The State of ’s Grocery and Consumables Landscape By: Robin Sherk

THE RETAIL AND SHOPPER SPECIALISTS Table of Contents

Executive Summary...... 2

Macroeconomic Environment Overview...... 2

Consumer and Retail Spending...... 3

Channel Sales Growth...... 3

Key Consumer Trends Shifting Shopper Demand...... 4

Health and Wellness Maintenance...... 4

New Tastes, New Experiences...... 4

Omnishopping Demands...... 5

Elevated Value Expectations...... 5

How Leading Retailers Are Responding...... 5

Loblaw...... 6

Sobeys...... 7

Metro...... 8

Walmart Canada...... 9

Costco Canada...... 10

Dollarama...... 11

Amazon...... 12

Implications for Consumables Brands...... 13

References...... 14

1 The State of Canada’s Grocery and Consumables Retail Landscape By: Robin Sherk

Executive Summary Canada’s retail environment is healthy. However, the consolidated and intensely competitive market means retailers must serve fast-changing consumer demands to find growth. These shifts are evident in shoppers’ rising health and wellness concerns, their desire for new tastes, their demands for the flexibility that comes with omnishopping, and their elevated value expectations.

Several established players, including Loblaw and , are well-positioned against today’s consumer trends, while rising consumables disrupters such as and Amazon are quickly changing the conversation about value and convenience. For manufacturers to be effective partners, they must keep pace with these shopper shifts, recognize how retailers are positioning themselves, and communicate their own alignment.

Macroeconomic Environment Overview Canada’s macroeconomic conditions are solid. In the second quarter of 2017, real GDP grew at an annualized rate of 4.5%, the strongest pace in five years.1 This increase reflects good performance across industries, with the energy sector showing particular strength. The International Monetary Fund forecasts that Canada’s 2017 GDP growth will outpace that of the euro area, the U.K., the U.S., and Japan.2

The national unemployment rate of 6.3% in July 2017 is the lowest since 2008.3 At 5.8%, ’s unemployment rate is even lower, and the lowest rate the province has recorded since comparable statistics became available in 1976.4

Although the market is looking up, three potential disrupters are on the horizon: oil, the North American Free Trade Agreement (NAFTA), and housing prices. A change in any of one could have dramatic consequences on consumer spending and the retail environment at large.

The first potential disrupter is a change in oil prices. Canada is an export economy, and crude oil is its top export.5 The price of oil has fluctuated widely in the past three years, exceeding USD100 a barrel in 2014, but hovering around USD50 a barrel more recently.6 This variation creates unpredictability for the business environment in oil patch regions, particularly and . If prices fall much below USD45 a barrel for an extended period, it will cause pullbacks in business investment and drive a sense of job insecurity as companies get pinched.

Next is the current renegotiation of NAFTA, a long-standing trade pact among the U.S., Mexico, and Canada. This treaty is important because the U.S. is Canada’s largest trading partner, accounting for nearly three- quarters of Canada’s exports in 2015.7 Significant changes to this agreement could have a big impact on a number of sectors, ranging from agriculture and raw commodities to automotive. Clarity on the treaty’s status is not expected until later in 2018.

The third market disrupter is escalating housing prices. After years of rising prices — punctuated by a year- over-year increase of 14% — housing prices across Canada hit a record high in June 2017, according to the National of Canada and Teranet.8 Prices rose despite ongoing policy tightening designed to help contain rising mortgage debt. For instance, in October 2016, the federal government introduced tighter

2 stress tests of mortgage applicants to ensure they could handle monthly payments if interest rates rise. Higher prices require buyers to take on large debts, making households vulnerable if prices crash or if interest rates increase sharply.

Concerns about unaffordable housing prices are regional, with and the area having the highest increases. In June 2017, Toronto posted the highest year-over-year growth in housing prices at 29%. To help contain the acceleration, both of these markets have introduced 15% foreign-buyer taxes in the past year to discourage foreign investors from speculative buying. To date, and have not faced skyrocketing housing markets, but the introduction of the tax disincentives elsewhere may shift investment focus to Quebec.

