Tide turning in food fight?

GROCERY SALES

Food stores’ share of food sales appears to have stabilized at 79 per cent of the market.

“If the grocers could have kept their share at 84 per cent, which it was in 2011, their food sales would have been about a billion dollars more each quarter,” Grier said.

The loss in grocery retailers’ share of food to the general merchandise channel has been slow and steady.

“You have still got erosion, but the rate of deterioration seems to be slowing. It’s still very good for Costco and Walmart, but on the other side we are seeing more competitive pricing, fundamentally, from grocery.”

The news comes as Canada’s veteran grocery companies have tried to step up their food game to compete with Walmart and Costco, both known for cavernous stores and value pricing of food and other merchandise.

Loblaw has been upgrading its stores, and adding fine breads and cheeses while expanding its in-store home meal replacement offerings, as has grocer Metro Inc., whose purchase of the Quebec-based specialty baker Première Moisson introduced premium baked goods and charcuterie to its stores.

Industry analysts have also noted much more intense pricing battles over the last year among the grocers in Western Canada, where consumers have been hit by the oil industry downturn, making the food business more competitive.

Last month, Costco reported that same-store sales in Canada outpaced growth in all of the warehouse retailer’s other divisions in the warehouse retailer’s second quarter, rising eight per cent, compared with growth of three per cent in the U.S. At Walmart Canada, same-store sales rose 0.2 per cent in the quarter ended Jan. 31.

The competition is not expected to let up any time soon. Analysts note the primary square footage growth in the grocery market this year will be at Costco Canada, which is opening seven stores.

Meanwhile, the general merchandise channel has been growing at a fearsome clip. Costco’s share of grocery food sales in 2016 was estimated at 10 per cent and Walmart’s at seven per cent, according to CIBC, up from seven per cent and six per cent, respectively, in 2010.

Food sales have been critical to Costco Canada’s success, and will continue to be as the company starts competing in earnest with industrial food, restaurant and office suppliers. The company opened its first business centre in Canada last month in order to better target owners of small businesses like restaurants and corner stores.

“At one time, we served (business customers) better than we serve them now,” Andrée Brien, senior vicepresident of national merchandising at Costco Wholesale Canada Ltd, told the Financial Post in a recent interview, adding the warehouse retailer had increasingly incorporated products that cater to families rather than businesses as its business model evolved in Canada..