Supermarkets in Canada

WWW.IBISWORLD.
CA Supermarkets & Grocery Stores in CanadaAugust 2019 1
Healthy gains: Increased sales of high-end food

products will stimulate revenue growth
This report was provided to
Andy Cuello (2132698972)
by IBISWorld on 24 October 2019 in accordance with their licence agreement with IBISWorld
IBISWorld Industry Report 44511CA

Supermarkets & Grocery
Stores in Canada
August 2019 Carlos Mieles
2 About this Industry 16 International Trade 30 Revenue Volatility

2 Industry Definition 17 Business Locations 31 Regulation and Policy
2 Main Activities 32 Industry Assistance
2 Similar Industries 19 Competitive Landscape
3 Additional Resources 19 Market Share Concentration 33 Key Statistics
19 Key Success Factors 33 Industry Data
4 Industry at a Glance 19 Cost Structure Benchmarks 33 Annual Change
21 Basis of Competition 33 Key Ratios
5 Industry Performance 22 Barriers to Entry
5 Executive Summary 23 Industry Globalization 34 Jargon & Glossary
5 Key External Drivers
7 Current Performance 24 Major Companies
9 Industry Outlook 24 Loblaw Companies Limited
11 Industry Life Cycle 25 Sobeys Inc.
26 Metro Inc.
13 Products and Markets 27 Jim Pattison Group
13 Supply Chain
13 Products and Services 29 Operating Conditions
14 Demand Determinants 29 Capital Intensity
15 Major Markets 30 Technology and Systems
www.ibisworld.ca | 1-800-330-3772 | info @ibisworld.ca

WWW.IBISWORLD.CA Supermarkets & Grocery Stores in CanadaAugust 2019 2
About this Industry
Industry Definition The Supermarkets and Grocery Stores poultry and seafood, canned and frozen
industry comprises the largest food retail foods, fresh fruits and vegetables and
channel in Canada. These establishments various dairy products. This industry
retail general lines of food products, excludes convenience stores, warehouse
including fresh and prepared meats, clubs and supercentres.
Main Activities The primary activities of this industry are

Retailing a general line of food
Retailing health and beauty products
Retailing alcoholic and nonalcoholic beverages
The major products and services in this industry are

Bakery products
Cereal grains and cereal products
Dairy products and eggs
Fish, seafood and meat products
Fruits, fruit preparations and nuts
Nonfood items
Vegetables and vegetable preparations
Other food and nonalcoholic beverages
Similar Industries 44512CA Convenience Stores in Canada

Establishments are primarily engaged in retailing a limited line of goods, known as convenience stores or
food marts, except those with fuel pumps.
44529CA Specialty Food Stores in Canada

Establishments are specialized retailers of food products including baked goods, confectionery, nuts, dairy
products, coffee, tea, soft drinks and other foods.
44531CA Beer, Wine & Liquor Stores in Canada

Establishments are primarily licensed to sell alcoholic beverages for off-premises consumption.
45291CA Warehouse Clubs & Supercentres in Canada

Establishments are engaged in retailing general groceries, but not as their primary activity, and general lines
of new merchandise.
Provided to: Andy Cuello (2132698972) | 24 October 2019

About this Industry
Additional Resources For additional information on this industry

www.agr.gc.ca
Agriculture and Agri-Food Canada
www.inspection.gc.ca
Canadian Food Inspection Agency
www.canadiangrocer.com
Canadian Grocer
www.statcan.gc.ca
Statistics Canada
IBISWorld writes over 400 Canadian

industry reports to help you make
better business decisions, faster. To
see all reports, go to www.ibisworld.ca

WWW.IBISWORLD.CA Supermarkets & Grocery Stores in Canada August 2019 4
Industry at a Glance
Supermarkets & Grocery Stores in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

Snapshot
$87.8bn 0.6% 0.3%
Profit Wages Businesses
$1.1bn $10.1bn 6,536

Revenue vs. employment growth Per capita disposable income
Market Share
Loblaw Companies 4 4
Limited 3
2
38.6%
2
0
% change
% change
Sobeys Inc. 1
29.6% -2
0
Metro Inc. -4 -1
11.0%
-6 -2
Jim Pattison Year 11 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25
Group Revenue Employment
6.3% SOURCE: IBISWORLD
Products and services segmentation (2019)

p. 24
4.6%
Cereal grains
8.2%
22.1%
and cereal products
Key External Drivers Bakery products
Per capita disposable Other food and nonalcoholic beverages
income
Consumer price 10.8%
Vegetables and
index for food vegetable preparations
External competition for
the Supermarkets and
Grocery Stores industry 10.9%
Population Fruits, fruit preparations and nuts
20.1%
p. 5
11.1%
Nonfood items
12.2% SOURCE: WWW.IBISWORLD.COM
Dairy products and eggs
Industry Structure Life Cycle Stage Mature Regulation Level Light

Revenue Volatility Low Technology Change Medium
Capital Intensity Low Barriers to Entry Medium
Industry Assistance Low Industry Globalization Low
Concentration Level High Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33

Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary The Supermarkets and Grocery Stores industry’s leading grocery store chains
industry in Canada has experienced have acquired smaller competitors in
modest growth over the five years to 2019. recent years to expand their market share
During this period, while rising levels of and lower operating costs through
consumer confidence and slight growth in economies of scale. For example, in 2018,
per capita disposable income provided an Sobeys Inc. acquired Farm Boy Inc., a
optimal business environment, the food retailer with 26 stores based in
proliferation of supercentres stifled Ontario. This trend of consolidation,
industry revenue as it increased price- combined with the growing popularity of
based competition and provided high-end, high-margin organic foods, has
customers with a one-stop shopping caused industry profit margins to expand
experience. Many consumers seeked cost during the five-year period. In 2019,
savings at grocery stores, stocking up on profit is estimated to account for 1.3% of
promotional items or trading down to the industry’s total revenue, up from
1.0% in 2014.
Over the coming years, while
The
industry’s leading grocery store chains economic indicators pertinent to the
have acquired smaller competitors in recent industry such as increased per capita
disposable income will be beneficial
years to expand their market share to the industry, increased external
competition will result in abated growth.
private label brands. In response to The growing health consciousness of
growing demand for affordable options, Canadian consumers will continue to
retailers expanded their private label generate significant demand for a variety
product lines to appeal to price-conscious of niche, high-end food products, such
consumers. However, while this shift has as organic, gluten-free and non-GMO
helped operators maintain sales volumes, foods. Increased sales of these relatively
industry revenue growth has been expensive goods will be the primary
constrained by the lower price points of reason for industry revenue growth,
these private label products. Industry though operators will continue to
revenue is estimated to grow at a modest experience significant price-based
annualized rate of 0.6% to $87.8 billion competition from supercentres and
over the five years to 2019, including an other external competitors. Ultimately,
expected growth of 0.1% in 2019 alone. industry revenue is forecast to increase
In response to intensifying at an annualized rate of 0.3% to $89.0
competition from discount retailers, the billion over the five years to 2024.
Key External Drivers Per capita disposable income Consumer price index for food
Per capita disposable income determines The consumer price index for food
an individual’s ability to purchase goods measures the changes in the price level of
and services. When disposable income foods compared with household income
declines, consumers limit grocery in Canada. An increase in the consumer
purchases to essential items and trade price index for food indicates that the
down to more affordable brands, curbing prices of groceries and other foods are
industry revenue growth. Per capita increasing at a faster pace than
disposable income is expected to increase household income. In turn, these higher
in 2019, representing a potential price points, combined with the relatively
opportunity for the industry. inelastic nature of most food items,