Consumer and Retail Spending

As the environment looks healthy, Canadians are feeling good. In August 2017, consumer confidence reached a 10-year high (Figure 1).

Figure 1. Consumer Confidence in Canada

Canada Consumer Condence 130 2014 = 100 Oct 2017: 120 116.6 110

100

90

80

70

60

50 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Kantar Retail, Conference Board of Canada

This optimism is translating into strong retail spending. Retail sales growth was up 7% through September 2017, with year-over-year growth reported in every province and territory. Furthermore, consumers are showing a willingness to buy big-ticket items. After hitting record growth levels in May, auto sales were up 5% through July 2017.9

Looking forward, spending growth cannot last at the current rate because household income growth is not keeping pace. Between 2000 and 2013, household income grew an average of only 1.2% annually, suggesting that debt is fuelling much of the increased spending.10 By Q1 2017, TransUnion Canada reported that consumer debt (excluding mortgages) averaged CAD21,696 nationally, up 1.9% year over year.11 This increase is due to rising debt across bank cards, auto loans, and installment loans. On a regional level, Quebec is relatively less leveraged, reporting an average debt of CAD17,894, whereas Alberta’s borrowers carry the most debt at CAD27,534. While delinquency rates average a relatively low 2.6%, Canadians are stretching their finances because they feel good about the value of their homes and other investments.

Channel Sales Growth

While Kantar Retail expects a more moderate increase in retail sales, channel sales are still looking up. The channel sales compound annual growth rate (CAGR) forecast through 2022 is 3.1%, up from 2.6% in the previous five-year period (Figure 2). While this projection includes expectations for inflation and population growth, the underlying result is still a slow-growth environment. and drugstores will lag the industry average. Instead, consumables channel sales growth will be led by discounters, hypermarkets, warehouse clubs, and online retail. These four channels offer shoppers a distinct value and convenience proposition.

3 Figure 2. Canadian Retail Formal Channel Sales: 2012, 2017E, 2022E

CAD Billions Kantar Retail: Canadian Retail Sales ‘12-’17E ‘17E-’22E 300 CAGR CAGR

Supermarket 0.5% 0.8% 250 Online 18.7% 12.1% Mass Merch Ex SC -6.1% -1.2% 200 Hypermarket 7.6% 3.2% Drug 2.5% 2.4% 150 Discounter 6.2% 5.3% Department -4.2% -0.7% 100 Convenience 1.2% 2.0% Category Specialist 1.5% 3.0% 50 Cash and Carry 3.3% 5.9% Apparel 5.2% 4.6% 0 Total Canada KR Retail 2.6% 3.1% 2012 2017E 2022E

Source: Kantar Retail

Key Consumer Trends Shifting Shopper Demand The shifts in retail spending reflect four underlying consumer trends reshaping how Canadians will shop: health and wellness maintenance, new tastes and new experiences, omnishopping demands, and elevated value expectations. These trends are driven by changing household demographics, new technologies, and shifting shopper demands. The following section details how each of these trends is being expressed in Canada today and how Kantar Retail sees each unfolding.

Health and Wellness Maintenance

Maintaining physical health and a sense of well-being is a rising concern, particularly as Canadians age. The 2016 census found more Canadians are older than 65 than are children for the first time.12 This situation is particularly accentuated in Quebec, where the current proportion of seniors is outpacing the national average (18.3% versus 16.9%). Moreover, the share of those older than 65 is growing fast and will reach 23% of all Canadians by 2031, according to Statistics Canada projections. As the population ages, more Canadians will look for ways to maintain their strength and mobility and manage chronic conditions associated with aging, such as heart disease, diabetes, and arthritis.

The focus on health extends across cohorts. The Kantar Futures 2016 Global Monitor report finds that 77% of Canadians “actively take steps” to improve their health versus the global average of 64%. These efforts extend beyond diet and medicine, with 45% of adults pursuing an “active outdoor lifestyle” with “fresh air” as a key way of maintaining their health.

