Size Demographic Characteristics and Customer Profiles Section 1
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SECTION 1 Size Demographic Characteristics and Customer Profiles Section 1 The Canadian Grocery Industry Size Demographic Characteristics and Customer Profiles In Section 1 the content will help to provide Drugs and gas stores (g-stores) such as Petro- producers and processors with a rounding in Canada, Shell, and Imperial Oil. the fundamentals of the retail food environment in Canada. In order to develop and introduce Section 1 will address the following areas in new food products that meet market needs, order to give the participants an understanding it is critical that producers and processors of the Canadian retail food industry. have an understanding of various segments that comprise the food retail environment in 1. Size of the retail market/market share by Canada. channel/segment/region Section 1 will provide a survey of the various 2. Channel growth/number of stores by types of food retailers, from big box stores, segment/region to mass merchants, to independents, to convenience stores (c-stores), to drug and 3. The types of retailer - fresh, dry, frozen, specialty stores. The range of retail distribution grocery, meat, organic or specialty options available to a producer or processor in the Canadian retail food sector is changing on 4. The changing competitive landscape - a regular basis and a thorough understanding new entrants/opportunities and current knowledge of these options can be critical to a producer or processor. This 5. Profit and margin expectations - grocery change is evidenced by the recent purchase of store mark up to warehouse margins by SunOpta Food Distribution by United Natural channel Foods of the U.S. 6. Food retailers objectives - turns to The content provided will focus on the size returns and nature of the Canadian Grocery Industry by channel, by province and by region. The 7. The role of distributors and brokers - distribution options to be reviewed will include DSD versus warehouse national retail food chains such as Loblaws and Sobeys; regional food chains such 8. Retail policies and procedures - as Metro, Safeway, Overwaitea, HY Louie packaging to recalls, sampling, in store (IGA), Federated Co-op, Longo’s; and major signage, charity spend independent food retailers by region, and small independent and specialty retailers. Included Content will also be provided on the changing in the content will be a review of the general demographics and psychographics of the retail products retailer channel such as Giant Tiger, consumer and will explore how retailers are Costco, Walmart; convenience stores (c-stores) responding to the needs and demands of a such as 7-Eleven, Mac’s; drug stores such as very diverse and rapidly changing consumer Shoppers Drug Mart, London Drugs, Rexall base. 1 Section 1 Size of the Canadian Retail Market, Market Share by Channel, Segment and Region According to Statistics Canada, in 2011 Loblaw’s Company Limited, Sobeys and Metro Canada’s 33.7 million consumers generated Stores controlled approximately 43% of the overall retail sales that totaled approximately retail grocery market in Canada in 2011. $451 billion, representing a 6% increase over 2008. However, food sales (excluding those However, in Canada, the retailing of food from beer, wine and liquor stores) registered is rapidly changing. Established general an annual sales increase of 4.3% over 2008 to merchandise and big box retailers that market reach C$88 billion or 19% of total retail sales. food products now include Costco, Walmart Retail food sales in 2013 are anticipated to and Target (125-135 stores opening in 2013) increase by 2% - 3%. as well as specialty retailers such as Shoppers Drug Mart, Rexall, Giant Tiger, Dollarama and The Canadian grocery retail market is currently gas stations. These general merchandise and dominated by two major national retail chains; big box stores are now directly competing Loblaw Company Limited (1,400 stores) and with the traditional grocery retailers. When the Sobeys (Empire Food) (1,337 stores). The sales of these general merchandise and other remainder are regional chains such as Metro retailers are considered the “share of stomach”, Stores (564 stores in Ontario and Quebec), the major grocery retailers take on a different Safeway (200 stores in Western Canada), appearance. Overwaitea (120 stores in Western Canada), Federated Co-op, Co-op Atlantic and the As the following chart indicates, in Western Northwest Company. Canada, national and regional food chain 2009 Retail Grocery Market Share 60 by Company Loblaw (Westfair) 50 Sobeys 40 Metro 30 Safeway 20 Overwaitea 10 Co-op Atlantic 0 Western Ontario Quebec Maritimes National TOTALS: 83.1% 94.7% 82.2% 98.4% 82.2% 2 Section 1 stores share of total retail food sales has It is important to note that while the majority steadily increased to approximately 75.6% of food sales in Canada are controlled by the in 2011. Sales through independent stores major nationals and regionals, approximately have decreased from over 27% of total food $14.6 billion in retail food sales are controlled sales in Canada in 2002 to just over 24% in by independent stores. For a small to medium 2011. Canadian food sales through unaffiliated size food company a small share of a $14.6 independents have varied from 3.2% to 3.8% of billion market can be very significant business. total sales since 2009. 