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Chains, Consolidation & Competition

Canada’s Evolving Retail Landscape

Adding More Fresh

American retailers like Costco and Walmart are benefiting the fresh produce industry by steadily increasing the amount of space devoted to food in both the United States and Canada.  According to Canadian Imperial Bank of Commerce (CIBC) World Markets, almost half of all food square footage growth from 2004 to 2014 will be due to mass merchants. 

Walmart Supercenters in particular devote a great deal of space to groceries, with produce and other foods displayed in prominent, front-of-store locations.  The company’s low pricing strategy, combined with a strong emphasis on better quality and selection, has made Walmart a destination for groceries.  Since 2009, many of its stores have added fresh fruits and vegetables.

“They’re into the game,” says John F.T. Scott, president and CEO of the Canadian Federation of Independent Grocers.  “But the traditional retailers, whether corporate or independent, are very good at fresh
produce.”  Scott believes the influence of Costco and Walmart lies much more on the “fresh side than the packaged side.”

In 2013, all eyes were on the expansion of Target, planning to open 124 stores this year with 25 more to follow in 2014.  Square footage is about 80 percent the size of the typical U.S. store.  Although Target has not announced plans to carry groceries in Canada, this has been a growing category in the United States and most observers expect the chain to do so in the future. “Surveys have shown that Canadians wouldn’t mind trying groceries at Target,” commented Uduslivaia. 

Alternative Formats

As the number of immigrants, especially Asians, has grown and continues to do so—the next five years are expected to bring 1 million new immigrants into Canada—there has been a rise in demand for ethnic produce and foods.  According to the CIBC, ethnic grocers will account for 15 to 20 percent of all food-related square footage growth in Canadian retailers in 2013.

Another recent development in this sector is an increase of large, modern supermarkets catering to consumers in a wide range of ethnic groups. “These [retailers] are very strong in foods, but they’re not just about food,” Uduslivaia says. “It’s a full-scale modern supermarket with a mix of ethnic flavors and a variety of products.”

The Big Three supermarkets are getting into the act by acquiring established ethnic operators. The largest is Asian supermarket chain T&T, with 22 stores mostly in British Columbia and Ontario, which was purchased by Loblaw in 2009, while Metro acquired a Montreal chain, Marché Adonis (specializing in Mediterranean foods) in 2011. Others include Galleria Supermarkets (Korean) and Starsky Supermarket (Eastern European), both in the Toronto area.

Mainstream supermarkets and discounters are also boosting selections of ethnic produce, as well as other kinds of food—a lucrative move, since margins tend to be larger.  Sobeys’ FreshCo banner is an example; it attracts ethnic and discount shoppers with an expanded produce selection as well as a variety of ethnic foods.

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