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More Change and Tales of Caution for Our Industry

We’ve seen plenty of changes in the past two years.
Will we see more?

For all of us involved in the grocery industry in Western Canada, it has been a wild ride over the past two years. There have been lots of big opportunities for some and challenging times for many on both the retailer and supplier side of the equation.

Since my last column, Overwaitea Food Group announced amid great fanfare that it would be expanding to markets Saskatchewan and Manitoba. This is exciting news for shoppers in these markets, which will benefit from increased competition and the shopping experience that Save On Foods offers.

Just walking around Save On Food’s new stores in Calgary you can easily see that their vision is strong and this will put pressure on retailers in these markets to make extra efforts on instore experience in order to keep premium shoppers coming in the door.

It is also not lost on me that the combined networks of Save On Foods and Metro will now cover every major centre from Victoria to Quebec City. I suspect that there is speculation already simmering about whether these two will be involved in the next round of consolidation. But that is for another day… This is the latest in a plethora of change that has struck our industry recently including the anticipation and demise of Target Canada, the continued roll-out of Walmart Supercentres, the acquisition of Safeway by Sobeys and SDM by Loblaw, the rebranding of Extra Foods to the YIG banner, just to name a few.

But what changes are around the corner? While my guess is as good as any, I strongly believe that we should always look outside our home markets to understand where the industry is headed. Below are two stories from outside of our region from which we can all draw parallels and learn lessons:

The first is the demise of Co-op Atlantic, which recently sold its grocery assets to Empire, the parent company of Sobeys; and then promptly filed for creditor protection. This once strong third player in Atlantic Canada (behind Sobeys and Loblaw) saw its sales slide dramatically as the two incumbents grew their store network and Walmart slowly built stores and share in the region.

The launch of Supercentres in Atlantic Canada may have been the straw that broke the camel’s back but the writing has been on the wall for a long time. Co-op relied on shrinking rural markets and did not invest in either the shopping experience or pricing that customers could get by driving to the next town.

Western Canada is becoming more urban and the distance required to reach a Walmart or Superstore is shrinking. Retailers in rural markets must look out three-five years down the road and determine what their customers want and need from a grocer that the big players cannot provide. These retailers must invest now and reposition themselves before the big players come calling or the shoppers stop coming.

The second cautionary tale is that of a fabulous small regional supermarket chain in the U.S. Pacific Northwest called Haggen. Widely known as expert retailers and a strong regional player with just 18 stores, Haggen looked to take advantage of the Safeway/Albertsons merger in the U.S. and purchased 146 stores giving it a presence in five states.

After only eight months, Haggen has now admitted it bit off more than it can chew and will be closing 27 stores as they struggled to integrate the new stores and manage a much bigger business despite being experienced and well regarded retailers. Combined with the recent demise of Target Canada these two cases should be ground zero for any player looking to grow by acquisition in the competitive grocery market in Western Canada.

Our industry has been changing since Western Grocer was first published in 1916. Change is what keeps the industry strong and profitable. As Christmas displays pop up in store and we stare down the barrel of 2016 there is no doubt that change is right around the corner!

Jeff Doucette is the founder of “Field Agent Canada” an iPhone-driven audit service that is revolutionizing how retail audits and mystery
shops are completed in Canada. He can be reached at jeff.doucette@fieldagentcanada.com

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