These rising health demands reflect Canadians’ shifting tastes for fresh, natural products. In 2016, 54% of Canadians bought more fresh produce than they did in 2015.13 This demand for natural products suggests heightened concerns with processed foods, as Nielsen finds that 54% of Canadians will pay more for products without “undesirable ingredients.”14

New Tastes, New Experiences

Beyond health concerns, new tastes also indicate Canadians’ desire for diverse experiences. Canada is very diverse. Approximately 21% of the population is foreign born.15 In the 2011 National Household Survey, East Asia was the top region of origin, followed closely by southern Asia and Southeast Asia. However, these three groups combined represented less than 40% of the country’s foreign-born entrants, underscoring the range of cultural backgrounds influencing cuisine, sport, health, beauty, and fashion in Canada.

Canadians are widely interested in exploring these new tastes. A 2016 Mintel study found that 73% of Canadians like to experience other cultures through food, and 57% are more open to trying new foods now than they were previously.16 Yet 38% said they have difficulty finding ingredients they need to make ethnic dishes — a retail barrier likely to diminish as businesses attune to shoppers’ changing tastes.

4 Changing regulation will also bring a new set of products into the mainstream. The government’s proposed legalization of recreational cannabis is set to start in mid-2018.17 Legalized cannabis will open up a multibillion- dollar industry and usher in new complementary social occasions that could create opportunities for categories ranging from gardening supplies to baking supplies.

Omnishopping Demands

Another significant trend changing how Canadians expect to shop is digital media. According to the Kantar TNS 2016 Connect Life survey, 87% of Canadians own a smartphone. And consumers now spend more media time on connected devices than they do on traditional media. With shoppers always expecting to be connected, their connected life is reorienting how they discover, select, and purchase products.

Online is becoming the place where grocery shoppers discover products and deals. A 2017 Kantar TNS survey found that household grocery shoppers are more likely to look for recipes or hosting ideas online than in traditional media. Canadians between the ages of 24 and 35 are already more likely to look for ads and deals online (53%) than in print (48%). Retailers including Rona and Jean Coutu are seeing success with digital flyers, further encouraging shoppers to move to this more targeted and flexible media.

Shoppers also want trip flexibility to buy online. Kantar TNS data found that 69% of Canadians would like to buy groceries and consumables online, and among those 25-34 years old, 85% are interested. The barrier is that a majority of Canadians do not enjoy shopping online today and many lack access to online grocery delivery or click-and-collect services. As more retailers build out their online capabilities, this barrier should diminish and flexible trip types should become more mainstream.

Elevated Value Expectations

Canadians are known for being quite price-conscious shoppers. According to the Kantar Futures 2016 Global Monitor report, 81% of Canadians say they always look for a sale or deal, 12 percentage points higher than the global average of 69%. Looking for a good deal does not mean that Canadians want the cheapest items available. Kantar Retail 2017 Canadian ShopperSpective data finds that 65% of household grocery shoppers believe value is what you get, not the specific low price paid. Additionally, 60% are willing to spend more for products that reflect their values.

Looking forward, shoppers’ value-for-money expectations are rising across three key dimensions. First, quality matters. Canadians want products that are healthy and natural, without having to pay premium prices. Walmart’s recently introduced Great Value Organics line looks to meet this expectation. Second, they expect greater trip convenience and flexibility without premium prices. Dollarama’s rapid store expansion and Amazon’s free same-day or next-day shipping for Prime members in key markets increase shoppers’ expectations for retailers to meet this demand. Third, they expect more relevant, useful services. This expectation may mean digital tools that target offers to specific shoppers’ preferences, such as the PC Plus digital rewards platform. Or it could mean in-store events or advice from an in-store pharmacist or wellness adviser. How Leading Retailers Are Responding As the retail environment transforms, each leading retailer and rising disrupter is taking specific approaches to adapt. The following section profiles how key consumables retailers and up-and-coming disrupters are positioning themselves against these key consumer trends.

