Supermarket chains and independent grocery retailers in Canada operate in an extremely competitive landscape. The big three national food retailers—Loblaw, Sobeys, and Metro—face continuing pressure from Walmart and other discounters, as well as specialty stores and the rollout of Amazon’s e-commerce push. Though Amazon is just beginning to enter the Canadian market, its popularity with millennials may signal an all-out battle for grocery dollars.
In a report released in June 2014, Euromonitor found the big three continued to dominate the Canadian grocery sector in 2013. The leading chain in terms of sales, Loblaw, commanded 29 percent of the total sector, down 2 percent from 2012, followed by Sobeys with a 25 percent share, up 6 percent thanks to its acquisition of Safeway in 2013. Metro ranked third in terms of store locations, but the bigger news is the fourth largest player, Walmart. Walmart has not only expanded steadily across the country, but vowed to open as many as 40 new supercenters in 2015 in the wake of Target’s highly publicized withdrawal.
Bolstering their positions, the key national players have been involved in a number of acquisitions, with the continued consolidation impacting smaller regional chains and independents. Loblaw completed its purchase of Shoppers Drug Mart in 2014 and pledged $1.2 billion in expansion funding for 2015; Sobeys expanded westward by taking over the smaller Safeway chain; and Metro moved into the upscale bakery market with the acquisition of the Québecois chain Premiere Moisson. “Acquisitions are still on the agenda,” comments senior research analyst Svetlana Uduslivaia at Euromonitor. “We’ll see this as more and more of a trend, especially for building business in urban areas.”
The consolidation, it turns out, was both boon and bane to independent grocers as the big chains got bigger, controlling more of the market. Tom Barlow, president and CEO of the Canadian Federation of Independent Grocers, explains: “In 2014, we actually saw an increase in share, driven mainly by the acquisition of new stores,” he says. “Most of these stores came from Sobeys as part of the Safeway acquisition; they were forced to divest stores as part of the purchase agreement.”
That said, continues Barlow, “consolidation has had a major impact on the industry. The centralization of power to a few big players is putting pressure on suppliers to move support dollars from medium and small retailers to a couple of large ones.”
On the plus side for suppliers, some of the acquisition activity is expanding the shelf space for produce. “There is growth in produce available at nontraditional retailers, which are creating new food hubs in areas where they don’t have a presence,” says Ron Lemaire, president of the Canadian Produce Marketing Association. He notes that Loblaw is piloting basic produce sections in its newly acquired Shoppers Drug Mart stores, particularly in urban areas.
