Canadian Grocer - March 2017

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FARM BOY MARKS A MILESTONE P.18 HOW SAVE-ON-FOODS IS WINNING IN THE WEST P.28 DOING DELI RIGHT P.37

MARCH 2017

How well did grocers fare in 2016? Our annual Market Survey reveals the numbers, for better and for worse March 2017 Canadian Grocer

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CONTENTS March 2017 Volume 131 Number 2 FEATURES

A MIXED BAG 22 Our exclusive 2016 Market Survey reveals the state of grocery sales

OPINIONS

5 Front Desk 21 Global Grocery 42 Checking Out STORE OF THE MONTH

HOW THE WEST WAS WON 28 Darrell Jones talks Save-On-Foods’ success and expansion plans

6 Bite Grocer & Eatery

See how this Calgary retailer is winning over customers, one brunch plate at a time

PEOPLE

11 Garnet Pratt Siddallal

Find out how Pratt Siddall is crafting a market for smallbatch beer

12 Milestones IDEAS

15 Urban planning

What’s the appeal of urban concept stores? Who shops at them?

17 Perfect packaging

It’s not only what’s inside the that matters—consumers care about the package, too

18 Farm Boy turns 35

Having marked a milestone, the indy grocer looks to the future

19 Bigger basket

Bug benefits, Empire Co.’s new chief and food safety at CPMA

AISLES

37 Doing deli right How to drum up sales beyond cooked chicken and lunch meat

39 Sauerkraut city

Fabulous fermented foods— they’re on trend and good for you

40 Clean labels

What’s next for the movement?

40 New on the shelf

CHRISTY LUNDY

Let us help you decide if these products are the right fit for your store

CHANGING TIMES 32 How some grocers are using tech to give them a competive edge March 2017 Canadian Grocer

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FRONT DESK

March 2017 Volume 131 Number 2

GROUP BRAND DIRECTOR & EDITORIAL DIRECTOR Alison Wood 416.764.3837 awood@ensembleiq.com

Nations Fresh Foods’ new Mississauga, Ont. store

EXECUTIVE EDITOR

Shellee Fitzgerald 416.764.1660

sfitzgerald@ensembleiq.com MANAGING EDITOR

Day Helesic 416.764.3944

dhelesic@ensembleiq.com ONLINE EDITOR

Meagan Kashty 416.764.2005

mkashty@ensembleiq.com ART DIRECTOR

Glenn Taylor 416.764.1667

gtaylor@ensembleiq.com CONSULTING EDITOR

George H. Condon 416.261.8326

condug@sympatico.ca

NATIONAL ACCOUNT MANAGER

Roshan Advani 416.764.1496

radvani@ensembleiq.com PRODUCTION MANAGER

Karen Richards 416.764.1688

karen.richards@rci.rogers.com

GROUP SALES MANAGER, CIRCULATION

Michelle Iliescu 416.764.1441

miliescu@ensembleiq.com

EDITORIAL ADVISORY BOARD

Tom Barlow, Ross Bletsoe, François Bouchard, Mandi Fawcett, André Gagné, Annick Gazaille, Denis Gendron, Lorelle Gilpin, Florent Gravel, Won Suk Ha, Jessica Kim, Les Mann, Ken Schley, Peter Singer, Mondella Stacey, Mike Venton

HOW TO SUBSCRIBE/RENEW:

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STAYING POWER Don’t believe the doom and gloom, bricks-and-mortar grocers still have an edge “IF YOU BUILD IT, THEY WILL COME.” Remember that line from the film, Field of Dreams? Well it wasn’t delivered exactly that way—it’s famously misquoted (the bodiless voice uttering it to a bewildered Kevin Costner actually said “he” not “they”) but let’s not get nitpicky— you get the gist.

Applied to business, the idea is that if you give customers what they want, they’ll keep coming back. And that’s how smart grocers are combatting online encroachers and others trying to take a bite out of their business. These retailers are creating stores that deliver a compelling shopping experience.

Take, for example, Nations Fresh Foods in Ontario and Save-On-Foods in the West.

The two grocers have recently opened sleek new stores that are all about fresh food and have a clear point of differen-

GIVE YOUR CUSTOMERS WHAT THEY WANT, AND THEY’LL KEEP COMING BACK tiation (in both cases a focus on world flavours). On opening day, the stores drew big, eager crowds. And both Nations and Save-On-Foods have plans in the works to open more stores. (Read more on Save-On-Foods’ expansion on page 28).

Other forward-thinking retailers are wooing shoppers with technology, making stores more convenient, fun and educational, as correspondent David Sherman explores in “The Times They Are a Changin’”, on page 32.

He also looks at how some online retailers are recognizing

the value of physical shops and are setting up their own.

Bricks-and-mortar stores are far from dying, you see— they’re simply evolving.

At Canadian Grocer’s Thought Leadership conference in November, IGD chief Joanne Denney-Finch told attendees that, despite competition from online services and others, “physical stores will always have the edge” for instant gratification and for products we want to see before we buy. To entice shoppers, she said, stores will become more exciting, with more fresh food, new products, special events and provide more opportunities to discover.

Makes a lot of sense to us.

Shellee Fitzgerald

Executive Editor sfitzgerald@ensembleiq.com March 2017 Canadian Grocer

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The Facts Location Calgary Number of Employees 42 Size 15,000 sq. ft.

Specialties In-house bakery, butcher shop and restaurant

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March 2017 Canadian Grocer

STORE OF THE MONTH

A growing grocerant A new full-service dining room takes the spotlight at Calgary’s Bite Grocer & Eatery

By Christina Reynolds Photography by Nathan Elson

March 2017 Canadian Grocer

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NOT MANY GROCERY STORES have been able to tap into the popularity of weekend brunch. But Bite Grocer & Eatery, in Calgary’s inner-city Inglewood neighbourhood, has done just that. The independent grocer’s “bennies”—two poached eggs served on an in-housebaked English muffin with hollandaise sauce and a choice of gravlax, back bacon, pulled pork or seasonal vegetables—are attracting an expanding crowd. “Brunch is one of our fastest growing segments,” says Philip Wong, the store’s general manager.

So it’s no wonder, then, that the gourmet grocer started the new year by redesigning its foodservice space to add a 53-seat, full-service dining room— complete with cozy banquettes—as well as a new takeaway counter to complement its existing 59-seat café and coffee bar. “Brunch is special,” says Wong, who formerly worked as a chef. “People need to be serviced and given time.”

Other big news for 2017 is the store’s refreshed name, Bite Grocer & Eatery, a welcome change from the old moniker, Bite Grocerteria & Café. “I found the term ‘groceteria’ really meant nothing to people and was more confusing than anything,” says Wong.

He believes that replacing “café” with “eatery” better represents the store’s sit-down dining experience.

Bite has come a long way since opening just over four years ago in a 15,000-sq.-ft. light-filled space on Inglewood’s busiest street. Today, you’ll still find the specialty products Bite is known for, but more products are moderately priced. And yes, there’s a freezer packed with locally sourced duck fat, foie gras and Wagyu beef, but the shelves are also stocked with a range of competitively priced grocery essentials, organic produce and local craft goods.

Wong continues to increase product selection— particularly in the popular natural foods category— and says inventory management has been his biggest challenge. He’s made what he calls “simple investments” by way of new shelves and storage space so shopping aisles are less cluttered and more in line with the modern-industrial vibe of the store.

“The first month after we changed the shelves, our grocery-product sales increased by 18%,” says Wong.

That said, he believes the most important factor for growth is the new restaurant. “The menu helps tell the story—no one knows we’re smoking our own salmon,” he says. The restaurant also showcases the in-house bakery, where bakery manager Laura Harvey and her team whip up English muffins (Wong calls them “little pillows of love”), as well as the in-house meat shop, where butcher Leanna Edwards and her assistant can often be seen cutting down whole carcasses of local beef. (Both departments do a good wholesale business for local restaurants, says Wong.)

Bite’s restaurant menu is designed to be practical and local, and it keeps food costs in mind. For example, the “Inglewood Breakfast” features all housemade items, comes in at just $10—and it’s available all day. Can there be a tastier marketing opportunity than that? CG

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March 2017 Canadian Grocer

STORE OF THE MONTH

Q+A

KELLIE TAYLOR, BITE’S SOUS CHEF, ON WORKING WITH HER TWIN SISTERS ALEXIS AND CASSIDY (THEY’RE PART OF THE FRONT-OF-HOUSE TEAM) AND GETTING CREATIVE IN THE KITCHEN. WHAT HAVE YOU LEARNED WORKING WITH YOUR SISTERS? How hard they work and that they have such good attention to detail. Alexis has built such good customer relationships and Cassidy can brighten someone’s day in like two minutes.

HAVE A SEAT Bite’s sit-down dining experience is cozy and inviting.

WHAT ARE YOUR FAVOURITE RESTAURANT ITEMS TO COOK? We make a lot of comfort food—we’ve added chicken pot pie, meatloaf and tacos to the new menu. The chicken club wrap with kale, bacon and caesar dressing is also really popular.

We’ve had people say, “Don’t you dare take that off the menu.”

WHAT DO YOU LIKE MOST ABOUT YOUR JOB? The creativity. We have a daily pasta feature that allows us to experiment with flavours. I’ve also learned to believe in myself here—I’ve worked in other kitchens that have knocked me down.

WHAT MOST EXCITES YOU ABOUT THE NEW FULL-SERVICE RESTAURANT? I think it will bring in more people that don’t know about us. This neighbourhood is pretty quiet in the evening so, hopefully, more people will come for dinner.

March 2017 Canadian Grocer

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Our 65+ members follow the OCB Brewing Philosophy.

Which means that our over 350 beers are naturally brewed in small batches using no chemical additives, ďŹ llers or preservatives. That means your customers get fresh, great-tasting beer from real people that are passionate about their craft.

ontariocraftbrewers.com Please enjoy our products responsibly.

