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Customers win as grocers battle each other

Hey there, time traveller!
This article was published 13/3/2014 (1258 days ago), so information in it may no longer be current.

It may take some local know-how to properly negotiate the parking at DeLuca's Specialty Foods on Portage Avenue but it's not keeping shoppers away.

The West End grocery/delicatessen/restaurant/cooking school/wine store recently invested in renovations at its cramped, non-traditional location and has done nothing but grow every year for the last decade.

One executive says change is necessary in any retail setting because standing still means certain decline.


One executive says change is necessary in any retail setting because standing still means certain decline.

John Colatruglio, the store manager, said, "Our business keeps growing because people are more and more aware of quality foods."

And more and more people are going further afield to find healthy quality, selection and service they don't get at the mainstream supermarkets.

In the U.S., the traditional supermarkets have lost about 15 per cent of their market share to other retailers over the past decade.

'If you know the market already and you're the incumbent already, it's difficult for other brands to really take a foothold here'-- Canadian retail consultant Maureen Atkinson

In Canada, that decline may not be as large, but it's happening.

And they're getting it from both ends of the spectrum. In addition to growth in professionally run specialty stores, the original category-killer, Walmart, has been rolling out its superstores in Canada. Target has entered the market and, notwithstanding the missteps it experienced in the early days of its Canadian experiment, its impact will be felt across the retail spectrum, including the Canadian grocery giants.

Lanny McInness, the Prairie director of the Canadian Retail Council of Canada, said, "What you have seen a lot of over the last number of years is a significant amount of convergence in the industry. Retailers who traditionally have not had grocery offerings in their stores are moving into the area and, vice versa, traditional grocery stores are expanding their offerings to be a one-stop shop for customers."

Loblaw saw it happening and hedged its bet by acquiring Shoppers Drug Mart, which, in addition to its huge growth in locations, now has a growing convenience grocery offering.

Maureen Atkinson, a senior partner at J.C. Williams Group retail consultants in Toronto, said while the Canadian supermarkets may be losing market share, they will continue to hold their own because they had more time to prepare for the Walmarts of the world. As well, they already had a level of operating excellence that was superior to many of their American peers.

"Walmart rolled out their superstores 20 years ago in the U.S. and it really impacted the grocery stores there," she said. "But in general, their food retailers were more regional and a lot of them were not as strong (as the Canadian players)."

That means domestic operators in Canada have been able to protect their turf more effectively than was the case in the U.S.

"If you know the market already and you're the incumbent already, it's difficult for other brands to really take a foothold here," Atkinson said.

The large Canadian supermarkets have even embraced the increasing consumer awareness of health and wellness issues when it comes to diet.

Robin Bradley, associate publisher of Western Grocer magazine, said it's the biggest trend in the grocery industry in Canada these days.

"There are tons of new wellness products and all the grocery stores are featuring health and wellness, natural foods and organic sections," Bradley said.

She's confident that trend is here to stay, so much so that after 97 years of covering the market with its regional trade mag Western Grocer, publisher Mercury Publications will be launching a new title next month called Health and Wellness Retailer.

Matthew Holtman, president of Vita Health Fresh Market, is also confident it's not a passing fad. A few years ago, the Winnipeg vitamin and nutritional supplement retailer bet heavily on the trend, building seven modern stores featuring full natural grocery offerings, including local artisanal products.

"The food side of the business is driving most of our growth," he said. "The big thing is just the fact people are more interested in what's in their food, where the food is coming from, the quality of the food. It's a trend away from bigger, cheaper, mass-produced. That, combined with increased interest in healthier options, is where those two trends converge in our stores."

His stores also feature sophisticated operational efficiencies such as high-end point-of-sale systems, something Holtman acknowledges is helped by consolidation among the distributors.

What it means is stores offering organic and local goods that might have suffered from indifferent service at best in the past are now fully professional operations.

David J. Livingston, a Milwaukee-based grocery store consultant, said the consolidation trend in the traditional supermarket business ultimately helps stores like DeLuca's and Vita Health.

"When companies have growth by acquisition, they take on debt," Livingston said. "They may get economies of scale but they also realize they have to manage the expense side. But any time a grocer tries to improve profit by lowering costs, it results in losing sales and declining market share."

And Holtman said at the end of the day, quality service is the real differentiator.

Read more by Martin Cash.


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