integrated health and wellness offering, which could support customer loyalty and store traffic over the long term. Investors may also see this as a sign that Empire is willing to make targeted acquisitions to strengthen its existing operations rather than just expanding its store count.
The deal also comes at a time when Canadian consumers are showing resilience in their spending, even as they face higher interest rates and inflation. Recent data from RBC card spending showed that Canadians kept spending in the second quarter despite the squeeze, which bodes well for grocers and their ancillary services. However, the broader retail environment remains cautious, with some retailers reporting softer demand.
It's worth noting that the deal is still subject to regulatory approval, and there's always a chance it could be delayed or altered. But assuming it goes through as planned, Empire will have a bit more control over a key part of its store experience.
For investors, the takeaway is simple: Empire is making a small, sensible move to strengthen its business. It's not a game-changer, but it's a reminder that grocers are constantly looking for ways to make their stores more valuable to customers and more profitable for shareholders.