PEOPLE Who you need to know

Something’s brewing Garnet Pratt Siddall is crafting a market for small-batch beer

By Christina Reynolds Photography by Jaime Hogge

The Facts Garnet Pratt Siddall Position President & CEO Side Launch Brewing Co. What’s New? Recently elected chair of Ontario Craft Brewers

IN EARLY SUMMER 2014, Garnet Pratt Siddall had just finished dinner with family at the Huron Club restaurant in Collingwood, Ont. when she spotted a man at the next table with a pint of dark lager.

It was the moment she had been waiting for since Side Launch Brewing Co. Ltd., the craft brewery she leads as president and CEO, started shipping product in May: she saw a stranger drinking her company’s beer for the first time. “I went over and thanked him for his support,” she says. “And then I paid for his beer— that was my own little personal joy.”

Pratt Siddall felt the same surge of excitement when she hired her first two employees (she now has 32) and when the brewery’s first set of expansion tanks arrived at the Collingwood headquarters.

More milestones have come quickly: The Ontario Craft Beer Guide, written

by Robin LeBlanc and Jordan St. John, has called Side Launch the top brewery in Ontario and the Canadian Brewing Awards named Side Launch the Canadian brewery of the year for 2016.

In 2002, when Pratt Siddall moved back to Toronto from New York, she never imagined that, by 2010, she’d be living in Collingwood and starting a craft brewery. But she’s certain the decision to trade in her investment-banking career March 2017 Canadian Grocer

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PEOPLE at National Bank Financial for one featuring a 28-foot-long reclaimed wood bar was the right one.

“We’ve reached a size in a little over two and a half years that a lot of craft breweries don’t even necessarily want to get to,” says Pratt Siddall. “We’re not in the league of Muskoka, Beau’s, Steam Whistle or Amsterdam—even if that may be where we see ourselves in a number of years—but we’ve grown quickly.” In fact, Side Launch continues to add expansion tanks to relieve capacity constraints.

Pratt Siddall estimates that only 6% or 7% of all beer sales in Ontario are craft.

So for her, that leaves room to grab market share from the major brewers who are seeing declining sales, as well as the import market, where she doesn’t see strong growth. November’s internal numbers showed that sales are fairly evenly split for Side Launch’s four key products: wheat beer makes up more than 30% of sales, pale ale accounts for around 30%, dark lager is about 20%, and Mountain Lager is around 20% (set to grow once the capacity issue is solved). “2017 will be all about the Mountain Lager,” she says.

As a former triathlete, Pratt Siddall has also been able to bring her passion for cycling to the business: Side Launch sponsors the Collingwood Cycling Club.

On Sept. 30, the brewer will hold its third annual Growling Beaver Brevet bike ride to raise funds for two Parkinson’s charities:

30 SECONDS WITH:

GARNET PRATT SIDDALL

WHAT’S YOUR FAVOURITE CELEBRATION? Oktoberfest has always been big. We’ve done two huge Oktoberfest parties at the brewery—we had 500 people last year. It’s a good fit because our beers are German style, with the exception of the pale ale. Our brewer, Michael Hancock, learned to brew from a German brewer.

WHAT SIDE LAUNCH BREW DO YOU REACH FOR? One of the dark lagers is my go-to.

We also do a different specialty beer each quarter; the Germanic Bock that we did last spring would edge out the dark lager if we made it year-round.

FOR NEWBIES, WHAT DO YOU RECOMMEND? We get people coming in all the time saying, “Hey, I drink Coors Light, what would you recommend?” The Side Launch Mountain Lager is the first one we have them taste. Then the wheat beer or the dark lager. The last one you’d have them try is the pale ale as the hop taste is the most different from a big macro beer.

MILESTONES

Michael Medline, CEO and president of Empire Co.

Appointment As this year begins, we’re pleased to announce some executive

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March 2017 Canadian Grocer

Appointment

appointments at George Weston Ltd. Galen G. Weston has been named CEO, taking the reins of a company that his father led for decades. Luc Mongeau has been appointed president of Weston Foods—one of Canada’s largest bakery companies. Sarah Davis, who was chief administrative officer at Loblaw, will become president of the business. / The Canadian Produce Marketing Association has hired Jeff Hall to the newly created role of food safety specialist. / Aimia’s chief executive, Rupert Duchesne, is taking a four-month leave of absence.

COO David Johnston will be interim

the Davis Phinney Foundation and ParkinGo Wellness Society. Raising $200,000 in 2015 and $300,000 in 2016, the event is close to Pratt Siddall’s heart; just over two years ago, her husband, Evan Siddall, was diagnosed with Parkinson’s. “It’s all connected,” she says. “We’re making sure what we’re doing is right for us.”

As of December 2016, Pratt Siddall also became chair of the board of directors for the Ontario Craft Brewers. There she’ll advocate for more than 80 of the province’s small brewers. As the first woman to chair, she plans to launch a new “women in brewing” initiative that will gather data about how many women are in the industry, what their experience is, what’s working—and what isn’t.

“There are more women on the brewing side of things, but not so many on the business side,” she says. “I wouldn’t have thought that, in moving from investment banking—also very male dominated—to craft brewing that I’d have more bad experiences. I would’ve thought the brewing industry would have more open-minded people.” Still, she doesn’t want to paint a negative picture of the industry.

“At the end of the day, how can I say things are that bad? Obviously, I have enough credibility to be elected chair of the OCB.” It’s a role she’s certainly earned, and she intends to perform it while keeping Side Launch’s motto, “From hard work comes good things,” top of mind. CG

Award

president of the company. / Former Canadian Tire executive Michael Medline has been named the new CEO of Empire Co. Medline takes over at Empire from Francois Vimard, who has ser ved as interim CEO since last summer when Marc Poulin abruptly left the company. / Duncan MacNaughton, a former Walmart Canada executive, has joined Family Dollar as president and CEO. / Domenic Pilla, former Shoppers Drug Mart CEO, has joined McKesson Canada as CEO.

Stores Some new store openings to

Stores

Shows

know about: independent grocer Galleria Supermarket opened its third location in Oakville, Ont. The Toronto-area store specializes in Korean food, but also sells other ethnic fare. / Nations Fresh Foods celebrated the grand opening of its third store in Mississauga., Ont. The multicultural grocer follows a mandate to “think globally, eat locally.” / Kainai Marketplace, located in Alberta’s Blood Reserve, celebrated its grand opening in December. It’s the area’s first grocery store. / Giant Tiger celebrates the official opening of its first store in Weyburn, Sask. It features 20,000 sq. ft. of selling space.

MILESTONES for their contributions to boosting economic growth in Ontario. Among the winners: First Ontario Shrimp (Campbellford), Honey Pie Hives & Herbals (Milford), MacKinnon Brothers Brewing Co. (Bath), Pyramid Ferments (Picton) and U-Pac Agri-Sevice (Picton). The award was presented by Minister of Agriculture Jeff Leal. / Sixteen new regional champions received top honours at Agropur’s 28th Club of Excellence gala. The event pays tribute to dairy farms that recorded the best milk quality results among Agropur members.

Agropur president Serge Riendeau with Marie-Josée Turcotte and Régis Lepage from Jolipré Holstein Farm at Agropur’s Club of Excellence gala

Awards Stone Hearth Bakery was a big winner at the Halifax Chamber of Commerce 2017 Business Awards. The bakery won the city’s best small business of the year as well as the prize for most innovative company. Stone Hearth is known

for its handmade kosher bread and also for its training of people who might otherwise struggle to find employment. / The recipients of the 2016 Premier’s Award for Agri-Food Innovation Excellence were honoured in Belleville, Ont. Recipients were recognized

Shows A couple of events to add to your calendar: The Canadian Federation of Independent Grocers’ annual Grocery & Specialty Food West conference and trade show takes place in Vancouver on March 20 & 21. The show brings grocer y retailers and manufacturers together to discover the latest innovations and trends influencing their busi-

Giant Tiger opened its first store in Weyburn, Sask. last month

nesses. Learn more at cfig.ca / The Convenience U Carwacs Show takes place at the Toronto Congress Centre on March 7 & 8. It’s Canada’s largest trade event bringing together all areas of the convenience, gas and car wash industry. Learn more at ccentral.ca.

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More Ideas on page: 16 Price predictions 17 The future of packaging 18 Farm Boy turns 35 19 Tea time

IDEAS

Retailers, suppliers, shoppers, insights

URBAN PLANNING What’s the appeal of urban concept stores and who’s shopping at them?

By Chris Powell

LONGO’S

IT’S JUST AFTER 6 P.M. ON A GLOOMY midJanuary Wednesday, and the Independent City Market in Toronto’s King West neighbourhood is packed with young professionals picking up dinner. There are enough Canada Goose parkas here to cause serious concern for the bird’s long-term survival.

One of three “urban concept” stores operated by Loblaw in downtown Toronto, it’s smaller than traditional grocery stores, catering to condo and townhouse dwellers in the neighbourhood.

In addition to standard grocery departments like produce and meat, the store also does a brisk business in prepared foods, with customers stocking up on soups, salads and home meal solutions.

From small-format stores built around convenience and speed to click-andcollect services to same-day online delivery, new grocery formats and innovations have exploded over the past decade as the industry caters to Canada’s growing urban population.

Just over 80% of Canadians live in urban areas, according to Statistics Canada. And Environics Analytics shows Canada is also home to approximately 9.5 million millennials, with many residing in major urban markets. It is this

The Market by Longo’s

March 2017 Canadian Grocer

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WANT MORE? Visit CanadianGrocer.com for extended coverage on many of our IDEAS stories

group that’s driving much of the innovation within the grocery sector, says Bruce Winder, cofounder and partner in the Toronto consultancy, Retail Advisors Network.

