Grocers see slowing market share loss to Costco, Walmart

While international retailers Costco and Walmart have gobbled up a growing share of Canadian food sales for more than a decade, further gains are expected to be tougher to eke out as the country’s traditional grocers mount an improved defence. Industry watchers say the price gap between the two sides has narrowed and the traditional stores’ loyalty programs are helping support sales.

“Every point of market share is hard fought over in the grocery market,” said Kenric S. Tyghe, a consumer and retail analyst at Raymond James. “The traditional grocers have done a better job defending share than, I think, a lot of observers expected.”

While they have operated in Canada for years, competition from Costco and Walmart is still top of mind for local grocers given the low-cost strategy of the two foreign giants.

In his most recent quarterly call with analysts in April, Metro CEO Eric R. La Fleche discussed Costco’s expansion in Ontario, saying it is “a significant competitor, and we have to execute and differentiate.”

In the second quarter of 2004, traditional grocery stores sold about $12.3 billion worth of food, accounting for about 90 per cent of the market, according to Statistics Canada data. General merchandisers, which include Costco and Walmart, sold about $1.3 billion or roughly 9.8 per cent.

In the same quarter of 2016, traditional grocers’ market share fell to about 79.2 per cent, while that of the general merchandisers more than doubled.

Those changes translate “into billions and billions of dollars every quarter,” said Kevin Grier, an agriculture and food market analyst, adding that the shift in market share to the U.S. chains is expected to slow.