5 Loblaw

As Canada’s biggest retailer, Loblaw operates in almost every major consumables channel, including , drug, discounter, hypermarket, warehouse club, and even specialty beauty. Loblaw is also growing as its “Live Life Well” mission and “best in food, best in health” strategy positions it strongly against each of the four trends.

In 2014, Loblaw acquired Shoppers Drug Mart, the largest drug and specialty beauty player in the country. The acquisition not only gave Loblaw a significant presence in the health service and beauty care space, but it also allowed the retailer to apply what it learned from that space to its hypermarkets. As shown by its 2016 acquisition of QHR, the country’s largest health records company, Loblaw is also investing in digital tools for prescription adherence and health records. To support health in its grocery stores and connect health to diet, the retailer also has dietitians at select grocery and hypermarket stores.

To serve new tastes, Loblaw acquired East Asian grocery banner T&T and Middle Eastern grocery banner ARZ Fine Foods. In addition to leveraging these retailers’ category expertise, Loblaw introduced their private labels into its conventional stores, thus adding a sense of both value and taste discovery while serving Canada’s diverse population. Loblaw is also not shy about supporting the pharmacist in dispensing medical cannabis, emphasizing to shoppers that this highly trained staff member is well-equipped to manage the substance.

Loblaw recognizes that shoppers expect trip flexibility through online shopping. To that end, the retailer launched a ship-to-home site for Shoppers Drug Mart’s beautyBoutique.ca in 2015. It is also focusing on grocery click- and-collect. After starting a pilot in 2014, Loblaw is aiming to have click-and-collect in 200 locations — spanning select supermarkets, hypermarkets, and warehouse clubs — coast to coast by the end of 2017. Next year, the retailer will also roll out grocery delivery at select , T&T, and Superstores, in partnership with .

To serve shoppers’ rising value expectations, Loblaw continues to grow its hypermarket and discount banners, which Kantar Retail forecasts will account for approximately half of Loblaw’s 2017 retail sales. While the retailer already has the two largest domestic private label brands in President’s Choice and No Name, it is also expanding its value label reach by expanding fresh prepared lines and ethnic lines, notably T&T and ARZ Fine Foods. Ultimately, Loblaw aims to better personalize its offers by leveraging two of the largest shopper loyalty card programs in Canada: PC Plus and Optimum. Management is investing heavily to share learnings between the programs, and will be combining them into a unified PC Optimum platform in 2018, allowing for cross-promotion among its grocery, discount, and drug stores. The retailer is also planning a paid membership program called PC Insiders, which will offer added conveniences, such as free shipping.

Source: Kantar Retail

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Relative to Loblaw, Sobeys has been slow to respond to shoppers’ shifts. Throughout its latest fiscal year, which ended June 5, 2017, comparable store sales and top-line sales growth were negative. Over the past year, the company brought in new management and implemented a major transformation initiative in May called Project Sunrise. This initiative is designed to streamline the organizational structure to speed decision- making, decrease procurement costs, and elevate operational efficiencies. The retailer is even re-evaluating its “Better Food for All” brand proposition with updated marketing messages expected by early 2018.

Of the four trends, Sobeys is best-positioned to meet health and wellness demands. The retailer has elevated its fresh grocery message and quality. Some of its concept Extra stores also employ Wellbeing Counsellors and offer group classes to help shoppers improve their nutrition. These offerings also help the retailer link its pharmacies to the food side of the store. Sobeys has approximately 350 in-store pharmacies and approximately 80 Lawtons Drug locations, furthering its credibility in the health space.

To test serving new tastes, the retailer opened the Chalo! FreshCo banner to target South Asian shoppers. More for testing and learning, the format has not been widely rolled out since its 2015 launch. Diversifying the tastes that Sobeys’ core banners serve remains an area of opportunity.