Key External Drivers generates additional revenue for the growth. External competition is expected
continued industry. The consumer price index is to increase in 2019, posing a potential
expected to increase in 2019. threat to the industry.
External competition for Population

the Supermarkets and The population in a particular
Grocery Stores industry province determines the number
Supermarkets and grocery stores of industry establishments within a
compete with alternative retailers, such region. Long-term population trends
as convenience stores, supercentres and depend on fertility, mortality and
warehouse clubs, among others. As immigration rates. As the population
competition intensifies, more consumers increases, demand for groceries expands,
opt to purchase their groceries at lifting industry revenue. The Canadian
different retail channels, placing population is expected to increase
downward pressure on industry revenue in 2019.
Per capita disposable income Consumer price index for food
4 180
3 170
2 160
% change
Index
1 150
0 140
-1 130
-2 120
Year 13 15 17 19 21 23 25 Year 11 13 15 17 19 21 23 25
SOURCE: IBISWORLD

Current The Supermarkets and Grocery

Stores industry in Canada has grown Industry revenue
Performance modestly over the five years to 2019.
4
Suppressed disposable income levels
during the first half of the five-year
2
period caused consumers to seek
deals and promotions, which placed
% change
downward pressure on industry 0
revenue growth. Additionally,
increased competition from alternative -2
retailers, including warehouse clubs
and supercentres, limited sales of -4
certain goods and further pressured Year 11 13 15 17 19 21 23 25
industry operators to lower their
product prices. Overall, IBISWorld SOURCE: IBISWORLD
expects industry revenue to increase at a

moderate annualized rate of 0.6% to including a projected growth of 0.1%
$87.8 billion over the five years to 2019, in 2019 alone.
Competition and Supermarkets have historically Due to the increased competition

consolidation represented the leading retail channel that industry operators have
for food purchases in Canada. In recent experienced over the past five years,
years, however, grocery stores have begun many supermarkets have been forced to
to lose ground to a variety of discount engage in price-based competition. As
retailers, such as supercentres and the cost of purchases has decreased,
warehouse clubs such as Costco Wholesale many operators have offered promotions
Canada Ltd. and Walmart Canada and discounts to drive foot traffic to
Corporation, which have gained market their stores. Consequently, independent
share of the food retailing sector in grocers that could not maintain
Canada. Supercentres have diversified profitability amid inflationary costs and
their grocery sections, adding a variety pricing pressures exited the industry.
of fresh meat and produce, to compete Conversely, many of the leading
more directly with grocery stores. While grocery store chains acquired smaller
Canadian consumers have not embraced competitors to enter new markets,
the concept of one-stop-shopping as much expand their market share and reduce
as US consumers have, which some say is operating costs through economies of
the reason for Target Canada Co.’s failure, scale and greater synergies. For instance,
warehouse clubs have experienced steady Sobeys Inc. (Sobeys) acquired Farm Boys
growth as they offer discounted products, Inc. in 2018, expanding its presence
appealing to consumers that seek value. into the greater Toronto area. Another
Moreover, as per capita disposable notable transaction includes Metro Inc.’s
income has increased modestly, more purchase of Premiere Moisson, a
consumers have turned to alternative company specializing in bakery, pastry,
retailers for cost savings. charcuterie and other specialty foods.

Private label brands In addition to shopping sales, using products, helping boost the profitability
coupons and stocking up on promotional of industry operations. Due to the
items, the continued growth of private growing popularity of private label goods,
label goods has placed downward industry leader Loblaw Companies
pressure on industry performance in Limited (Loblaw) has significantly
recent years. According to the Wall Street expanded its private label product line,
Journal, private label products are priced including organic and ethnic offerings.
29.0% below branded products on While these products boost profit
average. As a result, consumers have margins for industry operators, they also
increasingly gravitated toward generic limit industry revenue growth because of
products. These brands help retain their lower price point. Consequently, the
consumers by giving them an inexpensive growing popularity of private label goods
alternative to national brands. has contributed to the industry’s slow-
Additionally, generic products possess moving revenue growth over the past
higher profit margins than branded five years.
Fresh foods and fresh In recent years, many Canadians have

become more conscientious of the food Theindustry’s largest
format
they purchase at supermarkets and operators have increased
grocery stores. In response to more
stringent government regulations, food in scale and scope
manufacturers are placing more accurate
food claims on their products to inform these stores often have chef-prepared
consumers of the ingredients and nature ready-to-eat meals, juice bars, gourmet
of the food products they purchase. bakery items and an extensive selection
Additionally, the growing awareness of of health and wellness products.
the link between food consumption Over the past five years, the industry’s
and diseases, such as diabetes and largest operators have increased in both
cardiovascular disease, has caused scale and scope due to mergers and
consumers to become more conscious of acquisitions and a small degree of organic
their purchases. As a result, according to growth. In line with merger and
the Canada Organic Trade Association, acquisition activities, the total number of
the market for organic food products industry enterprises has declined at a
has nearly tripled in size since 2006, modest annualized rate of 1.0% to 6,536
contributing to significant revenue companies over the five years to 2019.
growth for supermarkets that offer Limited consumer demand, automation
organic products. of industry operations and ongoing
Several of the industry’s major players, consolidation have also affected the
such as Loblaw and Sobeys, have taken industry’s workforce, with total industry
advantage of growing demand for employment estimated to decline at an
premium products and organic food by annualized rate of 0.3% to 385,711
opening freshly formatted supermarkets. employees during the same period. This
Over the past five years, these companies decline in industry employment has been
have each invested billions of dollars in exacerbated by the implementation of
remodelling and opening up new stores self-checkout and inventory tracking
focusing on organic and premium systems, which enable stores to use fewer
products. Along with regular groceries, workers for day-to-day tasks.

