CANADIAN GROCERY MARKET: TRENDS

CANADIAN GROCERY MARKET: TRENDS

Canadian Grocery Market Trends

Two trends in the Canadian grocery market for 2021 are the snack category’s growth and the rising interest in sustainability.

1. The Snack Category’s Growth

  • The snacks category in Canada is growing by about 6% each year. It is expected to be worth $4 billion in 2021.
  • It is worth noting that the category has been steadily growing in the last decade. In 2018, Technomic reported that Canadians were snacking more often compared to 2016, as well as that snacks have been growing in the past five years.
  • The demand for healthy snacks is at the all-time-high. However, the split between nutritious and indulgent is still nearly even.
  • More precisely, 30% of customers go for wellness snacks, 23% for permissibles, 33% go for truly indulgent options, while 14% go for treats.

2. Drivers

  • Consumers are becoming more mindful of what they eat. This makes them look for healthier snacks, which is driving the growth of the wellness snacks subcategory.
  • 50% of consumers say they would pay more for a “healthy” snack.
  • For this reason, in the future, the main driver of brand innovation in the category will be trying to find a balance between taste and nutritional value.
  • Overall, the snacking category is driven by consumers having little time to prepare meals. They find snacking convenient, with half of them skipping lunch in favor of snacking and 83% snacking to satisfy hunger.

3. The Company at the Forefront

  • Bassé Nuts provides wholesale organic snacks. It is helping retailers create their own brands of healthy products by offering private-label services.

4. Sustainability

  • Sustainability is becoming an important cause for Canadian consumers. They are increasingly interested in reducing pollution and food waste, as well as trying to minimize climate change.
  • Experts predict that in the future, consumers will be even more eager to choose vegan, organic, and locally produced food, products that have sustainable packaging, and grocers that work on reducing food waste.
  • In 2021, Canada is planning to ban single-use plastic, which will drive changes in grocery packaging.
  • Choosing vegan options is and will continue to be one of the most popular sustainable choices.
  • According to Sandra Nomoto, a sustainability expert, vegan foods that will trend in 2021 are edible containers, jackfruits, vegan eggs and chocolate, tempeh, faux “chicken,” and faux “seafood.”

5. Companies at the Forefront

CANADIAN GROCERY MARKET: TRENDS
  • Metro, a Canadian supermarket chain, started accepting reusable containers, which means that meat or fish don’t have to be put in disposable plastic bags.
  • IGA supermarkets have multiple sustainable initiatives, including promoting reusable bags and containers and collaborating with FoodHero on reducing food waste.

6. Change in Consumer Habits

  • According to a study done by Mintel, the CoVID-19 crisis accelerated the use of e-commerce. About 37% of Canadians were shopping more online. Canadian consumers are also ordering prepared food and grocery online.
  • A Dalhousie commissioned survey found out that “22 percent of Canadians intend to buy food online post-COVID-19.”
  • According to Ipsos, Canadian consumers are being mindful of their spending and are spending more time researching online before making a purchase.
  • According to Deloitte, “consumers’ behaviors may take more time to return to what they were” before the pandemic. They may retain these habits, “they may continue to buy online or avail themselves of click-and-collect and may stay loyal to new brands they discovered while searching for hard-to-find items.”
  • The trend is driven by the COVID-19 pandemic. According to CTV News, “the long-term effects of prolonged lockdowns and fear of public spaces could permanently” consumer habits.
  • Companies at the forefront of this trend include Sobeys and Loblaw.

7. The Democratization of The Supply Chain

  • According to CTV News, a shift to online ordering may lead to consumers buying groceries direct from farmers. This is expected to continue post-pandemic.
  • After the disruption of the supply chain due to the COVID-19 pandemic, small-scale farmers were forced to look for other ways to reach consumers. This is because the regular avenues like farmers’ markets were closed.
  • Farmers began using online food hubs to set up e-stores. According to TVO, this trend is expected to stay post-COVID.
  • The trend is driven by the COVID-19 pandemic. The pandemic “has encouraged, and in some cases, forced Canadians to look beyond the oligopoly of the big-label grocery chains to get what they need.”
  • Companies at the forefront of this trend include the Open Food Network and Local Line.