When it comes to online grocery, Sobeys’ well-established IGA.net platform has been selling groceries online for two decades. Two years ago, the retailer stepped up its investment in the platform. It relaunched the site, expanded the assortment to more than 30,000 items, and made the service available at approximately 85% of IGA stores in Quebec. Sobeys’ Thrifty banner in also sells groceries online. However, Sobeys has not rolled out online grocery services to the core Sobeys banner. Instead, the retailer is partnering with InstaBuggy, a third-party on-demand delivery service in the Greater Toronto area. While Sobeys has been in the game longer than Loblaw or Walmart, these competitors are positioning themselves to outmanoeuvre Sobeys in key markets such as .

Sobeys struggles in the value-for-money area. According to Kantar Retail Canadian ShopperSpective 2017 data, only 42% of Sobeys shoppers rated Sobeys as “excellent” or “very good” at offering “good value for money.” The retailer has recently replaced Club Sobeys with rewards for a consistent, national program. However, moving to a third-party offer limits the retailer’s ability to build personalized communication and targeted rewards. In terms of format development, Sobeys has been slow to expand its presence. FreshCo is still in Ontario only. A national expansion of this discount banner is widely anticipated, though the retailer has yet to reveal any plans.

Source: Kantar Retail

7 Metro

As a regional grocer, Metro aims to offer the “best customer experience” in its approach to serve shifting demands.18 By focusing on consistent execution, as illustrated in the “always in stock” promise of its discount supermarket banner, the retailer has posted modest, but steady growth in recent years.

Metro has also developed its fresh quality and health credibility. With respect to fresh, the retailer expanded its local sourcing program to Ontario in early 2017. The program helps improve supply-chain efficiencies and the quality of fresh foods. Similar to Sobeys, Metro’s credibility in health comes from its approximately 260 pharmacies under the Brunet, Metro Pharmacy, and Drug Basics banners.

To serve changing tastes, the retailer added two Adonis ethnic grocery stores in 2016, bringing the total to approximately a dozen locations. Expanding its quality prepared items, the retailer partnered with Première Moisson to integrate the latter’s premium bakeries into Metro stores in Quebec and Ontario. Metro is taking learnings from these partners to elevate its in-store selection with new and interesting flavours.

Where the retailer lags is online grocery. Metro started piloting grocery delivery and click-and-collect only in October 2016. Now it is moving quickly. In August 2017, the retailer announced plans to offer its online grocery services in major urban areas of Quebec, covering 60% of the population, by the end of 2017.19 In addition, the retailer acquired a majority stake in Montreal-based meal-kit service MissFresh. Metro is already accepting its loyalty card on the MissFresh website, and management sees an opportunity to offer the kits in stores, providing shoppers greater flexibility.

To drive value, Metro focuses on targeted promotions and expanding discount stores. The retailer has a strong digital shopper loyalty program in Quebec called metro&moi, while it offers Air Miles rewards in Ontario. To further respond to shopper demands, the retailer emphasizes its discount store base, particularly in Ontario, where represented 48% of the retailer’s stores in the province as of the end of 2016. Looking ahead, Metro will be opening more Food Basics and Super C discount stores than Metro supermarkets.

Source: Kantar Retail

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For approximately a decade, Walmart focused on converting discount stores into Supercentres with a full fresh grocery proposition. Supercentres helped the retailer sustain positive comparable store sales in recent years. Now this runway is running out. By mid-2017, Supercentres accounted for 80% of Walmart Canada’s store base.

Walmart now aims to reinvent the Supercentre proposition. This reinvention will involve elevating the Supercentre’s fresh food credibility with enhanced marketing and selection and a greater focus on execution to win the weekly stock-up trip. Health services are another important driver of Walmart’s future positioning. The retailer’s pharmacy and in-store clinics have a sizable presence, and both feature prominently in the latest Supercentre prototype, such as the one that opened in , Ontario, in 2016.

Walmart is placing big bets on becoming the online grocery leader. Leveraging resources and learnings from its global eCommerce division, the retailer now offers grocery pickup across four (soon to be five) markets, and is testing grocery home delivery and third-party pickup services in the Toronto area. As Walmart offers greater trip flexibility, it is not charging a premium for pickup.