Industry As disposable income levels continue to

improve over the coming years, the
chains will also offer a greater variety of
prepared foods to attract consumers that
Outlook Supermarkets and Grocery Stores seek convenience. Moreover, domestic
industry in Canada is expected to food prices are projected to continue
continue expanding. Despite the growing climbing due to the increased use of
popularity of generic products and crops for alternative purposes, such as
mounting competition from alternative biofuel. In turn, higher prices and the
retailers, more consumers will trade up inelastic nature of most industry-relevant
to higher-priced premium goods and food items are expected to bolster
organic products over the five years to industry revenue growth, albeit at a
2024. While higher income levels will slower rate than the previous period.
cause some consumers to dine out more Overall, industry revenue is forecast to
frequently and depend less on grocery grow at an annualized rate of 0.3% to
stores to purchase food, grocery store $89.0 billion over the five years to 2024.
Premium goods on Despite intensifying competition from

alternative retailers, grocery stores are Grocerystores are
the rise
expected to benefit from rising health expected to benefit from
concerns, which will entice more
consumers to purchase organic, all- rising health concerns
natural and value-added products at
industry establishments. In particular, In addition to organic foods,
IBISWorld projects demand for organic IBISWorld expects supermarkets and
food to rise rapidly over the coming grocery stores to increase their stock of
years, causing industry participants ethnic foods. Canada is culturally and
to adjust their product portfolios and ethnically diverse, with a large immigrant
store formats accordingly. Some of population from Europe, Asia and
the larger chains, such as Loblaw Southeast Asia. As immigration is
Companies Limited (Loblaw) and expected to be the primary reason for
Sobeys Inc., will likely seek to introduce overall Canadian population growth,
organic food stores to attract a growing demand for ethnic foods in Canada is
consumer segment that chooses to expected to increase over the next five
purchase all organic foods. Additionally, years. Consequently, industry
the leading grocery store chains are participants that devote more retail space
expected to expand their organic to ethnic food products are anticipated to
private label offerings, which will outperform their competitors over the
help maintain profitability. coming years.
Supermarkets focus As a result of rising industry revenue and grocery stores’ high prices. However,
on customer loyalty growing demand for high-margin food fierce internal and external competition
products, industry profit margins are generally prevents industry participants
projected to remain stable over the next from passing on these costs to consumers
five years. The rising cost of food inputs in the form of higher markups. At the
forces many wholesalers and food same time, slight increases in the cost of
processors to charge supermarkets’ and energy and transportation will continue

Supermarkets focus to inflate purchase costs for industry forward, supermarkets and grocery stores
on customer loyalty operators, while competition from will have to increasingly depend on such
continued supercentres and warehouse clubs will programs to maintain their customer
continue to place downward pressure on base. In addition to loyalty programs,
product prices, somewhat constraining operators are expected to offer a greater
industry profit margins. range of amenities to make the shopping
To expand their customer base and experience more enjoyable and
enhance loyalty among consumers, convenient for consumers. For instance,
operators will continue to focus on some grocery stores enable customers to
developing customer loyalty programs be able to shop for food products online
that offer discounts, promotions and during their commute or at work and
perks for customers that visit a particular subsequently collect their orders when
grocery chain frequently. Moving they arrive at the store.
Continued In a hyper-competitive industry with low

consolidation operating margins, industry Industry
consolidation is
consolidation is expected to persist as
this is the only choice for some
expected to persist
companies to continue operations or
expand into different geographic regions. in ethnic and health foods are expected to
For instance, in September 2018, Sobeys be drawn into the industry, boosting total
acquired Farm Boy Inc. (Farm Boy), a employment. Over the five years to 2024,
food retailer with 26 stores based in the number of industry employees is
Ontario, for $800.0 million to expand anticipated to increase slightly at an
into the greater Toronto area. Companies annualized rate of 0.1% to 387,440
will continue to expand their customer people. However, consolidation will
base and market share by merging with continue, albeit at a slower rate than the
or acquiring competitive grocery store previous period. Thus, the number of
chains such as Farm Boy over the coming industry enterprises is forecast to
years. However, while large and midsized decrease at a modest annualized rate of
operators are expected to consolidate, 0.3% to 6,441 companies over the five
some smaller niche operators specializing years to 2024.

Life Cycle Stage There is ongoing market saturation
The industry is undergoing consolidation
The adoption of new technology is minimal

Industry Life Cycle The Supermarkets and Grocery Stores variety of nonperishable goods, often
industry in Canada is in the mature phase at lower prices. In response to uncertain
of its economic life cycle. Over the 10 consumer demand, many grocery
Thisindustry years to 2024, industry value added stores have focused on improving their
is M
ature (IVA), which measures an industry’s operational efficiencies by reducing
contribution to the economy, is expected wage costs and relying more on
to increase at an annualized rate of 0.7%. technology. As a result, operators have
Comparatively, Canadian GDP is forecast introduced self-checkout cash registers
to grow at an annualized rate of 1.7% and automated warehouse equipment,
during the same period. The similarity which have helped reduce employment
between these two growth rates and maintain earnings. Additionally,
illustrates that the industry’s contribution many of the leading chain operators
to the broader Canadian economy is have expanded their private label
stable, which is indicative of a mature product offerings to establish a loyal
industry. Additionally, this classification customer base and appeal to price-
is supported by the inelastic nature of conscious consumers.
grocery products, ongoing market In an effort to bolster industry profit
saturation and the modest adoption of margins, several large-scale grocery
new technology. stores have engaged in mergers and
Despite the inelastic nature of grocery acquisitions to gain market share and
items, demand for grocery products has benefit from economies of scale. Over
been suppressed due to intensifying the five years to 2024, IBISWorld expects
competition from alternative retailers. the industry to continue its trend of
Over the five years to 2019, supercentres consolidation as operators seek new ways
and warehouse clubs have increasingly to boost their competitiveness. Overall,
taken market share away from grocery these trends reinforce the industry’s
stores, as these competitors offer a wider mature status.

