July 2015 Newsletter

2015 is a pivotal year in the retail food industry.  There are three major factors coming together right now that are going to drastically change it.  The first is immigration.  Roughly 1 in 5 people in Canada today were not born here and that number is expected to jump to MORE than 1 in 4 by 2031 according to Stats Canada.  Immigrants bring with them an appetite for food and spices from their original homeland as well as specialty products like Halal and Kosher items and their shopping habits are different from the typical North American.  Next is an aging baby boomer population although the effect this demographic has on the industry might not be what you think.  For decades, the retail industry followed this demographic as they created new products, store concepts and changed retail with their demand for everything from disposable diapers to frozen dinners but alas, the sun is setting on this population bubble.  While they still remain a dream for the travel industry and adult living, as people age, they tend to eat smaller portions and simply don’t need as much stuff.  Thus, if you are a boomer, you may have already noticed the changes in the food industry starting to happen that cater to the immigrants and the next big population bulge.

There is a juggernaut which surpassed the boomers this year known as the millennials whom are just starting their careers and families.  They are the most studied generation ever, share some traits with the immigration bulge and are the most diverse and highly educated generation to date.  They love the same foods their immigrant counterparts love just as much as traditional food and in fact consider ethnic food to be main stream and they also tend to shop almost daily just like their immigrant counterparts.  In fact 57% of millennials decide what to eat for a meal less than one hour before meal time!  The process typically starts by browsing the internet (usually on a smartphone) and discovering a recipe which triggers the shopping trip.  In the past 90 days, a millennial will have shopped at 9 different retail banners as opposed to loading up at 2 or three.  More influential is that millennials are resolved to making a difference in their lives and the world around them.  They prefer to walk or bike to the stores they shop at.  They have strong convictions and understand the impact of their purchasing power so while price and nutrition are top factors for the millennial consumer, add in “social concerns” as the third priority in what they pick out.

They tend not to stock up as this leads to food waste especially with their eating style. They want fresh, locally produced, organic, non GMO, natural products that are produced by companies with ethical reputations who give some of their profits back for the betterment of the world, all packaged in environmentally friendly packaging. With their insatiable demand for instant information, on anything and everything, it will be very hard for large corporations to keep bad practices hidden for very long from them.  More importantly, it will be devastating for such companies reputations should ill practices get leaked out.

So how will this change the grocery industry?  While some experts believe the true effects of the millennials won’t be felt until about 2020, we are already seeing some changes.  The use of smartphone technology is already clearly incorporated in to the shopping experience of many retail outlets, chains are already looking at and experimenting with different ways of tackling food waste (although the bigger the chain, the more difficult this task becomes), we are seeing large chains taking a stance on environmental issues as best they can for example Lablaw’s promise to remove triclosan and phthalates, along with microbeads, from all of its Life Brand and President’s Choice products by the end of 2018 but the biggest change may be in store size and retail square footage per capita in Canada. 

With the exception of Walmart, 2015 marks a great slow in grocery space expansion. Industry experts hailed Sobeys last year as the smartest retailer out there when they closed down 50 underperforming stores across Canada after its acquisition of Safeway and after the sale of other locations to competitors thus changing their focus to profit as opposed to sales growth.  The industry experts believe that discount is reaching a saturation point and the achilles heel of the big box store may end up being dollar stores which now offer name brand items in affordable sizes all in a small (in and out quick) store which of course is what the millennial is looking for.  Slightly off topic but an interesting fact is that there are only 2 major dollar stores left in Canada due to behind the scenes acquisitions.  There is the Canadian owned Dollarama with sales last year of over 2 billion and the American owned Dollar Giant aka Dollar Tree with a combined gross sales of $7.84 billion in 2013.  Both chains now have tremendous buying power with way less overhead than the big box retailers. 

All of this is still good news for the baby boomers as they age and continue to become more health conscious and less mobile as the years go on.  As Tom Barlow, current President and CEO of the Canadian Federation of Independent Grocers points out, the combined revenue of independent grocers in Canada is a whopping $13 billion annually, greater than some of the more well-known corporate retailers such as Costco and Walmart as well as the dollar stores.  Suppliers have learned over the years that putting all their eggs in one basket (having a big box corporation controlling too much of their sales) can be devastating and today are very willing to work more with the smaller independents.  They are using independents as “incubators” to try new products and concepts as smaller stores are more willing to work co-operatively.  This may mean that products and concepts designed for boomers will likely emerge in small stores first before the large chains attempt to implement ideas across the country.  These smaller retailers offer a more enhanced and personable shopping experience which can easily cater to boomer needs as well as the new millennial needs. In fact it’s much easier for the smaller retailer to adjust to the needs of the community around them. All you need to do is ask. And with a focus on freshness, selection and service as opposed to moving volume should a boomer be in the mood for something more exotic for dinner once in a while, chances are the smaller sized retailer will have great products from around the globe in senior sizes with staff who know their products and have the time to help you with your shopping needs.

Come down to Roosters and meet the suppliers and ask the experts as well as enjoy shopping, browsing and fun on 1st Fridays August 7th and September 4th 4-8pm and we’ll “See you at Roosters!”