Walmart is also building out its mobile experience to make shopping easier. It relaunched its mobile app in 2016 with online grocery features. This year, the retailer is testing Scan & Go mobile self-checkout services in select stores, with a goal of adding Walmart Pay functionality at some point. By building out fulfilment flexibility and digital shopping services, Walmart elevates its value-for-money appeal by saving shoppers time and hassle.

Low prices are the cornerstone of Walmart’s “Save Money. Live Better” brand proposition. Since 2016, Walmart has stepped up efforts to reduce everyday shelf prices, and has communicated that effort with “new lower price” marketing at the shelf, across the store, and in the media. At the same time, the retailer did not run its Anniversary Sale campaign in 2016, signalling greater focus on its everyday low price promise. Complementing these investments is the ongoing expansion of its higher-tier private labels, including its Your Fresh Market prepared and fresh foods offer and its Great Value Organic line.

Source: Kantar Retail

9 Canada

Costco’s warehouse club model supports shoppers’ value-for-money and new taste demands with its unique merchandise, bulk packs, and treasure hunt experience. And Canadians love Costco. Canada is the retailer’s biggest market outside the U.S. in terms of sales, and Canadian clubs rank among the retailer’s most productive. According to 2016 Kantar Millward Brown BrandZ data, Costco is the most trusted grocer in the country.

As Costco looks to grow, it is focusing on offering quality wellness items to differentiate itself in the market. These products include locally made, sustainable, simple-ingredient, non-GMO, fair trade, and organic items that are significantly different from conventional items and incorporate a “better for me,” “better for my community” appeal. At the same time, Costco is investing in health services to maintain relevance with aging Boomers who may have less use for the club’s bulk sizes. This investment includes focusing more on hearing centres and optical centres in addition to its already ubiquitous pharmacy services.

To widen its appeal, Costco is broadening its connection to small businesses. In 2017, Costco opened its first Canadian Business Centre in Scarborough, Ontario. Approximately 80% of the format’s items are distinct from those at other , as the format is designed to serve the specific equipment and pack-size needs of business owners. Management sees potential to add approximately a dozen of these clubs over the next 10 years.20

Costco is not particularly focused on online grocery. The retailer’s transactional website is more for big-ticket general merchandise. Costco has underinvested in its consumables eCommerce services compared with key competitors, including Loblaw and Walmart. Instead, the club relies on third-party startups, such as Comfort.to, to deliver groceries. The potential risk is that these startups (and the markups associated with them) could undercut Costco’s value-for-money reputation. To date, online grocery is small enough that the retailer has yet to experience any such drawbacks.

Source: Kantar Retail

10 Dollarama

This Montreal-based value discounter is growing its consumables reach to build traffic and baskets. In recent years, Dollarama added national-brand grocery and consumables items across departments, widening the appeal of its assortment. To allow bigger packs and higher-tier items, it raised the price-point limit to CAD4. In addition, the retailer started accepting credit cards and Apple Pay in early 2017.

Shoppers are responding. According to 2017 Kantar Retail Canadian ShopperSpective data, 54% of household grocery shoppers shop at Dollarama for consumables or groceries, putting its past three-month shopper penetration for consumables ahead of the Sobeys banner and the Walmart Supercentre.21 Dollarama’s sales growth rose 13.7% in fiscal 2015 and 11.5% in fiscal 2016. Management plans to open approximately 65 stores in fiscal 2017, with long-term plans to grow its store base approximately 36% to reach 1,700 locations. This double-digit performance coupled with aggressive expansion plans underscore the fact that Dollarama’s reach and disruption in the grocery landscape is just getting started.

Source: Kantar Retail

11 Amazon

Although Amazon.ca is the smallest consumables competitor of the companies profiled here, it is growing the fastest. Kantar Retail projects Amazon.ca’s overall sales will grow more than 25% year over year in 2017. Within consumables, Kantar Retail Canadian ShopperSpective data finds that 28% of household grocery shoppers shopped on Amazon.ca for groceries and health and beauty items in 2017. Amazon Family and Prime Day deals prominently feature diapers, beauty care, and other key consumables to hook young families and broaden shoppers’ consideration for buying more categories online.