Products & Markets

Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

99CA Consumers in Canada
Consumers purchase groceries from grocery stores and supermarkets.
KEY SELLING INDUSTRIES

31211cCA Juice Production in Canada
Supermarkets and grocery stores purchase a variety of packaged beverages including fruit
juice, iced tea and sports drinks from industry operators.
41311CA Grocery Wholesaling in Canada
Supermarkets and grocery stores purchase a variety of grocery products from wholesalers.
41312CA Dairy Wholesaling in Canada
Supermarkets and grocery stores purchase dairy products from dairy wholesalers.
41314CA Fish & Seafood Wholesaling in Canada
Supermarkets and grocery stores purchase fish and seafood from operators in this industry.
41315CA Fruit & Vegetable Wholesaling in Canada
Supermarkets and grocery stores purchase fruit and vegetables from industry operators.
41316CA Beef & Pork Wholesaling in Canada
Supermarkets and grocery stores purchase beef and pork from wholesalers.
41319CA Frozen Food Wholesaling in Canada
Supermarkets and grocery stores purchase frozen food operators in this industry.
42445CA Confectionery Wholesaling in Canada
Supermarkets and grocery stores purchase confectionery items from wholesalers.
Products and Services Products and services segmentation (2019)

4.6%
Cereal grains and
8.2%
Bakery products
cereal products
22.1%
Other food and nonalcoholic beverages
10.8%
Vegetables and vegetable preparations
10.9%
Fruits, fruit preparations and nuts 20.1%
11.1%
Nonfood items 12.2%
Total $87.8bn Dairy products and eggs
SOURCE: IBISWORLD
Supermarkets and grocery stores sell a majority of total revenue from the sale of
variety of food and nonperishables, but various grocery products, including meat,
consumers primarily shop at dairy, fresh produce, canned foods and
supermarkets for food products. As a frozen goods. Over the five years to 2019,
result, the Supermarkets and Grocery revenue from organic products has
Stores industry in Canada generates the increased rapidly, boosting revenue from

Products & Markets
Products and Services produce items. According to the Canada among consumers. Demand for
continued Organic Trade Association, an estimated vegetables and fruits that are known for
80.0% of all organic food and beverage providing certain health benefits has
sales occur in traditional grocery stores. grown significantly. Despite intensifying
price-based competition, greater
Food items promotional activity, private label
Food items represent the most important product sales and the growing popularity
product segment for supermarkets and of fad foods have bolstered this segment’s
grocery stores, accounting for an share of total industry revenue.
estimated 88.9% of the industry’s total
revenue in 2019. Fresh and frozen Nonfood items
varieties of meat, including poultry, red Common nonfood items sold by
meat and fish, make up the largest share industry operators include household
of the industry’s total sales due to the high cleaning products and utensils,
price point of these goods when compared personal hygiene products, lawn
with other food items. However, stagnant and garden items, hardware, cigarettes
per capita consumption of meat has and other tobacco products, pet food
placed downward pressure on demand for and supplies, over-the-counter drugs,
meat and seafood at grocery stores. vitamins and other health products.
Conversely, rising prices for meat Collectively, these products are
products have offset lower demand, estimated to account for 11.1% of
causing this segment’s share of revenue to industry revenue in 2019. Over the past
remain steady over the past five years. five years, this product segment has
Additionally, the growing popularity of remained stable as a share of total
organic food products, which are more industry revenue. Although consumers
expensive than regular brands, has also have increasingly turned to more
contributed to this product segment’s affordable retail channels, such as
continued importance within the industry. supercentres and discount stores, to
Conversely, fruits and vegetables’ purchase goods that are included in
share of industry revenue has increased this segment, industry operators have
over the five years to 2019, with the trend responded by expanding their selection
driven by growing health consciousness of goods and lowering prices.
Demand Household disposable income is the premium goods, which helps lift revenue
Determinants primary demand determinant for grocery for the Supermarkets and Grocery Stores
purchases. While consumers regularly industry in Canada.
purchase goods at grocery stores and Another factor that determines the
supermarkets, the level of real household level of demand for grocery products is
disposable income determines the price levels. Over the five years to 2019,
quantity and quality of goods purchased. industry operators have expanded their
For instance, households with relatively private label offerings to attract price-
low levels of disposable income generally conscious consumers. Furthermore, these
purchase essential goods and very few, if products enhance customer loyalty to
any, premium items, such as organic or grocery store chains, enabling operators
imported products. Conversely, to benefit from a secure customer base.
households with higher levels of income Supermarkets and grocery stores are
are typically able to vary the quality of also affected by the level of external
goods they purchase, often trading up to competition. Operators in the Warehouse

Products & Markets
Demand Clubs and Supercentres industry in Additionally, they offer a wider array of
Determinants Canada (IBISWorld report 45291CA), products than grocery stores, including
such as Walmart Canada Corporation and electronics and clothing, which has also
continued
Costco Wholesale Canada Ltd., have caused many consumers to opt for the
rapidly entered the food retailing sector in convenience of supercentres, limiting
Canada, and these external companies demand for industry stores. Lastly, online
pose a serious threat to this industry’s retailers sell food products and while the
performance. Due to the size and scale of majority of food products sold online are
these alternative retailers, they can charge non-perishables, this trend is expected to
lower prices for their goods, appealing to grow as a viable alternative to brick-and-
consumers that seek affordable products. mortar stores.
Major Markets Major market segmentation (2019)
11.8%
Lowest income quintile
26.9%
Highest income quintile
16.8%
Second-lowest income quintile
21.1% 23.4%
Third income quintile Fourth income quintile
Total $87.8bn SOURCE: IBISWORLD
Products sold by the Supermarkets and five years to 2019, revenue from this
Grocery Stores industry in Canada are consumer segment has declined as a
typically essential in nature. Most share of the industry’s total revenue, as
households, regardless of their disposable many households have switched to less
income, purchase groceries from industry costly private label goods and have
operators on a regular basis. Even so, increasingly shopped at discount
household income is an important department stores, such as Walmart
determinant of how much and what types Canada Corporation. Members of this
of groceries consumers purchase. segment have also taken advantage of
promotional opportunities and discounts
Lowest and second-lowest at a much higher rate than consumers in
income quintile other market segments, limiting the value
In 2019, the lowest and second-lowest of revenue derived from these lower
income quintiles are expected to account income consumers.
for a combined 28.6% of industry
revenue. Consumers in this segment are Third and fourth income quintile
typically price-sensitive and purchase Collectively, the third and fourth income
items on an as-needed basis. Over the quintiles are expected to generate 44.5% of

