In March of 2020 Canadian grocery stores registered close to $2 billion in additional unplanned sales. As well, health and beauty products were skyrocketing as more face time in the mirror meant more focus on self improvement. What’s next for Canada’s grocers in our post pandemic marketplace? How has these recent event changed plans to operate, grow and thrive? According to Hanif Mohamed of NielsonQ in Toronto there are 7 key trends that have impacted the grocery category.
1. The newly constrained are anxious about their future. While some have been insulated from financial concerns during the pandemic, others were not so lucky. The insulated have not modified their spending habits, in fact they saved money and will have pent up demand for consumer services when they’re able to enjoy them. On the other hand, the constrained will be turning to mass merchandisers like Walmart, and dollar stores. Dollar store business is robust, as we can see from reported results. Dollar Store in Canada recently announced sales growth of 6.3% from their network of 1,938 stores and an ambitious plan to reach 2000 stores by 2030. This is an example of where opportunities have shifted as a result of the crises and the ensuing inflation.
2. Increased sales in health and beauty categories. Time in-home, more introspection and focus on self has resulted in great purchases of heath and beauty products, but although these product sales grew, in my opinion, there may have been some “stocking up” during the lock downs that could stagnate demand in the near term.
3. Online sales and delivery systems have advanced significantly. Some grocery stores are delivering from “dark stores”, meant strictly for delivery and pick-up orders. Sobey’s home delivery service called Voila operates from a $100M warehouse in Vaughan, with 16,000 products in inventory and a robot system for picking and packing. Loblaws on the other hand has opened more pick-up locations and converted sections of existing stores to strictly process online orders. The establishment of an online market of significance (roughly 20 to 25% of sales) means that grocery stores need more specialized warehousing and perhaps can live with fewer traditional retail locations.
4. Canadians are turning to discount stores for value. The discount-oriented grocers should do well in the coming near future but some stores may struggle to keep products on shelves in the midst of a supply chain crises. Walmart has invested heavily in their own supply chain, as has Costco and Amazon and these companies now have a competitive advantage far more significant then we could have realized pre-pandemic.
5. Declining number of occasions. People are now accustomed to fewer, but bigger trips to the stores, and this may continue for a while.
6. Lower population growth. Remember when we all thought there would be a baby boom after the pandemic? It didn’t happen. In 2020 Canada had the lowest population growth since 2016 at just 0.4%. As well, the pandemic stopped immigration in its’ tracks. This will have a lasting affect on year over year store sales growth but is unlikely to affect the long term.
7. Vaccines didn’t end the pandemic just yet. We are still in an era of caution and perhaps this means that there could be some pandemic like behaviour every winter for a few more winters to come.
