When Statistics Canada released its initial numbers from the 2006 census earlier this year, the piece of information that drew the biggest gasps was this: Within 23 years, all of this country's population growth will be a result of immigration. Just as start-ling was the corroborating statistic that immigrants represented 75% of the population growth that has occurred in Canada between the last two censuses-out of an overall increase of 1.6 million, 1.2 million new Canadians were from foreign countries.
These numbers mean many things to many people, but to B.K. Sethi, they mean Canada's big grocers have got a problem-one that's been apparent to him since he first started selling naan about 15 years ago. The chains were reluctant to carry the Indian flatbread, says the Toronto-based businessman, whose distribution company, B.K. Sethi Marketing, supplies ethnic foods to 800 grocery outlets across the country. And their attitude hasn't changed much, even as sales of naan have exploded at corner stores and independent grocers.
"You're at the bottom of my list," one chain buyer told Sethi recently. "What I sell from you, I can match with just two items from one of my cereal guys."
Sethi, a third-generation food distributor whose father and grandfather operated out of India, knows this may be true-he's been in the business for 25 years. But he also recognizes that the grocery business is one of the few whose customer base is the entire population, which means that the industry's growth is linked to Canada's population growth-and its demographic changes. "We bring in the authentic brands to attract the authentic ethnic people," says Sethi, repeating what he tells his clients about the drawing power of ethnic foods. People who come into a store to buy Herdez salsa (his company began importing it from Mexico three years ago and now sells a million units per year) leave with toilet paper and milk. "It's not a profit-building category. It's a traffic-building category." Sethi sighs. "The smart ones understand."
But industry observers agree that the grocery business still has a lot of smartening up to do. Chain retailers have been slow to respond to the changing needs of Canadian consumers, according to retail consultant Richard Talbot, who says the industry's ultimate success depends on it. "It's critical," Talbot says. "More critical in some communities than others, of course, like Toronto and Vancouver, but anywhere. It's Retailing 101: You need to serve the needs of the area into which you're trading."
The mainstream grocery business is a big ship to turn around. Chain store sales represent $44 billion of the $73-billion retail food business in Canada. The biggest player, Loblaw, which owns Fortinos, Provigo, Atlantic Superstore and No Frills, accounts for about $28 billion of that-which should be good news for Sethi, given that it's generally considered the leader in the ethnic sector. Loblaws put considerable Dave Nichol-era weight behind the President's Choice "Memories of…" sauces during the 1990s, and began carrying Patak's Indian products in 1992. Sethi sees more than a little irony, however, in Loblaws' new campaign: naan, the next big thing.
The fastest adapters on the grocery scene tend to be the independent players-mini-chains such as Longo's of Toronto, or Stong's of B.C.-which is why Loblaws and the other big chains are likely watching the rise of a rapidly expanding independent called T&T. Founded in 1993 by Cindy Lee and her husband Jack, a shopping mall developer who needed an Asian grocery store to anchor one of his properties, T&T has been aggressively pursuing the Asian market in B.C.'s Lower Mainland, Calgary, Markham, Ontario, and, as of late August, downtown Toronto. The Richmond, B.C.-based, privately held chain now has 16 stores, and if things go well, the latest opening will mark the beginning of a Toronto-area push, with two more per year planned for the near future.
"Konichiwa, Nicko-san," Melina Hung calls out as she walks the floor of the new 41,000-square-foot store, located in a windswept industrial zone in Toronto's south end. Hung, the chain's marketing manager, stops to say hello to chef Nick Kamida, her Japanese specialist, who has been flown in to help set up the sushi counter. The two chat for a bit in what sounds like very comfortable Japanese before she heads over to another counter where staff are making a Shanghai specialty called fan tuan-sticky-rice roll-ups. She talks to the woman behind the counter in Cantonese and orders a roll-up stuffed with spicy pig's stomach and meat floss. Memories of, this ain't.
T&T knows the Asian market. "Organic's not a big trend with Asians," Hung says. "The Chinese trend right now is baby." She points to the well-ordered stacks of baby yu-choy, bok choy and "gai lan jr." (young Chinese broccoli). "Everyone wants it younger, sweeter."
That clicking sound you hear is the chain-store buyers on BlackBerrys, messaging head office.
T&T's focus on the Asian market is timely given another Statistics Canada projection published this year: During 2006 and 2007, the country will see the arrival of more than 175,000 immigrants from Asia-an influx greater than the combined total from all other groups. But it's the location of the newest T&T store that the big players are likely most interested in. The burgeoning chain's other outlets have all been built within a 15- or 20-minute drive of a major concentration of Asian consumers; the new Cherry Street location isn't 15 or 20 minutes from a major concentration of any specific ethnic group (on several visits made during its first few weeks of business, about a third of the shoppers appeared to be non-Asian). Since its late-summer opening, the store has seen a broad range of customers dropping by for annatto seed and shredded banana flower. The shift away from the chain's traditional customer base is a departure, acknowledges Hung. "But down the line, we believe we will be able to cater to the mix: the tourist, the residents and the Asian population in the neighbourhood. We might not be relying so much on the Asian population in due course."
