No signs of slowing: Walmart, Costco continue to eat into sales of traditional Canadian grocers
CNW Group/Walmart CanadaWalmart associate Amanda Thompson stocks fresh bananas at the Halifax Walmart Supercentre.
TORONTO — Canada’s traditional supermarket chains continued to lose market share to Walmart and Costco in the first quarter, according to a new analysis, and there are no signs the trend is slowing down.
Food sales from grocery stores such as Loblaw and Metro were 3.7 times higher overall than food sales from general merchants in the first quarter, according to the report from Kevin Grier Market Analysis and Consulting. In 2010, they were 6.5 times higher.
“The growth in food sales through the general merchandising channels, largely represented by Walmart and Costco, is astounding,” Grier said in the report released Wednesday.
The pace of the general merchants’ penetration into Canadian grocery retail, once completely dominated by traditional supermarkets, is remarkable: In the first quarter of 2015, grocery retailers’ share of Canadian food sales was about 78 per cent. That has fallen steadily from 84 per cent in the first quarter of 2010, largely due to the growth of Walmart and Costco.
According to Statistics Canada, there has not been a quarter in the past 11 years during which the general merchandise channel did not outperform the supermarket channel. Between 2004 and 2015, the general merchandise channel’s rate of growth for food sales increased at a compound annual rate of 11.6 per cent, StatsCan reported. In the same period, the grocery channel’s food sales increased at a compound rate of just over three per cent.
Accordingly, the retail channel dominated by Costco and Walmart grew its food sales faster than grocery stores did in the first three months of 2016. Sales of food at general merchandisers grew 11 per cent in the quarter; food sales at grocers grew by two per cent compared with the first quarter of 2015.
According to estimates from CIBC Institutional Equity Research, the two giant U.S.owned subsidiaries now account for 10 per cent and seven per cent, respectively, of Canadian food sales.
“Both (Costco and Walmart) have been growing, but Costco in particular is notable for its expanded food presence,” Grier said. “During 2015 while grocers enjoyed a competitive pricing respite, general merchandisers’ [food] sales and shares kept growing. All the inflation of 2015 did was to make consumers more price-conscious than ever, if that is possible. Based on market share gains, the two general merchandisers were beneficiaries.”
Drug stores’ sales of food also increased sharply in the first quarter, according to the data, posting a gain of about 14 per cent compared with the first quarter last year.
Loblaw has been rolling out its President’s Choice brand of packaged food into Shoppers Drug Mart, which Loblaw president Galen Weston says has given a clear boost to the retailer’s food sales.
Food retail same-store sales growth at Loblaw was 0.7 per cent, excluding gas bar sales, the company said. Shoppers Drug Mart, the country’s largest drug retailer, performed better, with same-store sales climbing four per cent.
“The addition of a different type of food mix is helping to drive [Shoppers’] traffic, and it’s doing so at a much-improved margin,” Weston said last week on a conference call to discuss results for the second quarter ended June 18. “So imagine customers are going in and they’re buying full price competitive President’s Choice product and a wider food assortment, instead of being drawn in to buy deeply discounted carbonated beverages.”
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