2009 Market Share by Company Loblaw (Westfair) 40 Grocery and General Merchandise Combined Sobeys 35 30 Metro 25 Safeway 20 Overwaitea 15 Co-op Atlantic 10 Wal-Mart 5 Costco 0 Western Ontario Quebec Maritimes National TOTALS: 74.8% 77.9% 83.1% 85.3% 70.6% 3 Section 1 Channel Growth, Number of Stores by Segment, by Region There are four primary channels of distribution in the Canadian retail food sector: 1. Grocery Retail: major chains, independents, regional chains 2. General Merchandise/Big Box (Walmart, Costco, Target, Giant Tiger, Dollar Store) 3. Specialized Food Stores (health food, ethnic, bakery, meat) 4. Convenience (corner or “c” store, drug stores, gas stations) The following table illustrates the market share by channel in 2008. 80 70 60 Market Share by Channel in 2008 50 Sales ($Billions) Market Share % 40 30 20 10 0 Retail Grocery General Merchandise Specialty Food Stores Convenience Drug Stores Gas Stations What is interesting to note is the volume of sales of food products that are now being sold in general merchandise stores, drug stores and gas stations. These channels now represent approximately 20% of the food sold at retail in Canada. These channels, and the specialty food channels, represent a growing opportunity for small to medium sized companies that are searching for alternate channels of distribution. It is reasonably safe to assume that growth in the general merchandise and drug store channels will continue to increase over the next few years in western Canada and in Canada in general. Giant Tiger, Walmart and Dollarama are examples of stores that are now actively pursuing market share in the food industry. Walmart plans on doubling food sales in Canada by 2016, 73 new locations (4.6 million sq. ft) were added n 2012 and 39 are slated for 2013. Under pressure are the convenience and independent food stores. The number of independent and specialty food stores in Canada has been declining for a number of years as the major chains and general merchandise stores expand their food category. Health food retailers have come under pressure as the major chains and stores such as Walmart and Costco increase their selections of healthy-for-you products, natural and organic products. Most start up food and small food companies will target independent and specialty food stores for distribution. As the number of these outlets declines it will become increasingly more difficult to obtain placement on the shelf. In order to succeed it will become even more critical for vendors to ensure that their products have clear and distinct points of differentiation from their competitors. 4 Section 1 The Types of Retailer and Categories of Products and Departments The food market place in Canada is very diversified but this diversification offers both opportunity and challenges to the new and small food company wishing to develop a presence in the market. The opportunity exists in the fact that no matter how specialized a company’s food product, there is generally a retailer who has customers who will purchase the product. The challenge is to find the retailer and the distributor who will carry the product and sell it to the retailer. Another challenge is getting wide variety of general products ranging your message out to the consumers who could from clothing to sporting goods to auto purchase your product in order to create the parts. “pull” at retail. 4. Specialty Food (whole foods, health food Food retailers in Canada can be grouped into stores, vegetables and fruits, meats). 8 general categories. The categories may vary Stores in this category are generally in by name depending on how they are grouped the 1,500 – 5,000 sq. ft range and are together but as a rule most food retailers fall into noted for a focus on one or two product one of the following categories. categories. 1. National Mass Market Grocery Retailers 5. Independent Grocery (Meinharts, (Loblaw Company Limited and Empire Bruno’s). These operations vary in Food). The size of the chains is over 1,000 size but are usually 1,500 – 5,000 sq. stores and they are over 30,000 sq. feet ft. Normally independently owned but in size. These retailers have locations in usually part of a buying group such as each province. Distribution Canada or they belong to groups such as the Canadian Federation 2. Regional Grocery Chains (Overwaitea of Independent Grocers.