Looking ahead, the retailer is widely expected to roll out its range of Prime membership shopping services in Canada, including Prime Pantry (box orders of household staples), Prime Now (on-demand delivery of key consumables and general merchandise), and Dash replenishment (automatic reordering through Internet- connected devices). These services will help the retailer reset shoppers’ expectations for what a convenience trip can mean.

Perhaps most disruptive will be Prime Fresh, Amazon’s online grocery service for the weekly basket. The retailer’s August 2017 acquisition of shows how serious Amazon is about quickly expanding its grocery capabilities and credibility. The acquisition will give Amazon a platform not only to better understand baskets, but also to serve fresh basket delivery and click-and-collect trips. Whole Foods Market’s dozen Canadian locations are concentrated in the Toronto and Vancouver area, making these the most likely launching pads for the service.

Source: Kantar Retail, retailer website

12 Implications for Consumables Brands Canada’s retail landscape looks steady, and shoppers are feeling good. However, the competitive environment is fierce and shoppers’ expectations continue to escalate as they seek added health support, new tastes, digital shopping flexibility, and stronger value for money.

Each of these four overarching trends has clear implications for manufacturers and brands in this shifting environment:

Articulate how you align to each retailer’s health and wellness efforts. This may involve cross-promoting your brand with store services, such as referring shoppers to the pharmacist for seasonal or product selection advice. Also recognize that product and packaging demands will change as the aging of the Canadian population accelerates.

With greater shelf-space pressure, be able to communicate your community connection. As retailers increasingly adapt their selection to serve distinct local audience tastes, understand and articulate how your categories and brands connect to key ethnic groups across Canada. Promote awareness of your brand with niche communities to reinforce relevance.

Explore new retail opportunities resulting from the legalization of recreational cannabis. Such opportunities may involve distinct seasonal events such as 4/20 or new holiday celebrations altogether. While direct marketing of cannabis will be restricted, brands will nevertheless experience changes in product demand that could impact the accuracy of their forecasts. Stores’ shopper profiles could also shift, creating openings for new types of solution displays.

Invest ahead of online grocery expansion. Several leading retailers are moving quickly here, so the competition for top talent in this nascent space will be fierce. Look at bringing in managers from the U.K. and France, markets that are further ahead in delivery and click-and-connect, respectively. Aligning with retailer efforts requires excellence in tactical execution, such as developing strong product pages and focusing on the right search terms. This kind of marketing can aid visibility and help support the convenience and value proposition of this new way of shopping.

Master mobile to make a stronger connection. As retailers build out their shopper relationships, they are leaning in on digital loyalty programs to drive relevance and avoid competitor price matching. To effectively hone offers, supplier teams will require greater analytics to identify who their key shoppers are and when and how to reach them. Relying on traditional trade tactics, such as flyers and paper coupons, will become less effective over time and increasingly out of step with retailers’ strategic focus.

13 References

1 “Gross Domestic Product, Income and Expenditure, Second Quarter 2017.” Statistics Canada. 31 August 2017.

2 “World Economic Outlook Update, July 2017: A Firming Recovery.” International Monetary Fund. 23 July 2017.

3 “Labour Force Survey, July 2017.” Statistics Canada. 4 August 2017.

4 “Labour Force Survey, July 2017.” Statistics Canada. 4 August 2017.

5 Canada Profile. The Observatory of Economic Complexity.

6 Crude oil prices. NASDAQ.

7 Canada Profile. The Observatory of Economic Complexity.

8 “Highest June Monthly Rise on Record.” House Price Index. Teranet and the of Canada. 12 July 2017.

9 “Market Snapshot.” Desrosiers Automotive Reports. “Auto Sales Hit One-Million Mark by Midway Point of Year for First Time.” CBC News. 5 July 2017.

10 “Income of Canadians, 2000 to 2013.” Statistics Canada. 17 December 2015.