Products & Markets
Major Markets the industry’s total revenue in 2019. Highest income quintile
continued Members of this segment are able to spend Households in the highest income
more on premium-level goods. However, quintile are expected to account for a
slow economic expansion has enticed many substantial 26.9% of total industry
consumers in this segment to stick with revenue in 2019. Members of this
less costly alternatives during the five-year segment are the largest market for
period. Nevertheless, as health concerns premium and organic goods, which
have become more prevalent over the past command higher prices. Over the past
five years, this market segment has grown five years, several major companies, such
as a share of the industry’s total revenue as Loblaw Companies Limited and
as more high-income consumers have Sobeys Inc., have remodelled their stores
turned to organic produce and other to attract and retain consumers from this
high-end products. high-income market segment.
International Trade International trade is accounted for at the Grocery Stores industry in Canada is
manufacturing level. As a result, although sourced from international locations,
a significant share of goods retailed by supermarkets do not directly import and
operators in the Supermarkets and export groceries.

Products & Markets
Business Locations 2019
Establishments (%)
Less than 5%
5% to less than 20%
20% to less than 40%
40% or more
NT
YT NU
NORTHERN TERRITORIES
0.9
BC AB SK MB
14.2 10.3 4.5 4.3
QC NL
2.3
ON 25.2
33.4
PE
NB 0.6
1.8 NS
2.5
SOURCE: IBISWORLD

Products & Markets
Business Locations The geographic spread of establishments

Distribution of establishments vs. population
in the Supermarkets and Grocery Stores
industry in Canada largely follows the
40
distribution of the Canadian population.
This trend is common within the retail
30
sector, as these companies rely heavily
on foot traffic to generate consumer
purchases. Ontario is Canada’s most 20
%
populated province, containing an
estimated 38.7% of the country’s 10
population. Consequently, the province is
also home to a substantial 33.4% of all 0
industry establishments in 2019, making
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland
NW Territories
Nova Scotia
Ontario
Prince Edward Island
Quebec
Saskatchewan
the province the most popular destination
for supermarkets and grocery stores in
Canada. Moreover, Ontario’s location
on the Great Lakes provides retail stores
Establishments
in this area with a well-established
Population
transportation network and easy access SOURCE: IBISWORLD
to imports from the United States.

Quebec is another important region for population. For instance, British
operators in the industry. Containing an Columbia contains 13.5% of the nation’s
estimated 22.6% of Canada’s total population and an estimated 14.2% of
population, Quebec is the nation’s all supermarkets and grocery stores in
second-most populous province, in Canada. Similarly, Alberta is estimated
addition to serving as a major tourist to account for 11.7% of the national
destination and a hub for the nation’s population and 10.3% of all industry
commercial activity. The region also has facilities. The nation’s remaining
access to key waterways that make provinces and territories are estimated
transporting goods easier and more to collectively account for 16.9% of all
affordable for industry participants. industry establishments in 2019. Many
Overall, Quebec is estimated to contain of these regions have cold climates that
25.2% of all industry establishments are not attractive to consumers and
in 2019. businesses. Consequently, these areas
British Columbia and Alberta account for a relatively small share of
account for similar portions of industry both the total Canadian population and
establishments and the Canadian the country’s total economic activity.

Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Supermarkets and Grocery Stores Companies Limited and Sobeys Inc.
Concentration industry in Canada exhibits a high degree (Sobeys) have acquired smaller
of market share concentration, and the competitors to enter new markets
industry’s four largest players are and benefit from economies of scale.
Level
estimated to account for more than Over the five years to 2024, IBISWorld
Concentration in 85.0% of the industry’s total revenue in expects the industry to continue
this industry is H
igh 2019. Over the five years to 2019, the consolidating as large-scale operators
industry has experienced significant seek ways to reduce costs and boost
consolidation activity as many of the earnings in a heavily saturated market
leading grocery chains, such as Loblaw that is highly competitive.
Key Success Factors Proximity to key markets maintain operational costs by minimizing
This factor enables operators to unnecessary stock buildup.
maximize their exposure by being located
IBISWorld identifies in populated areas such as shopping Having a loyal customer base
250 Key Success strips and malls. Clear signage, easy Securing a loyal customer base is critical
Factors for a access and ample parking also drive for operators due to increasing price-
business. The most foot traffic. based competition.
important for this
Level of competition in the market Access to the latest available and most
industry are: Grocery stores compete with a variety of efficient technology and techniques
retailers within the food retailing sector. The implementation of new technology,
Furthermore, supermarkets that are such as POS systems and RFID tags, helps
located close to discount stores and operators reduce costs and boost earnings.
wholesale clubs have grown at a slower
rate than other operators. Having a wide and expanding
product range
Inventory management Offering a variety of branded, generic and
Operators must ensure that popular premium products is critical in appealing
products are always available and to different consumer segments.
Cost Structure The cost structure for the Supermarkets Wages

Benchmarks and Grocery Stores industry in Canada is Employee compensation and other
based on an estimate of the average labour-related expenses represent the
industry operator. Profit margins and second-largest cost for grocery stores and
other costs vary from retailer to retailer supermarkets, accounting for an
and depend on several factors such as estimated 11.5% of industry revenue in
ease of access to suppliers and scale of 2019. Over the past five years, wages’
operations. However, the industry as a share of revenue has increased slightly,
whole has some overarching with wage growth outpacing revenue
characteristics as high price-based growth. This is a result of legislation that
competition and oversaturation has led has increased the minimum hourly wage
to persistently low profit margins. of workers, which is significant as many

