Both Russell and Rubini see further opportunity with organic produce. Rubini believes smoothie and juicing trends are powering demand, while Russell believes pricing is key. “Organic producers are getting pretty sophisticated; their production levels are up to 75 percent of conventionals and the price differential is shrinking,” he explains. “Organic demand is increasing steadily, and there are various levels of demand based on family income. At the discount banners it’s all about affordability, but even those consumers are trying to manage their budget for organic.”
This is backed up by the big chains adding more organics, from various meat varieties at Metro and tropical fruit at Loblaw to a broader assortment of organic fruit and vegetables at Sobeys.
Regional Strategies
Each of the national chains has geographic areas of relative strength, as Metro has in Quebec or Sobeys in the Maritimes—but all have expanded nationally. Metro, which is the most regional of the big three chains, bought A&P years ago to enter Ontario, while Sobeys’ purchase of Safeway solidified its presence in the west. French-speaking Quebec has its own banners, but the national chains have entered through acquisition. As a result, consolidation, price pressure, new format testing, and other trends tend to be consistent across Canada.
There are some subtle differences, however. Many observers see Ontario, including Toronto, as being the most competitive of the provinces, with grocery square footage growing more quickly than in the past and, many believe, faster than the market can handle. Western Canada’s strong population growth and robust economy has led to opportunities there. And Alberta has higher per-capita consumer spending rates than other territories, which could mean there is room for more premium grocery stores.
Diversity, especially in Asian population growth, is affecting the country with higher concentrations in Ontario and British Columbia, though the actual composition of this trend varies by city and province as well. Uduslivaiya says the needs are tied to specific communities, propelling retailers into “analytics to really understand their customers.”
All of the national trends—the strength of the discount tier, expansion of ethnic and urban retail formats, and the testing of premium banners and features—occur in the context of a very small population. Canada has less than 35 million inhabitants, compared to more than 319 million in the United States. Meanwhile, competition from U.S. chains, from Walmart to Whole Foods, continues to grow. All of these trends likely point to more consolidation and continued price wars within the Canadian grocery channel.
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