Research Strategy

To compile these trends we used the opinion of industry experts, surveys from reputable firms such as Deloitte, and research organizations. If possible, we also used quantitative data points to confirm our findings.

Canadian E-Commerce Grocery Market Trends

Three current trends in the Canadian e-commerce grocery market include the increasing adoption of grocery shopping through e-commerce, restaurants shifting to selling groceries online, and grocery stores expanding and investing in e-commerce platforms.

1. Increasing Adoption of Grocery Shopping Through E-Commerce

  • As of August 2020, over 20% of Canadians had bought more groceries online. Also, 70% of shoppers were going to the grocery store less frequently and, in mid-July, 71% were limiting their time spent in the store.
  • Although every retail sector is experiencing reduced consumer spending, grocery spending spiked between March and April. Online grocery shopping, which was not well adopted in Canada, has “experienced heavy growth.”
  • This trend is driven by the global spread of COVID-19 as consumers take extra precautions to avoid getting infected.
  • One company at the forefront of this trend is Metro, as it saw an increase of 280% in online grocery sales in the third quarter of 2020.

2. Restaurants Shifting to Selling Groceries Online

  • Besides providing take-outs and deliveries from their menus, many Canadian restaurants are now offering basic grocery items online in an attempt “to supplement their income.” These restaurants are offering products like meal kits and staple items on their websites.
  • This trend is driven by the economic impact that COVID-19 has had in the restaurant industry in the country.
  • Some examples of restaurants that have adopted online grocery selling are Montgomery’s and King’s Head Pub. Another major player at the forefront of this trend is Loblaw, which has recently partnered with popular Toronto restaurants to offer meal kits.

3. Grocery Stores Expanding and Investing in E-Commerce Platforms

  • Several grocery chains in Canada are already expanding or making plans to expand their e-commerce platforms. For this reason, these chains are heavily investing in their e-commerce businesses to accelerate it.
  • This trend is driven by grocery e-commerce growing significantly in the country as a result of the coronavirus pandemic.
  • Companies at the forefront of this trend include Empire Company Limited, Walmart, and Metro.
CANADIAN GROCERY MARKET: TRENDS

4. Automation and AI

  • Automation and AI are expected to continue to transform the e-commerce grocery market in Canada. The use of online chatbots, the use of AI in inventory and operation, and customer service robots are on the rise.
  • According to a report by Shopify, “businesses expect to spend big on AI-powered automation. Worldwide AI and process automation expenditures are expected to top $15.4 billion by 2021.”
  • According to PRNewswire, global warehouse automation will grow at a compound annual growth rate of 11.7% to $27 billion in 2025. The growth is expected to be driven by the growth of the e-commerce market.
  • Companies at the forefront of this trend include Walmart and Sobeys. Walmart is experimenting with AI capabilities in its Intelligent Retail Lab (IRL). The company is exploring ways to make “shopping better now and into the future.”
  • In April, Sobeys announced plans to accelerate the “launch of its Voilà service in the Greater Toronto Area (GTA).” Sobeys partnered with Ocado to build a customer fulfillment center that optimizes Ocado’s robotic-driven solution.

5. Alternative Grocery Fulfillment Options

  • According to an Ipsos study on Canadian shoppers, “the number of consumers using alternative grocery fulfillment options like curbside pick-up and delivery” doubled during the month of the study and this is expected to continue.
  • According to the Retail Insider, “the concept of click and collect for consumers was a growing trend before the COVID-19 (coronavirus) crisis hit and it’s likely to become even more popular throughout this pandemic and even beyond.”
  • The trend is driven by the convenience of shopping online and picking the purchases at the curbside or the store.
  • Walmart is one of the companies at the forefront of this trend. Walmart is offering free curbside pickup in select stores.
CANADIAN GROCERY MARKET: TRENDS

Canadian Private Label Grocery Market Trends

Two trends in the Canadian private label grocery market are the growth of premium and health categories. Additionally, Canadian customers are more likely to choose private label products when the prices are rising.