Cost Structure workers in the industry work on an grocery stores. The leading supermarket
Benchmarks hourly basis. At the same time, the chains have also launched a variety of
implementation of various inventory generic branded products, which are
continued
tracking and self-checkout systems has more affordable than purchasing branded
reduced the number of entry level goods from suppliers. Despite the
employees and cashiers in the industry growing importance of private label
as industry operators try to maintain goods, purchases will remain the most
existing profit margins. important cost segment in coming years.
Purchases Profit
Typical of retail industries, purchases IBISWorld expects industry profit,
represent the largest expense for measured as earnings before interest and
operators in the Supermarkets and taxes, to account for 1.3% of total revenue
Grocery Stores industry in Canada, in 2019, up from 1.0% in 2014. Over the
constituting an estimated 76.3% of five years to 2019, rising levels of
industry revenue in 2019. The purchases disposable income and improving
category consists of goods purchased consumer sentiment have encouraged
from downstream suppliers, including everyday consumers to purchase more
wholesalers and producers, for resale to high-end, brand name products, slightly
consumers. Over the five years to 2019, bolstering industry profit margins.
purchases’ share of revenue has Moreover, substantial consolidation
decreased slightly due to the growing activity on the part of the industry’s
presence of private label products at largest players has significantly reduced
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2019) (2019)
100
6.0 1.3 n Profit
10.4 11.5 n Wages

n Purchases
80 n Depreciation
n Marketing
n Other
Percentage of revenue
60
72.0 76.3
40
20
1.2 1.1 1.0 0.7

6.8 5.5
0
SOURCE: IBISWORLD

Cost Structure the industry’s operating costs, further print, TV and mobile in an effort to
Benchmarks bolstering profitability. At the same time, retain customers.
extensive restructuring and store
continued
remodelling activity to optimize store Rent
layouts have somewhat constrained Rent is expected to account for 2.5% of
industry profit margins during the total industry revenue in 2019. Rent costs
five-year period. have remained steady in the industry
over the past five years.
Depreciation
Depreciation of the industry’s capital Utilities
assets is expected to account for an Utility costs have remained steady in the
additional 1.0% of the industry’s total industry over the past five years and are
revenue in 2019. expected to account for 1.2% of total
revenue in 2019.
Marketing
Marketing is expected to only account Other
for 0.7% of revenue in 2019. Due to Other industry expenses include legal,
mounting internal and external research and development, insurance and
competition, operators have advertised various administrative costs. Overall,
special promotions and programs these costs are expected to account for
through a variety of mediums including 5.5% of total industry revenue in 2019.
Basis of Competition Internal competition Operators also compete to secure the

Supermarkets and grocery stores best locations that are convenient and
compete internally on the bases of price, near a busy intersection or street. In
Level & Trend location, product selection, access to addition, the variety of goods offered in
ompetition
C in additional services, customer service and grocery stores is also important. To
this industry is convenience. Due to the homogeneous appeal to a diverse consumer base,
Highand the trend nature of the goods sold at supermarkets, operators must provide a balanced
operators in the Supermarkets and mix of generic, branded and premium
is I ncreasing
Grocery Stores industry in Canada products. While there are grocery stores
compete on price by offering discounts that target a specific consumer segment,
and promotions in addition to customer offering a diverse product portfolio
loyalty awards. Coupled with the growing helps operators satisfy the needs of
popularity of private label products, both high- and low-income households.
which are more affordable than branded Aside from food and traditional grocery
goods, price-based competition has merchandise, operators that provide
increased. Furthermore, the leading additional amenities, such as ATMs, and
supermarket chains have acquired exceptional customer service have an
smaller competitors in recent years to edge over competitors.
reduce operating expenses through
economies of scale. In turn, industry External competition
consolidation has exacerbated internal The Supermarkets and Grocery Stores
price-based competition because larger industry in Canada contends with
companies can typically offer lower substantial external competition from
prices than independent grocers and a variety of food retailers including
small chains. supercentres, convenience stores and

Basis of Competition discount stores. However, competition particularly intense in suburban

continued from larger retailers such as Walmart areas and smaller towns, where more
Canada Corporation (Walmart Canada) households turn to the convenience of
and Costco Wholesale Canada Ltd. supercentres due to the lack of grocery
(Costco Canada) is particularly intense. and convenience stores. Recently, there
While supercentres generate a large has been a trend of Canadian consumers
portion of their sales from food and shopping online for non-perishable food
grocery products, they also retail a variety items, as these products are typically less
of goods including clothing, furniture and expensive online and have long shelf-
appliances among other household lives. As a result of these developments,
products. As a result, supercentres over the past five years, external
and warehouse clubs offer a one-stop- competition has intensified as Costco
shop for consumers, appealing to large Canada and Walmart Canada have
families and time-strapped consumers. rapidly increased their presence
Competition from larger retailers is in Canada.
Barriers to Entry The Supermarkets and Grocery Stores

industry in Canada has moderate barriers Barriers to Entry checklist
to entry. New entrants are subject to high Competition High
Level & Trend initial capital investments, which are Concentration High
arriers to Entry
B needed to secure physical store space, Life Cycle Stage Mature
in this industry machinery and equipment such as point- Capital Intensity Low
are M ediumand of-sale systems and computers. Over the Technology Change Medium
five years to 2019, raising capital has Regulation and Policy Light
Increasing
become more difficult due to tighter Industry Assistance Low
lending standards, increasing the market’s
barriers to entry. Additionally, prospects SOURCE: IBISWORLD
must be able to obtain supply contracts

with a variety of food manufacturers and market saturation can deter
distributors. However, the leading grocery prospects from entering the
store chains have established relationships industry. Furthermore, in 2019, the
with suppliers, making it difficult for top four supermarket chains account
smaller competitors and new entrants for more than 85.0% of the market
to win supply contracts with certain and often engage in price-based
manufacturers. Conversely, no direct competition due to the benefits of
licences are required to operate economies of scale. As the industry
supermarkets or grocery stores, which continues to consolidate in the
significantly lowers barriers to entry. coming years, intensifying price-
Aside from the initial costs based competition will raise the
associated with entering the industry, barriers to entry for this industry.

Industry The Supermarkets and Grocery Stores countries, such as the United States.
Globalization industry in Canada exhibits a low level of However, US supermarket chains, such
globalization. Due to the nature of retail as Whole Foods Market Inc., have
Level & Trend stores, supermarkets do not engage in successfully carved out market share in
international trade. Major players Loblaw Canada and are expected to continue
lobalization
G in this Companies Limited, Sobeys Inc., Metro expanding in coming years. Overall,
industry is L owand Inc. and the Jim Pattison Group have a IBISWorld forecasts industry globalization
the trend is S teady substantial presence in Canada, but have to remain steady in the near future as
not pursued international expansion due companies focus on improving internal
to the high level of competition in foreign operations to boost profit margins.