Winder says millennials’ emphasis on convenience— as well as fresh, local and high-quality food—has forced grocers to adapt. “They’re in charge now,” he says.

“It poses significant challenges for grocers, who historically have built most of their stores based on a big-box model more like a factory than a grocery store.”

Isabel Morales, manager of consumer insights at Nielsen, says millennials are increasingly ditching cars— 12% don’t own a vehicle, compared with 8% of the total population—which, coupled with busy schedules, is creating a greater need for convenience in grocery.

Morales says meal solutions are the leading factor influencing where customers shop, coupled with location and extended hours. Prepared meals and “grocerants” are particularly attractive to millennials, she says.

Grocers, meanwhile, say catering to urban customers has taken on added importance. “Given how stringent the competition is out there, everybody’s looking for different avenues to service customers, says Rosanne Longo, spokesperson for the Toronto-area chain Longo’s.

Longo’s played a key role in developing Canada’s online grocery industry with its 2004 purchase of Grocery Gateway. She says that led to the development, two years later, of its urban concept store, The Market by Longo’s. Currently, there are five stores scattered throughout downtown Toronto. “[Grocery Gateway] paved the way for us to go into the downtown core because more people were recognizing the brand,” says Longo. “When the condo boom was happening, it was a good opportunity to take advantage of some properties that were available.”

Most of The Market by Longo’s stores are located in commercial office towers, enabling them to cater to shoppers at key dayparts (as they arrive at work, at lunchtime and as they shop for their evening meal after work). The market stores are also smaller than a regular Longo’s (typically between 5,500 and 7,000 sq. ft., versus 35,000 sq. ft.). While The Market by Longo’s offers staples such as fresh produce and meat, the product assortment is typically smaller than that of a full-size store, and caters to time-starved professionals with a variety of ready-to-eat foods.

A new Sobeys Urban Fresh store opened in Toronto last March “It’s really for grab-and-go stuff or stock-up items if you’re on your way home,” says Longo.

Retail consultant Ed Strapagiel says downtown dwellers in small condos have insufficient space to store a full week’s worth of groceries, meaning smaller baskets and more trips to the store.

Most major grocery chains, including Loblaw and Sobeys, have launched smaller urban stores, part of what Strapagiel describes as a broader trend that is also manifesting itself in segments such as hardware and furniture stores.

Sobeys, for example, has eight Sobeys Urban Fresh stores in Toronto and Ottawa. These stores range in size from 12,000 to 30,000 sq. ft. and are characterized by what senior director Mario Moccia calls a “store-within-a-store” design.

Sobeys Urban Fresh caters to a variety of constituencies, from health-conscious shoppers to on-trend foodies and gourmet shoppers, says Moccia. Products include staples like produce, meat, bakery and dairy, while an on-site kitchen cranks out prepared meals. Some locations even offer pizza made fresh in a stone pizza oven, a made-to-order noodle bar and a Nutella Café.

Winder applauds the innovation occurring in the industry, but says many of the new offerings remain a work in progress.

“When your business model changes, it takes a few years to really refine it.”

A NUMBERS GAME HOW MUCH WILL CANADIANS PAY FOR FOOD THIS YEAR?

By Meagan Kashty

A NEW REPORT FROM Dalhousie University says the average Canadian family’s food expenses could climb by as much as $420 this year.

Let’s break it down by item:

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March 2017 Canadian Grocer

EXPECTED PRICE INCREASES:

Dairy and Eggs

Fruit and Nuts

Bakery and Cereals

Meats

2% TO 4%

3% TO 5%

0% TO 2%

4% TO 6%

SHUTTERSTOCK; SOBEYS

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IDEAS engage, entertain and educate consumers in real time.

EXPANDING AN EXPERIENCE

Perfect packaging A NEW MINTEL REPORT SHOWS HOW TO MAKE A PRODUCT’S PACKAGING AS APPEALING AS WHAT’S INSIDE

By Meagan Kashty

According to Mintel, packaging design is becoming more important as brands try to go beyond simply creating customer connections to also drive experiences. In Belgium, Coca-Cola introduced a roll-fed label that allowed the user to create a bow.

Mintel sees packaging as a “key component to the cr eati on of m em or ab l e consumer shopper and user experiences, which, either in-store or in-use, build on brand values,” such as fun, community or authenticity as a way to motivate purchases.

STRUCTURE AND BRANDING According to Mintel’s report, more than one third of U.S. adults think high-quality food packaging is an indicator of product quality. The time is now for brands to roll out unique packaging that helps them stand out on the shelf and support brand identity.

“Good packaging protects your product.

Great packaging protects your brand,” says the report.

CAMPBELL’S

GET SMART Future-forward packaging is gaining momentum across the world, with 50% of U.S. consumers interested in scanning food packaging to learn more about the provenance of fresh produce. Mintel sees current opportunities for brands to

EXTEND MY BRAND Complacency kills, as the old saying goes. While gaining loyal customers is an important element of success, a company can leverage that loyalty to extend a product portfolio beyond traditional categories. Take Campbell’s, for example.

The soup company is branching into ethnic cuisine, cooking sauces and meal preparation, using flexible packaging for a distinctive look while leveraging the brand name. Mintel’s report shows that 26% of Canadians would be interested in trying restaurant-branded lunch options available at retail stores—just another indication that if a respected company forges a path into another category, its customers will follow.

Vegetables

Fish and Seafood

Restaurants

Other Food Items

4% TO 6%

4% TO 6%

2% TO 4%

4% TO 6%

T OT? HO OR N Here’s what is trending in the food business

TOP SELLER YOU SAY TOMATO: Have customers ever complained about the tasteless tomatoes in your store?

The Ontario Greenhouse Vegetable Growers in partnership with Vineland Research and Innovation is searching for a solution for tastier, commercially grown greenhouse tomatoes. As they look into how the flavour of tomatoes has changed with the industrialization of agriculture, is this a promising turn for the humble tomato?

SHELF-STABLE FOR THE BIRDS: Last April, members of the Canaryseed Development Commission of Saskatchewan were excited when Health Canada announced that canaryseed was approved for human consumption. But before the seeds hit shelves, producers need to overcome one hurdle: finding commercial de-hullers.

EXPIRED SWEET STUFF: Walmart Canada recently took a hit when Alberta Health Services accused the retailer of keeping and selling food that was potentially contaminated by the Fort McMurray wildfire. The health agency says Walmart has been charged with 174 violations of the province’s Public Health Act.

NUMBERS GAME – SOURCE: CANADA’S FOOD PRICE REPORT 2017

March 2017 Canadian Grocer

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+

WANT MORE? Visit CanadianGrocer.com for extended coverage on many of our IDEAS stories

Farm Boy hopes to have 15–20 stores in the GTA by 2020

JEFF YORK TOOK OVER AS THE CO-CEO OF FARM BOY IN 2009. Since then, it has evolved into a 23-store chain employing more than 3,000 people. On the eve of its 35th anniversary, Canadian Grocer talked with York about his plans to turn Farm Boy into a $1-billion company within the next decade, expanding in Toronto and rolling out “cool” private label products.

YOU’VE BEEN WITH FARM BOY SINCE 2009. WHAT’S YOUR PROUDEST ACHIEVEMENT? I was with Giant Tiger for 20 years and took it across Canada.

When I was 46, I wanted to join a company that had a strong team and was ready to grow. We put the muscle in, and now we’re seeing the team flourish and our leaders develop. We’ve said that we want to be a $1-billion company—we’re putting the teams together and we’re going to do it.

WHAT’S THE TIME FRAME FOR THAT?

FARM BOY’S MILESTONE MOMENT

It all depends on available real estate. Personally, I’d say it’s going to be 2020–22. Retail is all about momentum—once you get going, then people come. It’s a lot of fun seeing our team develop and people step up.

As the Ontario chain marks its 35th anniversary, CEO Jeff York looks to the future

We’re working on five sites in Toronto. It’s slow because [of city regulations]. They want you at a certain setback, they want the retail at the front, and we found out we have to put a green roof on one of our stores. Toronto’s an international city, and it wants things to be built to a certain standard. I’m fine with it,

By Chris Powell

P LL RESULTS THERE’S A LOT OF GROUND TO COVER IN YOUR STORE—WHAT WILL YOU FOCUS ON?

By Meagan Kashty

It’s an unfortunate reality for grocers that, while your department managers and staff can strive to put customers first, there’s only so much square footage you can concentrate on. So it’s time to prioritize. What will give you the most bang for your buck when it comes to catering to your customers?

18

March 2017 Canadian Grocer

We asked readers on CanadianGrocer.com:

What departments will be front and centre for your retail marketing strategies this year?

40% B E A U T Y

CONVENIENCE IS KING. TIME-PRESSED CUSTOMERS WANT READY-TO-EAT OR READY-TO-HEAT MEALS, SO I’LL BE BOOSTING MY HMR OFFERINGS.

MEAT

FISH

DAIRY

CHEF

PRODUCE

REGISTER

F R O Z E N

ADVICE. FROM 22% EXPERT PHARMACISTS TO IN-STORE

CHEFS, MORE EXPERTISE FROM DIFFERENT DEPARTMENTS WILL BOOST BASKET SIZE AND LOYALTY.

WITH A PUNCH. 21% PRODUCE WITH CONSUMERS

LOOKING FOR MORE HEALTHY OPTIONS, FRESH PRODUCE WILL BE AT THE FOREFRONT IN MY STORE.

GAINS. FROM 17% NON-FOOD BEAUTY TO FLORAL, THERE’S

MORE OPPORTUNITY TO GROW SALES IN OTHER NONFOOD OFFERINGS.

FARM BOY

YOU’VE RECENTLY OPENED STORES IN WHITBY AND PICKERING. HOW KEEN ARE YOU TO EXPAND INTO TORONTO?

IDEAS but we’ve got to build it into our planning time. I have about 15 locations I’m working on in the GTA; some are ready to be built.

