Sylvain Charlebois is professor in food distribution and policy and associate dean at the College of Management and Economics, University of Guelph.
For decades, Canadian consumers have been accustomed to the traditional grocery store, where you purchase most of your groceries under one roof once every week or two. That model, which emerged in the 1960s, is under serious threat now and may signal the end of the grocery store.
A few key metrics are telling us that the days of the typical grocery store are numbered. For example, take Loblaw, Canada's No. 1 food retailer. A good portion of Loblaw's business is now related to non-food products. Of course, Loblaw rocked the food retailing world last year by purchasing Shoppers Drug Mart for more than $12-billion. This act of brilliance allowed Loblaw to acquire cheap real estate, allowing its major labels like President's Choice to reach urbanites longing for convenience, healthy food choices and loyalty points. Consumers will now find sushi and fresh salad Niçoise next to their medication and makeup. Loblaw is even exploring the idea of a drive-through shopping experience.
There is one reason why Loblaw has been so active in reinventing itself: Wal-Mart. Because of Wal-Mart's spectacular ascent in the food retailing world, everyone else must adjust. With its super centres, the company now has close to 10 per cent of the Canadian market and is striving to become the No. 1 food retailer – it's already held the top spot in the United States for years. In all honesty, the numbers are making it difficult to bet against Wal-Mart's odds.
Online shopping is also another legitimate menace to the traditional grocery store. The virtual world is a channel being exploited by some very important players, particularly south of the border. Amazon, which has tremendous clout in the e-commerce space, has a growing interest in food e-retailing. The company is gaining market share in Los Angeles and San Francisco and may run pilots in other countries, including Canada. With our greying population, harsh winters and increasingly demanding work schedules, online shopping is slowly making a case for itself.
Above all this is the two-headed monster all food retailers will need to cope with in the future: On the one hand, boomers are slowly retiring with fixed incomes and depressed pensions; they will be looking for affordable prices. On the other hand, millennials link social values to food more than their predecessors did: Think organics, fair trade and local produce. Farmers' markets, known for their high price points, are breaking sales records across the country. In other words, food demand is becoming more fragmented, which makes consumer behaviour more challenging to anticipate.
Retailers will admit that not every grocery store is equal and most adapt to local needs. Customization will become an important driver moving forward, which means that specialty stores, once written off by many, may have a future after all.
Ethnicity and food trends are game-changers as well. Many observers predict that 70 per cent of consumer spending growth will come from visible minorities over the next decade. Ethnic and gluten-free products are becoming better and tastier to please growing segments of the market. But what's trendy one day may not be the next, making it challenging for the food industry to recognize which innovative features have currency.
For the foreseeable future, large grocery stores will continue to exist, but their numbers will drop significantly. Unlike the 1960s, when one model dominated the market, we will soon see many successful strategies emerge to feed Canadians.