1. Growth of Premium Private Label

  • According to the USDA Foreign Agricultural Service’s report on Canada’s food retail sector, the main trend in Canadian private label is the growth of premium products.
  • Premium private label products are on the rise across all categories.
  • NPD Group and Technavio also claim that premium private label products are growing fast.

2. Drivers

  • The main driver behind the trend is retailers wanting to reach new customer groups from the high-end market.
  • Typically, private label products were chosen by price-conscious consumers from lower-income groups. Premium products are supposed to extend the customer base.

3. Company at the Forefront

  • Walmart Canada has partnered with the retailer Coop Italia to introduce its premium private label brand, Fior Fiore, to Canada.
  • The line includes over 40 products such as pasta and pasta sauces, pesto, bruschetta, and pâtés. It is expected to grow to more than 100 products by the end of the year.

4. Growth of Healthy Private Label Brands

  • According to FMCG Guru’s Consumer Insights, 69% of consumers are looking for healthy/healthier lines of private label products.
  • At the same time, Canadian retailers provide creative solutions to meet customers’ needs, which are reflected in their health-conscious brands.

5. Companies at the Forefront

  • Metro is a Canadian retailer with health-focused private label lines such as Naturalia, which only uses simple ingredients, with products ranging from grain-fed chicken to natural peanut butter.
  • Sobeys sells frozen vegan burgers and organic baby food as its private label.
CANADIAN GROCERY MARKET: TRENDS
  • Basse Nuts is a Canadian company that provides affordable nut-based snacks.
  • The affordability of its products is one of the key elements of the company’s messaging.

6. Choosing Private Label During Inflation

  • According to FMCG Gurus, customers opt for private-label and store-owned brands when the prices are rising.
  • It is consistent with the research by USDA, according to which Canadian consumers choose private label, because they are price-conscious, especially if they have lower-income or middle-class backgrounds.

7. Expansion of Private Label Portfolio by Grocery Retailers

  • Grocery retailers appear to be actively expanding their private label portfolios.
  • It seems the driver of this trend is the observation that private label brands are growing at a faster rate than national brands. Nielsen Canada recently reported on the remarkable growth of private label brands such as Sobey’s Compliments and Metro’s Selection.
  • The COVID-19 pandemic appears to be a contributing factor as well. The demand for private label products grows in an economic downturn, as private label products are cheaper than national brand products. According to Marty Weintraub, a retail expert at Deloitte, bargain hunting is making a comeback.
  • Empire Company Limited is one example of a company that is at the forefront of this trend. The company behind Sobeys announced in July 2020 that given the tremendous growth of its private brands in the past two years and amid the COVID-19 crisis, it will be growing its private label portfolio by working in close collaboration with its supplier partners, increasing distribution, improving shelf placement, and introducing innovative products. The expansion of the private label portfolio is part of Empire’s three-year growth strategy Project Horizon.
  • The company shared that it is actively examining the performance of its private brands across grocery categories to determine the categories that warrant expansion. It also shared that it is investing in data analytics to improve its private label sourcing.
  • Empire recently acquired Farm Boy to facilitate the expansion of its private label portfolio. Farm Boy is known for its private label products and fresh food offerings. It appears Empire has already started converting some of its Sobeys stores into Farm Boy stores.
  • Farm Boy has nearly 1,000 private label products, and it will be rolling out 150 to 200 private label products this year alone.
  • Goodfood is another example of a company that is expanding its private label portfolio. In March 2020, it announced that it is planning to expand its private label selection from around 100 stock keeping units (SKUs) to around 4,000 SKUs, and in August 2020, it announced that it has leased a 45,000 square feet facility to prepare for the expansion of its private label fulfillment capabilities.
CANADIAN GROCERY MARKET: TRENDS