Major Companies
Loblaw Companies Limited | Sobeys Inc.
Metro Inc. | Jim Pattison Group | Other Companies
Major Players Jim Pattison Group 6.3%

(Market Share) Sobeys Inc. 29.6%
14.5%
Other
Metro Inc. 11.0%

Loblaw Companies Limited 38.6% SOURCE: IBISWORLD
Player Performance Brampton, ON-based Loblaw Companies insurance brokerage services, personal
Limited (Loblaw), a subsidiary of George banking services, deposit-taking services
Weston Limited, operates 550 corporate and telecommunication services, which
Loblaw Companies stores and 535 franchise grocery stores are all included under Loblaw’s financial
Limited across Canada. Employing an estimated services segment. The newly formed
Market Share: 38.6% 197,000 people across its global choice properties segment operates the
operations, the company operates company’s real estate portfolio. In
numerous brands, including private label 2018 (latest data available), the retail
products under President’s Choice, PC segment generated $45.9 billion in
Organics, PC Blue Menu, PC Black Label revenue, while the financial services
Collection, no name, Farmers Market, segment contributed a respective $1.1
Everyday Essentials, Life at Home, T&T, billion in revenue to the company’s
Exact and Life Brand. The company overall performance.
divides its business into two reportable Over the five years to 2019, Loblaw has
segments, which are retail and financial made several efforts to improve its
services. The company’s supermarkets, supermarkets’ operating results. In 2013,
drugstores, gas bars, apparel and other the company acquired Shoppers Drug
general merchandise stores are reported Mart Corporation, which falls outside of
under the retail segment, which is the this industry’s purview. However, the
most relevant to this industry. Loblaw move is widely acknowledged as an
also provides customers with credit card attempt by Loblaw to broaden its revenue
services, a retail loyalty program, stream outside of the increasingly
Loblaw Companies Limited (industry-relevant operations) - financial

performance*
Revenue Operating profit
Year ($ million) (% change) ($ million) (% change)
2014 32,681.0 N/C 507.7 N/C
2015 32,672.0 0.0 1,049.9 106.8
2016 33,175.0 1.5 1,390.3 32.4
2017 33,288.0 0.3 1,337.6 -3.8
2018 32,969.0 -1.0 1,235.0 -7.7
2019 33,908.6 2.8 1,446.1 17.1
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD

Major Companies
Player Performance competitive industry. In 2014, the revenue to increase at an annualized

continued company added Fresh Juice Bars and rate of 0.7% to $33.9 billion. Over the
ACE Bakery destinations in over 140 past five years, the company has
stores and chef-prepared ready-to-eat benefited from the success of its private
products in over 290 stores. In 2015, label brands and rising demand for
the company announced a $1.2 billion all-natural products. At the same time,
initiative to expand and enhance its the industry has lost market share in
existing stores, and build up its online recent years, as many of the company’s
channel. Much of the company’s competitors have experienced relatively
investment has been put toward strong revenue growth. The company’s
expanding the Inspire store format. profit margins have also expanded
These freshly formatted stores focus on during the five-year period, despite
more premium grocery and ethnic numerous investments in store
product offerings. The company has improvements. Overall, Loblaw’s
also expanded its private label brands industry-relevant operating income has
by offering more natural and gluten- grown at an annualized rate of 23.3% to
free products. reach an estimated $1.5 billion over the
five years to 2019. This growth has
Financial performance resulted in profit accounting for a
Over the five years to 2019, IBISWorld relatively strong 4.3% of the company’s
expects Loblaw’s industry-specific industry-relevant revenue in 2019.
Player Performance Nova Scotia-based Sobeys Inc. (Sobeys), services and convenience service. All
a subsidiary of Empire Company Limited, formats fall under thirteen banners,
operates more than 1,500 corporate- and which include Sobeys, Safeway, IGA, IGA
Sobeys Inc. franchise-owned stores in over 900 Extra, Farm Boy, Kim Phat, Pete’s,
Market Share: 29.6% communities across Canada. Employing Thrifty Foods, Foodland, Bonichoix, Les
an estimated 123,000 people, Sobeys’ Marches Tradition, FreshCo and Price
stores are laid out in five different Chopper. In addition to grocery stores,
formats, which include full service, fresh the company operates numerous
services, community service, discount pharmacies, liquor stores, gas stations
Sobeys Inc. (industry-relevant operations) - financial performance*

Year** ($ million) (% change) ($ million) (% change)
2014-15 23,928.8 N/C 639.9 N/C
2015-16 24,618.8 2.9 -2,509.2 N/C
2016-17 23,806.2 -3.3 259.3 N/C
2017-18 24,214.6 1.7 273.6 5.5
2018-19 25,142.0 3.8 561.8 105.3
2019-20 25,955.6 3.2 545.7 -2.9
*Estimates; **Year-end May


Major Companies
Player Performance and wholesale operations. However, new retail stores through the purchase of
continued these businesses are not relevant to the assets in Co-op Atlantic’s food business.
Supermarkets and Grocery Stores Most recently, in September 2018,
industry in Canada. Sobeys acquired Farm Boy Inc., a food
Similar to Loblaw, Sobeys has retailer with 26 stores based in Ontario,
continuously executed strategic for $800.0 million.
manoeuvres to decrease costs and drive
sales. For example, Sobeys has Financial performance
systematically converted Price Chopper IBISWorld expects Sobeys’ revenue to
stores to FreshCo discount stores in increase at an annualized rate of 1.6% to
Ontario, reaching 68 conversions by $26.0 billion over the five years to fiscal
2012. Moreover, in 2013, the company 2020. As many other large-scale industry
built an automated distribution centre in companies, Sobeys has used acquisitions
Quebec to boost its productivity and as a means of expansion, causing the
earnings. More importantly, Sobeys company’s share of the total market to
acquired all the assets of Canada Safeway expand during the five-year period.
at the end of 2013, significantly boosting Despite these positive trends, the
its market share. This acquisition not company’s profit margins have remained
only increased the company’s scale, limited by the substantial costs associated
adding 223 Safeway stores to its with integrating Canada Safeway stores.
portfolio, but also made the company an In fiscal 2016, company profit plummeted
industry leader in Alberta. Though the as a result of impairment charges and
company has divested several stores in continued price-based competition.
recent years, in compliance with the Overall, the company’s industry-relevant
Competition Bureau, the company has operating income is estimated to decrease
not experienced a significant drop in at an annualized rate of 3.1% to $545.7
market share. Sobeys has also engaged in million over the five years to fiscal 2020,
smaller scale acquisitions. For example, resulting in an industry-relevant profit
in May 2015, the company added five margin of just 2.1%.
Player Performance Montreal-based Metro Inc. (Metro) despite strong performance from the
operates 345 supermarkets and 228 company’s discount stores, Metro has
discount stores across Quebec and increasingly invested in its traditional
Metro Inc. Ontario. In addition to Metro’s supermarket format. Over the past few
Market Share: 11.0% supermarkets, the company operates 669 years, Metro has focused on opening and
drug stores, which are not included in renovating a fleet of stores to be part of
this industry. Metro runs its its new generation of offerings. These
supermarkets under several banners, new formats include features such as a
including Metro, Metro Plus, Super C, beef-aging room, a fish smoker, a bistro,
Adonis and Food Basics. a greater variety of home-ready meals
Metro has been able to reach a wide prepared on-site, an olive bar, a nut bar,
range of consumers through its a larger assortment of fresh produce and
traditional grocery stores and its discount several local products.
stores. The company’s discount stores The company has also added 320 new
appeal to price-conscious consumers that products to its private labels, taking
want to buy basic food items. However, advantage of consumers, especially

