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Food retailing changing in Canada

As big-box stores continue to open across Canada, numerous ethnic (largely Asian) large-format grocery stores are also being built across the country. Empire Co., the parent company of Canada’s second-largest grocery chain Sobeys, acquired Safeway Inc.’s Canadian operations in June 2013.

This positions Sobeys as a leading grocer in Western Canada and the largest grocer in Alberta with 234 stores combined. The changes retailers are making reflect Canada’s increasingly diverse consumer base.

Industry sales for food retail stores are estimated $85.5 billion in 2011, and it is projected to grow at a rate of 4.6 per cent annually, as more Canadians choose to eat at home.

The grocery market is highly concentrated and vertically integrated into food distribution. The top retailers are Loblaws, Sobeys, Metro, Costco, Safeway and Walmart, and they account for about 80 per cent of total food sales.
The Canadian Grocer (Executive Report 2012-2013), forecaste that convenience stores, hypermarkets (Walmart, Costco and Supercentres) and speciality food stores grow in value with higher percentages.

“Canadian retail industry has been transforming due to a combination of factors such as economic conditions, demographic shifts, changes in consumer behaviour and technology innovations,” says Jeewani Fernando, Alberta Agriculture and Rural Development provincial consumer market analyst. “Compared to the U.S., Canada’s economic conditions are suitable for retail market expansion. Canada’s GDP has shown a modest growth. Unemployment is declining and consumer prices are trending towards long-term stability. Canada has demonstrated less volatility, however, the exchange rate advantage over U.S. dollar has disappeared and this will become a bigger issue for Canadian grocers.”

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Nielsen reports that, despite the fact that Canadian recession is officially ended, 49 per cent of consumers say that Canada is in a recession. However, Canadian consumer confidence continues to increase, but they are still showing spending restraints.

“Baby boomers are expected to account for 21 per cent of Canadians in 2026,” says Fernando. “As the population ages, consumer products and services will need to adapt to meet their changing needs.

Another demographic shift which is shaping Canada’s market place is Millennials. Their influence on the market is strongly related to their financial power. 

They value quality over quantity, have a real passion for social causes and have grown up using Internet for everything. Retailers who can appeal to this demographic section and offer them the products and experiences they value will be the most successful.”

The other biggest change is the increasing ethnic diversity in Canada. Increased importance of ethnicity will continue to redefine produce trends with more diverse selections and offerings.

Aging consumers and rising awareness of the relationship between food choices and personal health is influencing the type of food products that consumers demand. Healthy eating has become a trend and is a significant change in consumer behaviour.

Consumers are increasingly demanding fresh, natural and organic products. Consumers are also seeking ways to maximize the limited time they have for food preparation and this had created a great demand for convenience products.
Technological innovations such as mobile platforms, smart sensors and social media have enabled new ways of shopping.

Shopping on mobile devices have made it possible for online offers to be localized and personalized. As more stores adapt to Wi-Fi and the use of smart sensors around the store, shoppers will be able to use location-based services which include checking product availability, locating products and identifying alternatives and complementary products.

Tomorrow’s ‘smart consumers’ will require all retailers to address the new ways they want to shop and how they will expect to be served.
“Retailing strategies used by companies reflect complex retail food market place,” says Fernando. “Loblaw’s Guiding Stars nutrition navigation system with in-store registered dieticians to support consumers is one such example.”
Recent developments in the Canadian retail food landscape have intensified the market competition. In general, this situation is beneficial for consumers as choice will continue to expand. However, consumers may be concerned about higher prices due to retail concentration in their local shopping areas.
“Concentrated retailers’ buyer powers are high,” says Fernando. “Retail buyers will constantly look to reduce price, improve product quality and extend the product range.
“This situation is challenging for small and medium scale food producers, processors and suppliers to begin with.”

Publication date: 8/5/2013


 


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