11 “TransUnion Industry Insights Summary 1st Quarter 2017.” TransUnion of Canada. “Equifax Canada Reports: Consumer Appetite for Credit Grows as Total Debt Climbs to $1.718 Trillion.” MarketWired. 15 March 2017.

12 “Age and Sex, and Type of Dwelling Data: Key Results From the 2016 Census.” Statistics Canada. 3 May 2017. “More Canadians Are 65 and Over Than Under Age 15, StatsCan Says.” CBC News. 29 September 2015.

13 Grocery Business. July/August 2017.

14 “Food for Thought: How Canadians’ Dietary Choices Are Influencing Food Purchases.” Nielsen. 20 October 2016.

15 “150 Years of Immigration in Canada.” Statistics Canada. 29 June 2016.

16 “Three-Quarters of Canadians Like to Experience Other Cultures Through Food.” Mintel. 25 May 2016.

17 “Introduction of the Cannabis Act: Questions and Answers.” Government of Canada. “Majority Approve of Legalized, Regulated, Taxed Cannabis.” Forum Research Inc. 8 November 2015.

18 Metro 2016 Annual Report.

19 Metro Q3 2017 Financial Results Transcript. August 2017.

20 “Costco Opens First Canadian Business Centre Store.” Canadian Grocer. 31 March 2017.`

21 Report based on the questions: Which of the following stores did you visit for food, beverages, health and beauty and/or nonfood household products in the past three months?

14 About the Author Robin Sherk Vice President, Retail and Digital Insights [email protected]

Robin leads Kantar Retail’s syndicated research on the Canadian market and digital retailing in North America. She is instrumental in developing the research and framing analyses within Kantar Retail’s Market Insights division. Robin helps brands navigate digital’s impact on traditional retailers, shoppers’ evolving demands and behaviours, and online retailers’ strategies and positioning. As a trainer for syndicated seminars, she provides guidance to numerous Fortune 500 CPG companies across North America. In addition to maintaining a public blog for the trade magazine Canadian Grocer, Robin is a frequent contributor to Kantar Retail’s various publications. She is a magna cum laude graduate of McGill University.

About Kantar Retail Kantar Retail (kantarretail.com) is the world’s leading shopper and retail insights and consulting business and is part of the Kantar Group of WPP. The company works with leading branded manufacturers and retailers to help them transform the purchase behaviour of consumers, shoppers, and retailers through the use of retail insights, consulting, analytics, and organizational development services. Kantar Retail tracks and forecasts more than 1,300 retailers globally, has purchase data on more than 200 million shoppers, and counts the annual PoweRanking® survey (U.S. and China) and Industry Shopper Study among its market- leading reports. Kantar Retail works with more than 400 clients and has 20 offices in 15 markets around the globe. Information and Insights Kantar Retail provides robust, data-driven insight that looks across markets, shopper, and customer trends, presenting the most accurate view of the top global retailers and markets. By transforming this intelligence into insights, Kantar Retail helps clients understand the trends of today and prepare for the realities of tomorrow.

Kantar Retail Market Insights studies more than 1,300 of the world’s leading retailers, providing invaluable data and insights for the industry and for our clients. Clients access Kantar Retail’s Market Insights through its online platform KRiQ, by attending workshops or conferences, through Webinars, or by having our retail subject-matter experts visit client offices.

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For more information, contact: Disclaimer: The analyses and conclusions presented Amy McCoy herein represent the opinions of Kantar Retail. The +44 (0) 207 450 2609 views expressed in this publication do not necessarily [email protected] reflect the views of the companies covered by this publication. This publication is not endorsed, or Katie Schoerning otherwise supported, by the management of any of +1 (617) 912 2827 the companies covered herein. [email protected] Copyright notice: No part of this publication may be For a complimentary copy of Kantar Retail’s reproduced in any form or by any means without the Breakthrough Insights publication, a express written permission of the copyright owner. semiannual collection of insights, email us at [email protected]. Copyright © Kantar Retail 2017

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