8. Focus on Weekly Essentials, Conversation Starters, and Exclusive Products

  • Grocery retailers appear to be paying particular attention to three grocery categories in their efforts to expand their private label business.
  • Goodfood, a company that started out in 2014 as a pure-play online retailer of ready-to-cook meals, is taking a bite out of Canada’s grocery market by transforming itself into an online grocery retailer with a growing selection of private label products.
  • In March 2020, the company shared that it is planning to expand its private label selection by growing its presence in three grocery categories, namely the weekly essentials, the conversation starters, and the exclusive products.
  • Weekly essentials are fruits, olive oil, vegetables, and other basic grocery products that consumers purchase week to week, while conversation starters are products that consumers leave out on the dining or kitchen table such as finishing salt. Exclusive products are products that consumers can find at Goodfood only, for example, a chocolate hummus dip.
  • It is likely that the decision to focus on these categories is driven by Goodfood’s observation that these grocery categories are the categories that hold the most potential for private label products. Goodfood’s selection of these three grocery categories suggests that these three are the most promising categories for private label products.

Research Strategy

Our examination of recent articles and reports about the Canadian private label grocery market revealed that a list of predicted trends in said market is not readily available in the public domain. As a workaround, we looked at what market players such as Empire and Goodfood are planning to do in the next three to five years in regard to their private label businesses. We looked at predicted trends in the United States market as well. A source indicates that alternative protein and plant-based products are the next big thing in private label, but unfortunately the move towards premium and healthy private label products has already been covered by previously submitted research on current trends.

Canadian Grocery Market Omnichannel Marketing Trends

The e-commerce market in Canada has grown over 30% since 2017 accounting for up to 9% of total retail sales. Two current trends in the Canadian grocery omnichannel marketing sector include forming new partnerships and mobile technology. Details of each trend have been provided below.

CANADIAN GROCERY MARKET: TRENDS

1. Forming New Partnerships

  • With a growing demand for e-commerce offerings in Canada driven by emerging sales of large retailers such as Amazon and Walmart, smaller grocers are looking into forming new partnerships with companies that will allow them to offer better omnichannel features as well as increase their marketing efforts with e-commerce offerings.
  • The main driver of the trend comes from what experts call “The Amazon Effect.” Canada has been less affected than the United States, however, research shows that there will continue to be disruption in the market. When Amazon partnered with Whole Foods to offer Amazon Go, it created a new competitive market in the online grocery space with leading retailers like Walmart and Costco experimenting in the space.
  • Experts say that due to the emergence of the omnichannel trend in large retailers, consumers are beginning to expect these offerings from all retailers. Because small retailers do not have the capabilities to implement these offerings alone, it becomes necessary to partner with experienced companies in order to increase reach in the market and maintain a market presence.
  • Example:
    • Loblaw partnered with Metrolinx in 2018 to offer PC Express checkout.

2. Mobile Technology

  • According to PwC, the two most important factors to in-store shopping for Canadians are easy navigation (52%) and easy payments including mobile payments (32%).
  • Mobile technology has become increasingly important to Canadians with the emergence of omnichannel grocery shopping due to the interest in continued in-store shopping. This is because consumers want the convenience of online shopping with the interaction and speed of in-store interactions.
  • Approximately 26% of Canadian shoppers shop in “micro-trips” weekly or daily. This means that they want to spend 5 minutes or fewer in-store, however, most Canadians feel that shopping online could result in low-quality products or damaged shipments. Due to these factors, blended mobile technology has become an interest to many shoppers.
  • Mobile technology marketing includes the emergence of AI-powered chatbots, express checkout, virtual reality technology, and other in-store applications. PwC stated “CEOs who focus on consumers’ needs and create unique and seamless experiences will come out on top, according to the 22nd annual CEO Survey—Canadian insights. Successful retailers use technology to create “frictionless purchase journeys” with their customers similar to the customers’ interactions with personal technology, according to the Consumer Insights Survey (CIS).”
  • Example:
    • Sobeys invested in mobile automation technology in 4 stores in 2018.