Joe Virgona can attest to the fact that demand for Asian products isn't driven only by Asian consumers. At Fiesta Farms, Virgona's grocery store in Toronto, sales of Japanese foods have increased by 100% in the past year, and its Indian food sales have soared by more than 300%. And almost none of the sales are to Japanese or Indian customers.
Taking a cue from the independents-Virgona says chain buyers watch his store "like a hawk"-the big chains are slowly beginning to recognize that many ethnic foods transcend ethnic demographics. With the explosion of cooking shows and ethnic restaurants throughout the country, a broad consumer base is interested in products such as chutney and coconut milk. Food imports from Thailand, for example, where most of our coconut products come from, rose more than 1,300% over the past decade, from $157.5 million in 1995 to $2.3 billion last year. According to market researcher AC Neilsen, in the last year, major chains sold more than $18 million worth of basmati rice, a staple of Indian cooking-a 12% increase compared with the previous year: That's double the rate of increase over the prior 52 weeks. Indian breads, pappadums and curry pastes all experienced double-digit growth during the past year, as they did the year before.
Bruce Nicholas, who has worked at the Ontario Food Terminal since 1975 and is now the general manager of one of North America's largest produce way stations, says he walks into some of the vendors' spaces these days and regularly runs into fruits and vegetables he's never seen before-like dragon fruit-and then, within three months, he's seeing them everywhere. "You get one of the Longo kids in asking for something," he says, referring to the buyers of the Toronto-based, family-owned business, "and people are going to start stocking it."
For his part, Sethi is always happy to help the chains figure out what to stock. "If Sobeys calls me and says, 'Can you go to Millwood [Avenue]and tell me what we should put in,' I go and drive around and check how many small ethnic stores there are. Are they Lebanese stores? If there are stores around, there must be consumers, too. We also go around and see what sort of mosques, temples or synagogues there are in a three- or four-mile area. And we can also go to a Wal-Mart. If they've got 16 aisles, and eight of the checkout girls are Indian, or Somalis, that means something. This is the crude kind of research we do, but it works. We've gone to schools to speak to the principals, and we ask them what the mix of their students is, and they'll say, 30% black, for instance-the sort of stats Stats Canada will only tell us five years later."
He also sends notices to his clients three months in advance to remind them, say, that the Indian festival of Diwali is in November this year, and to suggest they stock up on foods people eat more of then (saffron, basmati rice, condensed milk).
And every time, he doubles his orders of everything he mentions.
WHAT DRIVES SALES OF CARIBBEAN FOOD? Immigration isn't the only factor behind the rising interest in new foods. Canada only has about 400,000 citizens of Caribbean background, points out Lucky Lankage, president of GraceKennedy Ontario, the largest distributor of Caribbean food products to Canadian chain stores. Not nearly enough, you'd think, to support its $30 million in annual sales. But as travel to the Caribbean has increased-from 129,000 visits to the Dominican Republic in 1997, for instance, to 536,000 by 2006-so has demand for the region's food. Now, Lankage says, "everybody knows about jerk and hot pepper sauce." When the company started selling its coconut-water drink in 2002 to mom-and-pop shops, it sold about $540,000 worth. In 2006, once the chains noticed what was going on, sales more than tripled, to $1.8 million. Lankage is expecting that number to grow by another 14% this year. And that's before anyone has figured out that this low-calorie, high-potassium, all-natural drink could make a decent alternative to Gatorade.
POCARI SWEAT, ANYONE? Ethnic foods don't just vary based on country of origin-according to distributor B.K. Sethi, they can be broken down based on three levels of customer appeal: ethnic, core ethnic and ethnic-plus. An ethnic product might be a soy sauce made by a North American manufacturer. Herdez salsa, imported from Mexico, and appealing to Latin Americans who use salsa as an ingredient rather than as a dip, is core ethnic-a category that also appeals to mainstream consumers who crave authenticity. Ethnic-plus, comprising items such as mooncakes for the Chinese autumn festival, or the Japanese soft drink Pocari Sweat, refers to specialty products within the ethnic market. While aimed at ethnic consumers, they can also appeal to extra-adventurous early adopters from the mainstream. "The core ethnic is what Loblaws is getting into," says Sethi, but the front lines of the grocery wars have already moved on to ethnic-plus.