A Dollarama store in Toronto.CARLO ALLEGRI/Reuters
I bought Dollarama Inc. DOL-T stock recently, but I’ve been fascinated with the Montreal-founded discount chain for years. For while there are many reasons to be bullish on Dollarama stock, particularly in the current economy, mine is unique and personal: The chain reminds me of the discount grocers in Germany, where I grew up.
The likes of Germany’s privately held Aldi Inc. were born out of widespread poverty at the end of the Second World War. By the 1990s, when my family would shop at those places, their unique beginnings had given rise to ruthless and sometimes hilarious cut-price tactics.
German discount shops are infamous for having no phone number, no marketing, offering little staff assistance and displaying products in their cartons on packing pallets. For in-house products, they slather them with multiple barcodes so cashiers won’t have to fumble and can thus scan faster. All that allows for hiring fewer staff.
Such stores offer less selection, such as only one brand of ketchup, so as to maximize the savings of bulk buying. They also stock not just in-house brands but straight-up knock-offs.
Then there are the random products that pop up from time to time, from churro makers to diet-specific low-carbohydrate bagels – oddly specific items not normally associated with discount grocers but briefly available for their low prices all the same.
Many aspects of these German grocers bring to mind Costco Wholesale Corp. They can also be seen in the discount chains we know in Canada such as Loblaw Cos. Ltd.’s No Frills. But none has all of those aspects, and in a quasi-monopoly where our largest grocers have been implicated in allegedly fixing bread prices, there’s not much incentive in disturbing the status quo.
For a truer equivalent to the German grocers, the closest thing might just be the unexpected: the outsider that is Dollarama.
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For a long time, dollar stores in Canada have not been viewed in the same league as supermarkets and big-box stores. But in addition to their cheaper offerings of the same consumer products as elsewhere, observers say such stores have been increasingly selling a more substantial selection of food.
Dollarama’s recent announcement to sell items up to $5, up from $4, is perhaps not a bad thing. Chief executive Neil Rossy said that while part of the move is in increasing the price of some current items, it is also in bringing in new items it previously couldn’t sell at $4.
Once selling only $1 items, Dollarama’s steady price increases is perhaps the best domestic example of its kind inching into the territory of grocery and big-box stores, as seen in the United States.
And I see in Dollarama some of the same nickel-and-dime tactics as with the German discount grocers. What is uniquely reminiscent for me is the kitschy, cut-price product selection, which makes for an almost treasure-hunting-like shopping experience.
My girlfriend once gushed about Dutch stroopwafels. A friend has more than once lauded hazelnut-filled croissants. Another friend, who’s so healthy that he eats only at Whole Foods, once introduced kombucha to me, the gassy, fermented tea – which I thought was neat but way too fancy, given that it’s from Whole Foods. I found all of them at Dollarama. I’d point that out to my girlfriend whenever we pass the confectionery aisle: “There – there’re your stroopwafels – $2 for 10.”
That’s much like with the German discount grocers. In 2020, on my first time back as an adult, I saw Canadian “Mounty” Whisky on sale, made at the same domestic distillery as “Landon” Dry Gin.
Dollarama has not quite gone as far. But even if it has, with inflation recently hitting a 30-year high, knock-offs are precisely Dollarama’s value. On March 30, Dollarama reported fiscal 2022 sales of $4.3-billion, up 7.6 per cent, with many shoppers perhaps finding brand-consciousness to be a privilege they can ill-afford.
In retrospect, it’s hardly a surprise that, in 2021, Dollarama saw its valuation surge by more than a fifth. The stock recently touched an all-time high $76.56 and now hovers around $74 a share.
In my view, though, the reason for that is not just that people have been gravitating toward cheaper options but also because of a whole litany of qualities that set the company apart.
For investors, it’s the closest thing we have in Canada to a pure-play publicly listed discount grocer – a rare vehicle for betting on inflation-caused changes in Canadian consumption habits.
But ultimately, my bullishness on Dollarama goes back to how I’ve viewed the chain from the lens of discount grocers in Germany.
Part of that is straightforward. A 2017 report by the Boston Consulting Group showed that such grocers in Germany had a market share of nearly half, while in Canada, that figure was only 3 per cent. I’ve long thought that Dollarama has a lot of room for growth.
The other part of my German-discounter view on Dollarama might be harder to describe. I see value in how, for example, in a forum for pet rodents, a user in British Columbia once excitedly posted about a new store opening for the chain: “I know Dollarama is where you all get your cool rat things.”
That is precisely the sort of cult devotion the German grocers have gained for their quirky, oddly specific finds. Dollarama’s fandom feels not just oddly familiar, but it also seems like a magnified version of it.
There’s a Facebook group called Dollarama Hauls and Finds. One writer has said “the group has a mythology” and that it’s a manifestation of a new collective sentiment in society. At the end of 2020, the group had 200,000 members. It now has more than 300,000.
Ethan Lou’s latest book is Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.
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