4. Utilizing Technology and Partnerships for Omnichannel Growth

  • Retail Council of Canada notes that while Canada is considerably behind certain other countries in terms of omnichannel grocery retail, there are some grocers that have pioneered new approaches to expand their omnichannel presence through partnerships and leveraging new technology to improve discoverability and transparency in their operations.
  • It states that Loblaw had recently partnered with Metrolinx to enable commuters to pre-order groceries online for pickup during their next day’s commute in five GO Transit stations in the Greater Toronto Area.
  • Systeme U has utilized Snapchat to demonstrate to customers of the freshness of fish sold using snapcodes in labels and allowing customers to view the journey from the boat to the store. HEMA uses innovative technology to allow customers to view the entire supply chain, including distributor licenses as well as the temperature of refrigerated trucks. Uber Eats plans on expanding into new areas with technology to help people get food more easily and efficiently and to provide customers new options such as an in-store experience.

5. Personalized Services through Data

  • Speaking of Canadian grocers, Deloitte spokesperson Wong-Li has predicted that “data is going to be one of the most important differentiators for grocers. To be able to integrate all these datasets is going to be critical for building AI-driven recommendations, or predict what the customer’s going to buy, and what their basket is going to look like. I think that’s going to be the goal moving forward.”
  • She has further stated that consumers are increasingly seeking a smoother cross-platform experience and more personalization, and that “the most crucial part of an improved omnichannel presence lies in the acquisition and leveraging of data.”
  • Metro has shifted a key part of its loyalty program to its mobile app, while previously, members of the Metro&Moi program received paper cheques in the mail with loyalty points that could be redeemed in-store. “Along with being able to deliver more personalized content, the digital shift has allowed Metro to deliver on more touchpoints in a more cost-effective way.”

6. Expansion of Digital Offerings

  • Digiday states that “while Amazon isn’t a significant component of the Canadian online grocery market, its appeal among digital-first shoppers is causing Canadian grocery retailers to build out their e-commerce offerings at a rapid pace.” It has reported that retailers such as Loblaws, Canada’s largest grocer, are rapidly upgrading their digital offerings and loyalty program in defense of Amazon and Walmart gaining market share in Canada.
  • Grocery leader Loblaws has expanded its digital presence to reach 75% of the Canadian population. It has also implemented an Amazon Prime-style loyalty program that costs customers $75 a year. The article further states that similarly, Canada’s no. 2 retailer Sobey’s has partnered with Ocado to develop an automated warehouse in Toronto to speed up online orders.
  • Mintel has reported that, with the increasing competitive threat from Amazon, Canadian retailers have increasingly focused on strengthening their market presence through omnichannel strategies. Loblaw’s PC Express service and Metro’s announcement that it will be updating its online grocery service in Quebec with same-day pick-up and delivery are examples of such initiatives.

Research Strategy

According to multiple sources such as the Retail Council of Canada and Deloitte, Canadian grocers are years behind their counterparts in the US and UK in terms of utilizing e-commerce and omnichannel strategies. One such source states that “despite encroachment by major players like Amazon, grocery remains largely separate from the digital disruption that has affected retail.” In addition, survey findings show that only 17% of grocery shoppers shop online although they visit physical stores more than six times a month. Currently, only 1% of Canadian grocery sales occur online.
While it is predicted that 70% of consumers will buy at least some groceries online within the next 5-7 years, the current situation remains that Canadians lack exposure to omnichannel shopping due to the cautious attitudes of grocers as well as customers. After an extensive search, it was clear that there is a much higher focus on the current situation and trends in omnichannel grocery retail compared to future trends beyond 2021. Due to this information limitation, our research will focus on expert opinions and predictions related to the progress of omnichannel marketing in Canadian grocery retail in general.

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