In the next three years, the plan is to have 15 to 20 stores in the GTA.

YOU HAVE A LOT OF GROWTH OPPORTUNITIES IN ONTARIO. ARE YOU CONSIDERING EXPANDING INTO OTHER PROVINCES? I’ve put a business case together to move West. The rents are finally coming down in Alberta. There’s a business model there, but we’re going to concentrate on the GTA because we’ve had great acceptance of the brand and the rents are starting to come down. We have 13 stores in Ottawa—we could put 50 stores into Toronto. If we can’t put 50 stores in Toronto [which York defines as Burlington to Oshawa] it means we don’t know what we’re doing. Just using a [Highway] 407 strategy, there are 15 locations we could put full-size Farm Boy stores in.

ARE THERE ANY RETAILERS, EITHER WITHIN YOUR CATEGORY OR EVEN OUTSIDE THE GROCERY INDUSTRY, THAT YOU TRY TO EMULATE? I kind of like Marks & Spencer Simply Food. They’re really neat, small stores and they’re very busy. I don’t really like entire stores, but I like aspects of stores. We pick off the stuff from the competition that we like. I like the Wegmans food bars; there’s a similarity between theirs and ours. They make the food taste great while working inside a retail box. You look at certain produce stores that really do a good job: West Coast produce stores, specialty meat places. I’m more about taking best practices from really good retailers, incorporating them into our box and making the whole thing work.

PURE LEAF; ONE HOP KITCHEN

HOW DO PRIVATE LABEL PRODUCTS FIT INTO YOUR BUSINESS? We have 600 private label SKUs. One of our board members is the ex-president of Trader Joe’s, so we’re rolling out really cool private label items all the time in grocery. It’s all premium private label—no cheap no-name stuff. We’re sticklers about no added preservatives. It’s not about the shelf life, it’s about great tasting food that people aren’t afraid to feed their kids.

There’s a trust in what we market, because it’s our name. CG

THE GENERATOR WILL TEA TAKE OFF IN SALES AND POPULARITY THIS YEAR?

By Meagan Kashty

DID YOU KNOW THAT CANADIANS aged 19 to 37 make up more than one third of tea drinkers in Canada? What’s more, tea drinkers are becoming more experimental with flavours and varieties.

Pure Leaf is taking advantage with a new range of bagged and loose teas.

SEEING THE BIGGER BASKET How will the news stories of the day impact the way you do business?

By Meagan Kashty

BUG BENEFITS YOU MAY BE FAMILIAR WITH INSECT ADVOCATES in recent years encouraging shoppers to try incorporating bugs into their diets. The Food and Agriculture Organization of the United Nations supports entomophagy—the eating of insects—because of its environmental and health benefits (insects are known to be high in nutrients).

But it’s tough convincing Canadians not to squirm at the idea of eating bugs. Part of the problem is how they’ve been presented; for example, when it comes to mealworm croutons or sea salt–flavoured crickets, it’s hard to see past the antennae or legs. But today’s insect advocates are aiming to package the protein in ways that make it easy to add to the average person’s diet such as One Hop Kitchen’s Bolognese sauces or CrikNutrition’s cricket protein powder.

It’s a lot easier to try something new when it’s not staring you in the face.

MAN ON A MISSION SIX MONTHS AFTER MARC POULIN WAS OUSTED, Empire Company announced that former Canadian Tire CEO Michael Medline would bring Sobeys into the future.

Medline only lasted two years at Canadian Tire, which might make some skeptical of his ability to lead the struggling grocery retailer, but he brings more than just an outsider’s perspective to the new gig. With experience in both technology and loyalty, Medline’s forward-thinking nature just might be what Sobeys needs.

SAFETY, PLEASE THE CANADIAN PRODUCE MARKETING ASSOCIATION has appointed of Jeff Hall to the newly created role of food safety specialist. In the role, Hall is responsible for food safety efforts including crisis management and developing training programs. It’s an indication that food safety is a priority for CPMA, and it should be for grocers as well.

Meagan Kashty is Canadian Grocer’s online editor.

March 2017 Canadian Grocer

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Discover more new innovations, items, solutions and trends at the Sweets & Snacks Expo than anywhere else.

With access to the most candy & snack people and products, you’ll gain a real competitive edge and grow your business.

Your “center” is here.

Register Now sweetsandsnacks.com

GLOBAL GROCERY Stewart Samuel

RETAIL TECHNOLOGIES TO WATCH What does the supermarket of the future have in store?

Here are three innovations to keep on your radar FROM DRONES TO DIGITAL signage, the scope and number of retail-focused technologies are growing. With new innovations on display at the recent Consumer Electronics Association (CES 2017) and National Retail Federation shows, it’s clear technology will impact the grocery store of the future. Here are three innovations that caught my eye over the past month.

While the launch of the Amazon Go store and other “walk-out technology” points to a future without physical checkouts, changes are likely to be more evolutionary than revolutionary. Given the cost implications, it will be some time before checkouts are radically redesigned. However, Focal Systems, based in Menlo

Park, Calif., is looking to speed things up with a shopping cart–mounted tablet.

Using technology that provides machine learning and computer vision, the tablet helps shoppers navigate a store, locates items on their shopping list and processes payment. It also tracks outof-stocks as the cart is pushed through the aisles. With several smaller retailers in California already using the system, the relatively low-cost technology could make wider adoption a reality.

For most retailers, the technologies of real interest are those with potential to drive sales. San Diego, Calif.-based Cloverleaf’s shelfPoint system aims to provide retailers with insight on what’s happening

at the shelf edge, as well as impact category performance.

Featuring LCD strips across the entire shelf, the idea is to offer visual marketing campaigns based on shoppers’ level of engagement and distance from shelf. The strips are equipped with optical sensors that gather shopper data including age, gender, ethnic group and time spent in front of the display, while emotional artificial intelligence technology (AI) identifies joy, sadness, anger, fear or surprise. Based on this data, ads are changed in real-time to drive shopper engagement and to provide deeper customer insight.

Some retail technologies are still in the concept stage.

Mercedes-Benz Vision Van

IGD

Mercedes-Benz Vision Van

was developed to support last-mile delivery in urban areas. Each van is equipped with storage racks that easily slide in and out for fast loading. Each package has its own location on the rack, which is programmed with the package’s final destination. A robotic arm loads each package onto a rooftop drone for delivery. Each drone has a range of around 20 kilometres.

Although the Vision Van r em ai n s a con cep t, t e st s involving autonomous delivery robots and drones are ramping up. Recently, 7-Eleven completed its 77th drone delivery in the U.S., with hot foods, cold drinks and OTC medicines among the most popular delivery items. For many retailers considering home delivery, drone technology could be a costeffective solution, although it will likely be several years before there is widespread commercial adoption.

The role of advanced retail technologies remains unclear.

With so many different products and services in development, it can be challenging to identify which ones will have staying power. What technologies will go beyond novelty to have lasting impact? The good news is that many companies are looking to partner with retailers, using stores as living labs. This provides grocers an opportunity to understand the innovations that can deliver a shopper benefit, operational improvement, or both. CG

Stewart Samuel is a program director at IGD in Vancouver. IGD is a leading source of insight and best practice in the food and consumer goods industry. Visit igd.com/retailsafaris to see how we can support your retail innovation.

March 2017 Canadian Grocer

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22

March 2017 Canadian Grocer

PHOTO CREDIT

How well did grocers fare in 2016? Well, it depends on where they did business.

Our annual Market Survey reveals the numbers, for better and for worse

T H E A N N U A L M A R K E T S U RV E Y 2 0 1 6

A MIXED BAG

By George Condon

any of us weren’t sad to bid adieu to 2016, what with all of its conflicts and uncertainties. Though 2016 could be considered less than a banner year for Canada’s traditional grocers, these retailers did manage to eke out a 0.9% increase in total sales compared to 2015. All tallied, traditional grocers rang up sales of just over $91.8 billion.

As the figures demonstrate, however, not all grocers experienced the same sales story. Canadian Grocer’s annual Market Survey, based on Statistics Canada data with estimates from Canadian Grocer, revealed a wide regional disparity, with Alberta’s total grocery store sales slumping 3.3% compared to 2015, while Quebec’s sales grew the most, by 2.7%. How did the rest of the country measure up? Grocers in British Columbia saw sales inch up 1.6%; Manitoba and Saskatchewan experienced a meagre 0.8% sales rise; Ontario sales were up 1.8%; and in Atlantic Canada, sales slipped by 1.7%.

The Market Survey tracks sales through the traditional grocery industry (chains and voluntary franchise groups), independent supermarkets, major banner convenience stores and unaffiliated independents. For the purposes of the survey, chain supermarkets are classified as any four or more stores with a single ownership, which includes a number of what the industry considers independent supermarket chains such as Longo’s, Quality Foods and Colemans.

Not included are grocery sales through mass merchandisers, warehouse clubs and specialty food stores, all of which have

M

taken bites out of supermarket sales for years. These retailers are showing greater sales increases than traditional grocery stores. For example, CIBC World Markets estimates Walmart’s grocery sales were up 8.5% last year, while Costco’s were up 10%. Although specialty food store sales took a slight dip in 2016, sales in this channel have climbed a not-too-shabby 22.3% since 2010.

So what’s behind the sluggish sales at traditional grocers?

One of the factors curtailing sales growth is that consumers continue to be focused on price. A recent study by Dalhousie University delving into the shopping habits of Canadians found that almost 70% of adults surveyed said they had become more price conscious over the past year. About 60% of these shoppers admitted to seeking more deals in grocery stores and 57% reported stocking up on sale items. As retailers respond to these shoppers with discount prices, sales growth is impacted.

Given Alberta’s current economic woes, a sales decline of 3.3% is not surprising, but Quebec’s robust increase of 2.7% is unexpected. In Quebec, supermarket chains and major banner convenience stores showed an increase of 3.9%, franchise (voluntary group) supermarkets were up 2.4% and only unaffiliated independents (mostly small stores) showed a decline of 2.4%.

