Canada’s retail landscape for groceries, underpinned by a comfortable co-existence of a few giants, is ripe for disruption by one of those European players.Alex Lupul/The Canadian Press
Sylvain Charlebois is professor of food distribution and policy and the director of the Agri-Food Analytics Lab at Dalhousie University.
Loblaw’s suspension of its price freeze this week on No Name products should prompt us to reflect on a bigger issue: The company’s No Frills chain, which heavily stocks these house-brand items, is not a real discount grocer.
This may come as a surprise for some Canadians, but our country doesn’t really have any true discount grocery chain. With higher food prices and a growing number of consumers seeking refuge from record-setting food inflation at the grocery store, real discount grocery stores would really come in handy. But the option is simply not there.
In recent years, what few discounted groceries we do get have grown scarce since No Frills and other “value” grocers, such as Empire’s FreshCo and Metro’s Food Basics, took a noticeable step back from their continuing fight with Walmart. The Quebec market is even worse, as shoppers can find only Metro’s Super C or Maxi, which is owned and operated by Loblaw; Empire doesn’t even operate a discount chain in the province.
Which brings us to the wider, underlying problem: All these discount stores are connected to just a handful of grocers controlling the Canadian market – they are essentially co-operative arms of the mainstream supermarkets, rather than competitors.
The result is that the lower prices you see at No Frills or FreshCo are just not as aggressive as what you would see in European-based discount stores – which are exclusively cut-price operations whose entire existence is based on competition against mainstream supermarkets.
Canada’s retail landscape for groceries, underpinned by a comfortable co-existence of a few giants, is ripe for disruption by one of those European players.
Tips for saving at the grocery store as food inflation in Canada continues to soar
Your personal inflation rate: Calculate how you compare to the Canadian average
For years, we have seen reports suggesting that both Lidl and Aldi would enter the Canadian market. They both still have not done so. But they have expanded into the United States. In fact, Lidl, a German international discount retailer chain, opened its first store in the United States in 2017 and is now operating almost 200 outlets. Aldi, also from Germany, now has over 2,300 stores in the United States. Both have similar business models, centring all of their efforts on discounts, plain and simple. With both, the stores are truly no-frills.
Unlike traditional grocery stores, both Lidl and Aldi operate with a restricted selection strategy, offering only a narrow range of private-label products as well as a smaller range of national brands. (Lidl may have more branded products, however, depending on location.) This leads to lower overhead costs and allows stores to sell products at lower prices compared with competitors.
Moreover, these discount grocers implement cost-saving measures such as a bring-your-own-bag policy, incredibly minimalistic store design, and an efficient checkout process. In fact, in Europe, their clerks typically sit while working at the checkout counters, since most of the bagging work is done by customers themselves.
Strategies at Lidl and Aldi not only benefit the consumer with lower prices but also contribute to a more sustainable and efficient retail environment. Some no-frills stores, such as No Frills, do some of that but not nearly at the same level. No Frills does, in fact, have quite a few frills. Lidl and Aldi are also known for their emphasis on quality, offering products that meet strict quality standards while still being more affordable than their rivals’.
In recent years, non-traditional grocers like Costco, Dollarama, Giant Tiger and Walmart have slowly shifted and tried to fill the discounting void we have in Canada. But they have not meaningfully changed the landscape.
Take the example of Costco. Its quality and freshness rarely disappoint and deals are impressive. But shoppers need both a car to get to their locations and space at home for the bulk purchases. And many Canadians are deprived of either.
The bottom line is this. Canada needs a disrupter, a new player which will redefine what competition looks like within the grocery industry. Loblaw just converted more than a dozen stores into discount Maxi stores in Quebec simply because the company is seeing the writing on the proverbial wall for their higher-priced banners. Grocers, coupled with the complacency of shoppers, have gotten comfortable, perhaps too comfortable.
One can only hope that either Aldi, Lidl or another non-Canadian discount grocer reads this column. Canadians are calling you.