Alberta, on the other hand, showed declines in all channels: chain supermarkets and major banner convenience stores were down 3.4%; franchise (voluntary group) supermarkets were down by 3.2%; and unaffiliated independents dropped by 2.9%.

Interestingly, despite a number of store closures across

10-YEAR GROCERY STORE SALES TOTAL SALES

SHUTTERSTOCK

(000s) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (EST) 2017 (FORECAST)

76,310,523 79,277,293 82,340,768 84,449,941 85,291,822 87,909,344 87,550,013 89,190,441 91,009,189 91,833,474 92,751,808

CHAINS

% Change 3.7 3.9 3.9 2.6 1.0 3.1 -0.4 1.9 2.0 0.9 1.0

(000s) 45,642,613 47,829,010 49,370,520 50,763,726 51,392,991 53,364,506 53,000,277 54,106,987 55,393,723 55,881,898 56,578,602

INDEPENDENTS

% of total 59.8 60.3 60.0 60.1 60.3 60.7 60.5 60.7 60.9 60.9 61.0

(000s) 30,667,911 31,448,283 32,970,248 33,686,215 33,898,831 34,544,838 34,549,736 35,083,454 35,615,466 35,951,576 36,173,206

% of total 40.2 39.7 40.0 39.9 39.7 39.3 39.5 39.3 39.1 39.1 39.0

March 2017 Canadian Grocer

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INNOVATION, INFLUENCE, LEADERSHIP, DEDICATION

“EVERY ROLE BRINGS NEW LEARNING AND NEW CRITICAL EXPERIENCES” Kathryn Matheson, VP of R&D and innovation, PepsiCo Foods Canada Winner 2016

ARE YOU A STAR WOMAN?

NOMINATIONS ARE NOW OPEN. DEADLINE TO ENTER

MARCH 31, 2017

FOR FULL DETAILS VISIT

www.CanadianGrocer.com/microsite/starwomen

March 2017 Canadian Grocer

24

T H E A N N U A L M A R K E T S U RV E Y 2 0 1 6

2016 SALES GROWTH AND SHARE BY REGION Sales were pretty sluggish for Canada’s traditional grocers last year, all tallied they managed only a paltry 0.9% increase. Some provinces fared better than others; for instance, while Quebec saw a healthy bump in sales in 2016, Alberta, Saskatchewan and the Atlantic Provinces dipped into negative territory.

CHAINS’ MARKET SHARE (of grocery store sales*)

2016 (est) (%) 79.0 36.8 60.0 72.3 76.4 73.4 60.9

Atlantic Provinces Quebec Ontario Manitoba/Saskatchewan Alberta British Columbia** Canada

* Does not include department store, food or specialty stores ** Includes Yukon, N.W.T. and Nunavut

2015 (%) 78.6 36.4 59.8 72.3 76.4 73.3 60.9 60.7

Last year, chain grocery stores across the nation saw barely any change in their market share, compared to 2015.

BRITISH COLUMBIA*

1.6% sales increase 15.1% national share ATLANTIC PROVINCES

****** *Includes Yukon, Northwest Territories and Nunavut

-1.7% sales increase 7.7% national share

MANITOBA ALBERTA

-3.3% sales decrease 13.7% national share

1.8% sales decrease 3.9% national share ONTARIO

SASKATCHEWAN

-0.6% sales decrease 3.0% national share

CANADA

0.9% sales increase 100.0% national share

In 2013, Alberta was one of Canada’s bright spots, posting a 2.1% sales increase when most other provinces were struggling.

In a revearsal of fortune, Alberta experienced the biggest sales dip in the country last year.

Canada, the year ended with more stores than in 2015.

In 2016, there were 2,516 chain supermarkets in Canada, up from 2,507 the year before, but there were 25 fewer major banner convenience stores. Quebec saw the most positive change with six more chain supermarkets, 60 more convenience stores and 71 more voluntary groups stores (franchises). It should be noted that a number of franchise stores in Quebec are smaller than average supermarkets, which negatively affects the total sales growth figure.

Ontario had two more corporate chain supermarkets, 79 fewer convenience stores, and 17 fewer franchised supermarkets. British Columbia had four more major banner convenience stores and four more voluntary group stores.

Denis Gendron, president of United Grocers Inc. says conventional stores are suffering in the face of discounters.

1.8% sales increase 31.9% national share QUEBEC

2.7% sales increase 24.7% national share

“The conventional model needs to be redefined to create a distinctive offering,” he says.

Industry analyst John Scott agrees that traditional grocers are losing ground to discounters as well as ethnic stores and drugstores with stepped-up food offerings. “This is a huge wake-up call for the traditional grocer,” he says. “The next year will be fraught with cost reductions and much slimmer margins, as the battle is joined in earnest by all competitors.”

Even though total sales increased slightly in 2016, some storm clouds remain on the horizon, from economic upheaval in Alberta to shoppers’ pursuit of bargains to increasing competition from retailers such as Walmart, Costco and Shoppers Drug Mart. Future growth in the traditional grocery industry seems uncertain, at best, with many challenges ahead.

March 2017 Canadian Grocer

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T H E A N N U A L M A R K E T S U RV E Y 2 0 1 6

CANADIAN GROCERY STORE SALES IN 2016 CHAINS INDEPENDENTS

CHAINS Supermarkets

ATLANTIC PROVINCES

Dollar sales

5,549,249

% of total

79.0

QUEBEC

Dollar sales

8,345,789

% of total

36.8

ONTARIO

Dollar sales

17,596,191

% of total

60.0

MANITOBA & SASK.

Dollar sales

4,563,873

% of total

72.3

ALBERTA

Dollar sales

9,620,647

BRITISH COLUMBIA*

% of total

76.4

Dollar sales

10,206,149

% of total

73.4 6,589

2,516

No. of stores Dollar sales

1,354,342

119,571

1,473,913

7,023,162

19.3

1.7

21.0

100%

2,264

1,989

4,253

6,288

13,437,861

903,429

14,341,290

22,687,079

59.2

4.0

63.2

100%

679

2,198

2,877

5,995

10,428,489

1,278,071

11,706,560

29,302,751

35.6

4.4

40.0

100%

694

559

1,253

1,998

1,640,464

108,347

1,748,811

6,312,684

26.0

1.7

27.7

100%

311

551

862

2,236

2,604,012

372,170

2,976,182

12,596,829

20.7

2.9

23.6

100%

186

676

862

2,032

3,338,216

366,604

3,704,820

13,910,969

793

377

No. of stores

1,634

1,084

290

No. of stores

971

558

187

No. of stores

55,881,898

% of total

60.9

* Includes Yukon, Northwest Territories and Nunavut

Total Independents

783

2,211

907

No. of stores

($000s)

1,562

473

No. of stores

Unaffiliated

188

381

282

No. of stores

CANADA

Convenience

Voluntary Groups

TOTAL STORES

24.0

2.6

26.6

100%

4,322

6,756

11,078

20,183

32,803,384

3,148,192

35,951,576

91,833,474

35.7

3.4

39.1

100%

EXPLANATIONS: Chain Stores: Four or more stores under single ownership.

Sales figures are Canadian Grocer estimates based on Statistics Canada data and include convenience and supermarket stores.

Store numbers from Canadian Grocer’s Who’s Who 2017 directory, and later information supplied.

Voluntary Groups: Franchised independents operating in major or secondary wholesale-sponsored group programs.

Store numbers from Canadian Grocer’s Who’s Who 2017 directory. Sales and market share data estimated by Canadian Grocer.

Not included: Food sales through department stores (mass merchandisers), drugstores and club stores.

There were nine more chain supermarkets in Canada in 2016 versus 2015, 25 fewer major banner convenience stores and 40 fewer unaffiliated independents.

SPECIALTY FOOD STORE SALES IN 2016 Specialty food stores (not included elsewhere in the Market Survey) in Canada experienced a slight dip (-0.4%) in sales last year.

However, since 2010 sales in this channel are up a considerable 22.3%.

2016

2015 249,039 1,392,209 2,716,266 218,029 507,509 914,539 5,997,591

Atlantic Provinces Quebec Ontario Manitoba/Saskatchewan Alberta British Columbia* Canada

% Increase 2016 / 15 240,376 1,510,290 2,586,054 225,395 514,916 944,080 6,021,111

SPECIALTY FOOD STORE SALES VS CANADIAN GROCERY FOOD STORE SALES - ($000) CANADA TOTALS COMPARISON

$91,833,474

3.6 - 7.8 5.0 - 3.3 - 1.4 - 3.1 -0.4

* Includes Yukon, Northwest Territories and Nunavut

PER CENT CHANGE - SPECIALTY FOOD STORE % Decrease 2016/2015 Canada..............

26

March 2017 Canadian Grocer

$5,997,591

% Increase 2016/2010 -0.4

22.3

$84,449,941

Specialty Food Store Sales

2010 Estimated

(est., $000s)

2016 Estimated

SPECIALTY FOOD STORE SALES

$4,902,634 Canadian Grocery Food Store Sales

Specialty Food Store Sales

Canadian Grocery Food Store Sales

â„¢

PHOTO CREDIT

HOW THE

WAS WON

OVERWAITEA PRESIDENT DARRELL JONES TALKS SAVEON-FOODS’ SUCCESS AND HOW HE EXPECTS THE POPULAR WESTERN BANNER TO FARE ON THE PRAIRIES

By Meagan Kashty

I

f you ask Darrell Jones how he’s changed his approach to the Overwaitea Food Group business over the years, he’ll tell you it’s been about learning to roll with the punches.

“I’ve learned how important it is to be adaptive and adjust your plans to fit a new reality,” says Jones, Overwaitea’s president and a 40-year veteran of the company. “Every day you open up the newspaper or turn on your television and there’s something new and exciting happening in the retail business.”

It’s an enterprising perspective for a century-old independent grocer (Overwaitea celebrated its 100th anniversary last year).

Langley, B.C.-based Overwaitea boasts about 150 stores, with its Save-On-Foods banner accounting for the majority of the real estate. The brand is so appealing that Overwaitea plans to convert most of its other banners to Save-Ons, with the exception of a few PriceSmart stores that specifically cater to the Asian demographic, as well as its upscale Urban Fare format.

What else does Overwaitea have going for it? An exceptionally loyal customer base. In 2014, BCBusiness ranked Save-On-Foods the most loved brand in British Columbia. And in 2015, a poll by Ipsos Reid named Save-On-Foods B.C.’s most trusted brand.

Not only that, last June, Gustavson’s national Brand Trust Index ranked Save-On-Foods the top supermarket in the Pacific region, beating out Walmart.

With accolades like that, it would be easy for Overwaitea to coast, but Jones certainly isn’t one to rest on his laurels. The company opened 13 new Save-OnFoods stores last year and it’s pushing forward with a Prairie expansion, hoping to win the same customer loyalty in Saskatchewan and Manitoba that it has won in British Columbia and Alberta.

Ambitious plans are in the works to open 40 Save-Ons in the two provinces over the next three to five years, including stores in Winnipeg, Regina, Saskatoon and Moose Jaw. March 2017 Canadian Grocer

29

missing from the stores in their area.” The goal isn’t just to open another store—it’s to open stores tailored to the area’s ethnicity and socio-economic background.

So, on a chilly Saturday morning in November, Save-On-Foods opened the doors of three new stores, marking the Western Canadian grocery chain’s Winnipeg debut.

Perhaps the most notable of the three is the 60,000-sq.-ft.

Northgate store, which the company says is “tailor-made” for Winnipeg.

The store is modelled after the chain’s newest format— Save-On-Foods International—which features a mix of mainstream groceries and “foods from around the world.” The International stores run about 25,000-sq.-ft. larger than a typical Save-On. Overwaitea first introduced the concept in Surrey, B.C.’s Fleetwood neighbourhood a little over a year ago. The Surrey store caters to a population where roughly half of the 400,000 residents are visible minorities, with one-third being South Asian. Selection-wise, the store carries 8,000 Asian products.

Save-On-Foods’ Northgate location follows a similar strategy, letting customers influence its product assortment. The store stocks nearly 6,000 international products.

Brenda Kirk, vice-president of store merchandising, told media on opening day that there are more than 36,000 FilipinoCanadians living in northwest Winnipeg. To cater to that population and other South Asian Canadians in the neighbourhood, Northgate carries more than 700 SKUs and the largest selection of rice in Western Canada.

To satisfy the large number of Eastern SEE IT MADE, KNOW IT’S FRESH European shoppers, smoked meats such Customers can literally watch their as kolbassa, sausages, jerky and pepfood being made at Northgate’s peroni are all made fresh at an in-store in-store commissary. smokehouse. Jones is also quick to call attention to the store’s perogy machine— PREPARED FOOD perogies, of course, being a staple in The Save-On-Foods Kitchen carries many Ukrainian diets. ready-made meals ranging from “We make nine different varieties,” he barbecue pork to duck dim sum, says. “Dessert perogies, traditional perohand-stretched pizza and nine kinds gies, cheeseburger perogies—they’re a hit.” of perogies. The store also features A fan favourite, says Jones, is a perogy the a frozen yogurt machine and a fresh staff created that’s filled with smoked tortilla machine. salmon and cream cheese—Eastern European meets West Coast.

SWEET SHOPPE There are also areas of the store An in-house team makes 12 varieties of dedicated to consumers with British fudge, freshly popped flavoured popcorn backgrounds (specifically a large selection (including a true north maple cinnamon of Tesco-branded products) as well as mix) and chocolate-dipped treats such products of German, Polish, Ukrainian, as licorice and sour keys.

Russian, Mexican, Caribbean and Middle Eastern origin. The goal is CHOICES, CHOICES, CHOICES to create a one-stop shop where cusThe store features more than 6,000 tomers of all ethnicities, ages and international food products, as socio-economic backgrounds can find well as 300 items from more than the foods they want.

60 local vendors.

Grocers usually place their stores in three different buckets, says Jones: full service, discount or ethnic. “I don’t buy

Overwaitea president Darrell Jones at the grand opening of Save-On-Foods International, Northgate in Winnipeg

30

March 2017 Canadian Grocer

A LOOK INSIDE SAVE-ON-FOODS’ NORTHGATE STORE

OVERWAITEA FOOD GROUP

Overwaitea’s aggressive expansion was spurred by Empire Company’s purchase of more than 200 Canada Safeway stores in 2013.

That meant “one less competitor for us and it presented new opportunities,” Jones said at the time.

On top of that, a little over two years ago Overwaitea purchased 15 stores from Sobeys (an Empire company) and last year, it took over a former Thrifty Foods location in Coquitlam, B.C. and bought three B.C. Marketplace IGA stores from H.Y. Louie.

Seem like a lot of movement? It was. And all carefully orchestrated; for instance, during the most recent store openings and acquisitions, a crew of Overwaitea staff was behind the scenes, simultaneously conducting market research on the new cities awaiting Save-Ons. Jones says that, prior to any expansion, Overwaitea does exhaustive research and spends considerable time trying to understand its new markets and refining what the new store’s offering will be.

“We spent about two years doing research for our Regina and Winnipeg stores,” says Jones. “Then, before we even ordered material or started construction, we went to the customers and asked them what they were looking for in a grocery store and what was

it,” he says. “You can give great value, great service and still provide the right ethnic mix.”

This fusion of formats is one of the reasons Save-On-Foods has been so successful. Jones says there are certain Save-On characteristics that are consistent across all of its stores, like the “Always Lowest Guarantee” price program, for example. The brand, however, is ready to adapt and change its product offerings and merchandising strategies to fit what the customer is asking for.

“There are two or three things that will be critically important to your customer no matter what: you need to give your customer exceptional quality, you have to give great value and you have to listen to what they want and give them that,” he says. “The basic things that made a grocer a good retailer in the past still make you a good retailer now, you just need to change how you deliver and make sure you do it better than you’ve ever done it.”

Following this approach was critical when Overwaitea ventured into online shopping and grocery delivery a few years back. If customers don’t come home to the best-quality produce, “they’re never going to come back to us,” says Jones. “When you do home delivery, it makes you even more conscious of making sure you’re giving the best quality to your customers.”

Jones’s strategy appears to be paying off. Ipsos’s Michael Rodenburgh says customers feel a sense of pride in SaveOn as a familiar day-to-day presence.

The Gustavson study showed that Save-On ranked especially high in social equity and sustainability, which includes contributions to communities and treatment of workers and suppliers.

The latter may be why more than 13,000 Winnipeggers applied for positions at the three new Save-On stores.

While expansion into central Canada is certainly not out of the question, for now, Jones says, Overwaitea is going to concentrate on its Western Canada stores and upcoming openings in Saskatoon and Moose Jaw. “We don’t want the same cookie cutter store everywhere,” he says, adding that the company is focused on spending the time and money to make sure its stores are a good fit for the communities they’re serving.

“The first thing you should ask yourself every day is, ‘Is this the best thing for the customer?’ ” says Jones. “If you do that, I think you’ll live to fight another day.” CG

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March 2017 Canadian Grocer

Times They Are

Changin’

S

elling groceries is an increasingly competitive business. What are retailers doing to stay in the game? Here, we take a look at how technology is being used to elevate the in-store experience—and keep shoppers coming back.

By David Sherman

Illustration By Christy Lundy

The headlines are as chilling as a frozen food section: “Amazon to Add 100,000 Jobs as Bricks-and-Mortar Retail Crumbles” and “Where Did my Supermarket Go?” screams the New York Times, while others chime in with “The Supermarket is Dead. Long Live the Supermarket.”

Though the demise of bricks-and-mortar grocery retail is surely exaggerated, there is little doubt conventional grocers are feeling the effects of unprecedented competition now coming at them from all directions. A growing online marketplace, warehouse clubs and mass merchandisers, cheap fast-food restaurants, convenient meal-kit delivery services, farmers’ markets and pharmacies with expanding food offerings are all taking a bite out of grocers’ sales. To these woes add the much-coveted younger shopper who finds supermarkets about as appealing as his father’s Buick.

To survive in a rapidly changing, fiercely competitive market, experts advise that grocers must enhance the in-store experience and employ new technologies to elevate shopping, pump up March 2017 Canadian Grocer

33

consumer loyalty and, ultimately, improve the bottom line.

Conventional grocers in Canada are certainly having a tough slog of it. According to Canadian Grocer’s annual Market Survey (see page 22), the number of chain supermarkets grew marginally, but sales were down in many regions and, all tallied, the nation’s traditional grocers only managed a meagre 0.9% lift in total sales last year.

“Many people are asking, ‘Will supermarkets survive or will we do everything online?’ ” says Carlo Ratti, director of the Massachusetts Institute of Technology’s Senseable City Lab. “On the one hand, we will increasingly use digital services— ideally mobile apps—to purchase down-to-earth products such as toilet paper, laundry soap, milk, etc.,” says Ratti, who partnered with Coop Italia, Italy’s largest supermarket chain, at Milan’s World Expo 2015 to present Future Food District, a digitally-augmented supermarket. (The same concept was applied in real life to Milan’s Supermarket of the Future, which opened for business in December.)

“But on the other hand,” he continues, “I see a blossoming of ‘experiential’ shopping. Think about choosing fresh food produce: we will always enjoy going to a physical store where we can touch, smell, etc. Stores can become increasingly focused on providing us with unique experiences.” Ratti adds that the design of experiential supermarkets has never been as important and that, even if high-tech retailing becomes more prevalent, it doesn’t spell the end for physical stores.

Sylvain Charlebois, professor of food distribution and policy at Dalhousie University, agrees. “There is still a need for traditional food retailing,” he says. While clicking online for groceries is convenient, there are many consumers out there who will continue to find the smell of freshly baked bread, the extravaganza of colours in the produce section and the sensual necessity of squeezing a tomato or a melon too much to pass up.

For Milan’s Supermarket of the Future, the physical and digital come together in a state-of-the-art shopping environment. Featuring touchscreens within the aisles, shoppers can navigate through product categories to search for items, find product info and discover promotions. Tables filled with fruits and veggies are interactive by way of movement-detecting sensors; if a shopper picks up an apple, screens positioned above the table display key information on the fruit, including its origins, nutritional info and even tips for its disposal at home.

“Online shopping has made us addicted to data—so we need to find new ways to bring data to the physical world,” says

34

March 2017 Canadian Grocer

Technology is changing how we shop (and not just online). Clockwise from top left: A drive-thru supermarket concept from Russia; Scan and Go at Walmart; Amazon Go; and Coop Italia’s Supermarket of the Future.

Ratti. “In the future, we’ll be able to discover everything there is to know about the apple we are looking at: the tree it grew on, the CO2 it produced, the chemical treatments it received and its journey to the supermarket shelf. We can use technology to get a better understanding of the production chain and to have a closer, more personal relationship with the products we buy and eat.”

On this side of the pond, U.S. grocer Kroger is testing a so-called “digital shelf edge” project, the aim of which is to deliver a more personalized experience through sensors and analytics. According to the Wall Street Journal, shoppers can receive tailored offers via their mobile devices as they move through the aisles, and they can interact with small colour screens fixed on shelves to help them find products on their mobile shopping list. The retailer is reported to be expanding the pilot program this year.

Even online players recognize the value of providing a compelling in-store experience. Amazon, of course, grabbed headlines late last year when it announced Amazon Go, the online giant’s first foray into bricks-and-mortar food retailing. The 1,800-sq.-ft. test store in Seattle, Wash. features what Amazon touts as “the world’s most advanced shopping technology.”

Seemingly the ultimate in grab-and-go convenience, the store boasts no lines and no checkouts—shoppers simply use the Amazon Go app to enter the store, then anything they pick up is added to their virtual cart and charged to their Amazon account upon exiting. The company explains that computer vision, deep-learning algorithms and sensors combine to achieve what it calls “just walk out technology.” Amazon

isn’t revealing its plans for the format but some reports say the behemoth will roll it out to 2,000 locations.

Scan and Go is another variation of checkout lane-free shopping. With Scan and Go, shoppers use an app to scan the barcode of items they add to their carts, pay for them via their mobile device, and then simply present their receipt to staff as they leave the store. Sam’s Club in the U.S. is currently using Scan and Go with its parent, Walmart, also testing the technology at some of its stores. (Walmart originally introduced Scan and Go a few years back, but abandoned it when customers reported the app too difficult to use.)

On a much simpler scale, many retailers are employing technology via social media to better interact with shoppers and drive them to their stores. Whole Foods, Tesco in the U.K. and Walmart’s Seiyu in Japan have taken to Twitter to open a dialogue with customers. Seiyu asked customers which products they felt should be sold for less and then lowered prices on 100 items for four weeks. Tesco asked customers for favourite recipes.

In some instances, stores are becoming drive-thru destinations. Going beyond click-and-collect, one Russian inventor recently filed a patent for a true drive-thru supermarket where

customers can drive up to an available bay (something like a gas bar), select groceries from a rotating vertical shelf and place them on a conveyor belt that carries the items to a cashier for checkout. Voila! Shopping without the bother of getting out of the car. While the idea may seem a little far-fetched, who would’ve thought a few decades back that we’d be using phones to pay for groceries or that there could be stores bereft of cashiers?

Despite all the technological innovation and investment to help bricks-and-mortar grocers stay competitive, for a lot of retailer’s, it’s still a game of wait and see, says Stewart Samuel, program director at IGD Canada. Some are inhibited by the costs, and others, by their unfamiliarity with the technology.

“As technologies gain scale, the costs will come down,” says Samuel. “There’s a lot of testing, a lot of prototyping… hard to say what’s a fad and what will be very useful.”

Without a doubt, however, traditional grocers that offer a compelling in-store experience will have an edge; after all, there will always be shoppers who want to smell freshly baked bread and squeeze those vine-ripened tomatoes. CG Next issue we delve into the non-tech solutions traditional grocers are using to woo shoppers.

March 2017 Canadian Grocer

35

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CONGRESS CENTRE

Stroll more Aisles:

38 Diving into deli sales 39 Fabulous fermented foods 40 Inside clean labels

AISLES Products, store ops, customers, trends

Deli

DRUMMING UP DELI SALES Today’s deli goes beyond cooked chicken and lunch meat

By Rebecca Harris

ISTOCK

THINGS ARE REALLY COOKING in the deli department. In the United States, deli is the fastest-growing perimeter department, with convenient, innovative products continuing to be key elements of the department’s success, according to the What’s in Store 2017 report by the International Dairy-Deli-Bakery Association (IDDBA).

In Canada, deli departments are seeing growth across a number of categories, according to Nielsen. Prepared salads (+6%), natural cheese (+4%) and refrigerated entrees (+4%) are leading the way in dollar sales.

While grocery retailers have long branched out from humdrum lunch meat and rotisserie chicken, there’s still a world of opportunity to boost sales at the deli counter.

March 2017 Canadian Grocer

37

AISLES Deli

PREPARED FOODS “A big opportunity continues to be in the whole area of convenience,” says Mary Kay O’Connor, vice-president of education at IDDBA. “People are incredibly time-pressed today. And we’ve got a faction of people who don’t cook, so they’re more comfortable buying semi- or fully-prepared foods from the deli.”

While ready-to-go meals are already a deli staple, there’s room to capitalize on demographic trends. According to Nielsen, 70% of the meals millennials eat happen at home, and more than 40% of these consumers prefer fast, easy-to-prepare meals.

“There’s an untapped opportunity to gain market share in the nutritious, portable and ready-to-eat meals market that retailers could fill via their deli solutions,” says Isabel Morales, manager of consumer insights at Nielsen Canada.

Grocers can also put more emphasis on global flavours—Mexican, Thai and Middle Eastern. “Millennials are looking to try different foods and they’re very adventurous in their eating,” says O’Connor.

“That’s something grocers should really take advantage of, and put together menus that rotate every week. It will give [shoppers] a new reason to come in.”

ENTERTAINING OPTIONS For a number of years, Longo’s has offered convenient, freshly made meals and gourmet dinners to go. Today, the grocery chain is also emphasizing convenience in the meat and cheese section, particularly for shoppers entertaining at home.

“We’ve seen a lot of opportunity around [at-home] entertaining, so we’re pairing foods to provide solutions to our customers,” says Joey Bernaudo, Longo’s director of deli and bakery. For example, a deli cheese island might incorporate different charcuterie items, olives and antipasto, or jellies and compotes that pair well with a particular category of cheese.

Then, on top of the deli cheese island, Longo’s will feature relevant items from other store areas. Over the holidays, for instance, Longo’s Signature Brie was merchandised with Brie bakers. “We try to make those connections between the products so that it’s easy for the consumer and makes sense for the category as well,” he says.

CLEAN LABELS Having deli products labelled with “clean” ingredients is another way to pump up sales.

The What’s in Store 2017 report notes that

all generations want more natural, organic, antibiotic-free, and non-GMO foods, as well as proper labelling.

According to the report, simple and clean ingredients are cheese purchase drivers, with more than half of shoppers preferring cheese with no additives or preservatives, and 30% of consumers wanting organic choices.

“There is an opportunity for retailers to do some pretty important messaging around [health benefits], to inform customers about how these foods can meet their health and dietary needs,” says O’Connor.

the more successful you’ll be.”

O’Connor notes that deli departments have an unusually high turnover rate, which is an expensive proposition.

“Whatever you can do to develop a strong orientation program, provide training, and encourage professional employee development to [retain] staff and keep them engaged with your customers I think is a really big opportunity.”

Longo’s, for one, recognizes the value of having knowledeable staff manning the deli counters. The retailer employs cheese masters who have taken courses to build their product knowledge. “They’re able to help [shoppers] navigate the cheese aisle and speak to pairing options, or provide a recommendation if someone has a flavour profile in mind,” says Bernaudo. “That really helps customers try new things and get engaged.” CG

STAFF ENGAGEMENT Having engaged staff is a critical area of opportunity, says O’Connor.

“People are actively seeking advice and recommendations around food choices,” she says. “So, the more engaged and informed your staff are,

A deep affection for deli TEMPTED BY ITS CONVENIENCE and abundant options, the deli department is getting lots of love from Canadians. Take a look at the Nielsen data below to see how categories such as cheese, prepared salads and dips are doing.

Deli sales in Canada 52 weeks to December 10, 2016

Latest 52 Weeks

52 Weeks Year Ago

$ (000’s)

$ Vol % Chg

Unit Units Vol (000’s) % Chg

$ (000’s)

Unit (000’s)

1,989,390.9

4

337,079.0

4

1,915,864.2 322,721.5

343,486.2

3

105,026.0

9

334,162.5 96,389.7

REFRIGERATED/DAIRY

1 NATURAL CHEESE - EXACT WEIGHT 2 DIPS - PREPARED PROCESSED MEAT

2

LUNCHEON MEAT - EXACT WEIGHT

1,209,196.1

240,292.8

1

1,184,388.6 236,959.7

BACON & SUBSTITUTES

576,963.8

-0

111,467.7

-1

578,482.9 112,383.6

SAUSAGES - EXACT WEIGHT

409,769.4

1

79,090.8

0

406,109.2 78,739.1

307,698.0

-4

80,773.3

-6

320,171.5 85,813.0

3

WIENERS

HOME MEAL REPLACEMENT 235,318.5

4

30,783.4

2

227,338.5 30,200.9

PREPARED SALADS

156,324.8

6

43,081.6

4

147,367.5 41,460.1

PIZZA & SUBS - REFRIGERATED

22,245.3

-3

4,404.5

-4

ENTREES - REFRIGERATED

4

1. More cheese please, Canadian shoppers say.

Natural cheese is up 4% in both dollars and units.

2. Good times for dips. Prepared dips have climbed 9% in units and 3% in dollars.

3. Wiener woes.

The humble hot dog has hit hard times—dollar sales are down 4%, units are down 6%.

22,848.6

4,570.8

4. Lots of shoppers are grabbing prepared salads.

These items are up 6% in dollars, 4% in units.

NIELSEN: NATIONAL, ALL CHANNELS, ALL SALES (EXCEPT N.L.)

38

March 2017 Canadian Grocer

KARTHEIN’S ORGANIC Karthein’s Organic Unpasteurized Sauerkraut is prepared the old fashioned way, in labour-intensive small batches.

Unpasteurized or raw cultured means the sauerkraut is never subjected to heat, as Karthein believes the high temperatures destroy naturally occurring digestive enzymes and beneficial bacteria.

PRICE: $5.99

AISLES Fermented foods

CUISINE SOLEIL Rouyn-Noranda, Que.-based Cuisine Soleil has a simple mission: to produce gluten-free and allergen-free products made with local, organic ingredients. Cuisine Soleil combines traditional kraut flavours with the super foods of the day in its matcha and kale variety.

PRICE: $7.99

Sauerkraut city

by Meagan Kashty / Photography by Brandon Gray

IT’S NO SECRET THAT fermented foods were poised for growth in 2016.

Foodies have long praised their benefits, which include promoting gut health, optimizing the immune system and acting as a natural detoxifier. Last year, drinkable fermented foods such as kefir, kombucha and authentic ginger beer made their mark at events like the Canadian Health Food Association show, among others.

This year, thanks to rising food prices, consumers are looking for affordable fermented food alternatives that provide similar health benefits. And, according to Mintel’s “Global Food and Drink Trends,” consumers will seek comfort from modernized updates of age-old formulations and flavours.

Enter sauerkraut: a traditional Eastern European cabbage side dish fermented by layering raw cabbage with salt. Served with meats or as a sandwich topping, cabbage could be the next super veggie.

Toronto-based West End Food Co-op certainly thinks so. The urban independent hosts threehour sauerkraut and kimchi workshops where attendees learn the history and theory behind fermentation. Here are more sauerkraut products waiting for their moment in the spotlight:

WILDBRINE

ONTARIO NATURAL Josh Whitehead and Caroline Pilon make their locally sourced sauerkraut in Guelph, Ont. It’s available in a kimchi style, adding an Asian kick to the traditional side dish. Kimchi plays on shoppers’ desire for different flavours while promoting digestive health.

Wildbrine got its start in 2010 when one of the founders was tasked with developing large quantities of kraut for cancer patients as part of a non-profit project. Sauerkraut is still Wildbrine’s claim to fame, with flavours such as Brussels sprouts, cauliflower and beets, but the company also produces kimchi and salsas.

PRICE: $12.64

PRICE: $14.99 March 2017 Canadian Grocer

39

AISLES

CLEAN UP IN AISLE 1, 2, 3…

With no sign of slowing down, what’s next for the clean-label movement?

By Chris Powell

THE AVERAGE GROCERY SHOPPER READS “no” a lot these days: Product labels boast “No artificial colouring or flavouring,” “No preservatives,” “No artificial sweeteners,” “No MSG” or “No nitrates.”

It’s all part of a sweeping trend towards so-called clean labels, driven by health-conscious consumers seeking products with a short list of ingredients that have easily pronounceable names.

Clean label is a broad term, encompassing everything from shorter ingredient lists to naturally sourced, recognizable ingredients to the absence of “unnatural” ingredients. The term, though common within the industry has little meaning for consumers, so companies also convey clean traits through descriptors like “authentic,” “artisanal” and “homemade.”

According to Euromonitor International, clean-label

products will generate global sales of US$180 billion by 2020.

“Naturally healthy food is becoming increasingly important to many consumers,” said John Madden, Euromonitor’s global head of ingredients research, during the 2016 presentation “The Clean Label Revolution: The Industry Responds.” “Consumers are also looking back to the days before processed foods for inspiration regarding healthy and unadulterated diets.”

And shoppers are also willing to pay a premium for clean products. A recent study conducted by Ingredient Communications found that, out of 1,300 consumers in Europe, North America and Asia-Pacific, 73% would be willing to pay more for foods featuring “recognized and trusted” ingredients.

Denver-based Clean Label Project (CLP), is going a step further, expanding the definition to include product purity.

The non-profit organization uses lab tests to identify trace elements of contaminants such as mercury and arsenic, as well as food additives, artificial colours and Bisphenol A (BPA) in select products. CLP’s purview is limited to baby foods (board chair Doug Porter says the organization’s scope is currently “an inch wide and five miles deep”) but there are plans to expand into pet food and beyond.

Increasingly, major food manufacturers are jumping on the trend. Cereal giant, Kellogg, for instance, has pledged to stop using artificial food colouring and flavours by 2018, while Campbell’s recently launched a clean-label soup line. This may be due to a growing aversion to “Big Food,” particularly among millennials. The numbers tell the tale: A 2016 report from Rabobank said the 10 leading processed food companies in the U.S. have lost 4% market share over the past four years.

“It all equates with trust, and we’re seeing a huge shift in trust right now,” says Jo-Ann McArthur, president of Toronto-based Nourish Food Marketing. “The baby boomers trusted ‘Big Food’: the Campbell’s and P&G’s and Unilever’s of the world. You now have millennials for [whom] it’s the opposite—they don’t trust Big anything.” She adds that the clean-label trend is becoming the price of doing business.

Ultimately, however, clean label is about what’s inside the package. “You can convey that story,” says McArthur, “but the proof of concept is when they turn it around and see that ingredient list.” CG

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March 2017 Canadian Grocer

Nourish Popped Granola with Quinoa

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Start the day off right

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KELLOGG’S SPECIAL K Nourish Popped Granola with Quinoa comes in two varieties: Dark Chocolate Coconut and Mixed Berries. Containing no artificial colours or flavours, it’s perfect with yogurt, in smoothies or as a standalone snack.

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CHECKING OUT

U.K. LESSONS Can we learn from Britain’s grocery woes?

CANADIAN GROCERS HAVE much to learn from Britain’s experience over the past five years, says industry analyst David Rogers, president of U.S.-based DSR Marketing Systems Inc. In an opinion piece sent to Canadian Grocer, Rogers writes: “Despite the obvious differences of geography, population density and the (current) absence of the German hard discounters from the Canadian scene, there are some lessons to be learned.”

Although the U.K. supermarket industry is further along the curve in terms of both e-commerce and hard discount price impacts than Canada’s, both markets share similarities, writes Rogers. Both industries are highly competitive and both countries have recently experienced demographic and lifestyle changes that have produced major shifts in shopping habits, such as fewer stock-up trips (as average household sizes decline), more emphasis on convenience and fresh foods, and the dimin-

42

March 2017 Canadian Grocer

ished appeal of centre-store products and brands. Finally, both countries have seen the overdevelopment of large-format stores that are now less appealing to shoppers than they once were.

In Britain, Rogers writes, these changes have led to price reductions and deflation, driven by discounters Aldi and Lidl (grocery prices are now 6% lower than in 2014). That has resulted in squeezed profits, worsened by “fashionable” but unprofitable digital investments, and drastic cutbacks in new store openings.

Hopes that inflation will be restored by the declining British pound may be offset by the entry of Amazon Fresh into the U.K. market and more store openings

by Aldi and Lidl. (The latter now have a combined market share of 10.4%, according to the Kantar Worldpanel.)

The general responses of the “big four” U.K. retailers have been cost-cutting, price reductions,

THE U.K.’S “BIG FOUR” HAVE CUT COSTS, REDUCED PRICES, INVESTED IN CONVENIENCE STORES AND PURSUED MERGERS

George Condon is Canadian Grocer’s consulting editor.

He’s based in Toronto. condug@sympatico.ca

and a focus on core operations.

There have also been major investments in the development of convenience stores—most successfully by Marks & Spencer (Simply Food) and Tesco (Express, One Stop), and renewed interest in mergers aimed at improving buying terms and operational efficiencies. The latest example is the Tesco/Booker merger (Booker is primarily a wholesaler to c-stores and restaurants).

The major U.K. chains “have no choice but to continue with their digital investments—because of the arrival of Amazon Fresh and, possibly, Amazon Go—but there has been a recent shift in emphasis from (at best) marginally profitable click-and-deliver to click-andcollect. That is, the ‘last mile’ burden is being put back on the British consumer,” Rogers writes.

But what’s in store for Canada’s retailers?

“The Canadian industry is arguably in a better position because of the current absence of Aldi and Lidl and, for reasons of geography, it has a healthier, small(er) chain and independent sector than does the U.K,” writes Rogers.

Amazon Fresh, however, is just around the corner and looming price wars in North America and Europe will be driven by the competitive conflict between Amazon and Walmart/Jet.com. This promises to keep pressure on prices and margins in Canada, even if the arrival of Aldi and/or Lidl continues to be delayed.

So what are the lessons for Canada? Rogers says the country’s food retailers should reinforce their focus on operational efficiencies, take a hard-headed approach to online investments, and pursue market research that keeps retailers in touch with rapidly changing consumer behaviours, preferences and shopping patterns.

Rogers has a compelling point of view, don’t you agree? CG

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