Major Companies
Player Performance millennials, shifting to private labels. In the range of this service is available to
continued 2014, the company acquired a majority 60.0% of the Quebec population.
stake in popular bakery chain Premiere
Moisson. This acquisition has helped the Financial performance
company expand its premium baked Despite increased price-based
goods offering. Additionally, over the competition, IBISWorld expects Metro’s
past five years, Metro has continued to industry-specific revenue to increase at
develop its online and mobile platforms an annualized rate of 4.0% to $9.7 billion
to make shopping easier for customers. over the five years to fiscal 2019. In a
For instance, customers can use the market that is highly competitive, Metro
company’s My Metro mobile application has used strong customer loyalty
to scan the barcodes of products and seek strategies such as personalized
discounts while they are shopping. In promotions and investments to maintain
2017, the company also acquired a modern stores to obtain growth over the
majority stake in MissFresh Inc., a past five years. The company also credits
company specializing in online sales and the $400.0 million reorganization in
home delivery of ready-to-cook meals, to 2017 of its Ontario store network for
further augment its online delivery helping increase sales and earnings. In
service. This has permitted Metro to fiscal 2019, profit is estimated to account
became the first food banner in Quebec for 7.5% of the company’s industry-
to offer same-day delivery for its only relevant revenue, which is well above the
grocery shopping service. Furthermore, industry average.
Metro Inc. (industry-relevant operations) - financial performance*

Year** ($ million) (% change) ($ million) (% change)
2013-14 7,961.6 N/C 536.8 N/C
2014-15 8,545.1 7.3 599.6 11.7
2015-16 10,038.5 17.5 731.1 21.9
2016-17 10,373.9 3.3 760.9 4.1
2017-18 8,428.9 -18.7 592.5 -22.1
2018-19 9,679.0 14.8 721.8 21.8
*Estimates; **Year-end September

Player Performance The Jim Pattison Group (JPG) operates in company specifically operates within the
a variety of sectors. Furthermore, the Supermarkets and Grocery Stores industry
company’s business operates in eight in Canada through Save-On-Foods,
Jim Pattison Group verticals, which include food and Choices Markets, Quality Foods and
Market Share: 6.3% beverage, media, automotive, Buy-Low Foods. All of JPG’s grocery
entertainment, periodical distribution and stores are located in western Canada. In
marketing, investments and partnerships, recent years, the company and its
illuminated signs and packaging. The subsidiaries have focused on achieving

Major Companies
Player Performance incremental growth by expanding their Financial performance

continued private label offerings. IBISWorld expects JPG’s industry-
Prior to the current five-year period, relevant revenue to increase at an
JPG also acquired Ocean Brands, a annualized rate of 3.0% to $5.6 billion
producer of canned seafood and a variety over the five years to 2019. Operating
of food products, such as pasta sauce. profit margins have also led to increased
JPG’s involvement in such downstream profit growth as the company is
endeavours, including food manufacturing estimated to earn $145.9 million in
and wholesaling, has afforded its operating profit in 2019. Furthermore,
subsidiaries significant cost savings. The it is estimated that JPG has higher
company expanded further in 2014 by than average profit margins as JPG
purchasing 15 grocery store locations in operates in different industries, which
British Columbia and Alberta from Sobeys permits the company to take advantage
Inc. Additionally, in 2015, the company of synergies. For example, JPG
expanded supermarket operations into supermarket brands can take advantage
Saskatchewan and Manitoba. Lastly, of JPG’s operations within the retail
in 2017, JPG bought Quality Foods, a distribution, marketing, package and
Vancouver Island-based grocery store signage verticals. This permits the
chain. Quality Foods consist of 13 stores company’s supermarkets to reduced
and this acquisition further cemented costs either directly or indirectly,
JPG’s market share in British Columbia. leading to improved profit margins.
Jim Pattison Group (industry-relevant operations) - financial

performance*
Year ($ million) (% change) ($ million) (% change)
2014 4,784.8 N/C 95.7 N/C
2015 4,788.3 0.1 134.1 40.1
2016 4,950.0 3.4 138.6 3.4
2017 5,240.0 5.9 125.8 -9.2
2018 5,455.0 4.1 136.4 8.4
2019 5,558.8 1.9 145.9 7.0
*Estimates
SOURCE: IBISWORLD

Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Supermarkets and Grocery Stores

industry in Canada exhibits a low level of Capital Intensity
Capital units per labour unit
capital intensity. In 2019, IBISWorld
Level
estimates that for every $1.00 spent on 0.5
The levelof capital labour, industry operators will spend
intensity is L ow $0.09 on capital investments, remaining 0.4
unchanged from 2014. Capital 0.3

expenditure for the industry includes the
purchase of store assets such as cash 0.2
registers and shelving. 0.1

As with most retailers, supermarket
operators rely heavily on their workforces 0.0
Economy Retail Trade Supermarkets &
for day-to-day operations. Supermarkets Grocery Stores
depend on manual labour to stock Dotted line shows a high level of capital intensity
shelves, organize inventory and provide SOURCE: IBISWORLD
customer service. The level of labour

expenditure in this industry is influenced Employees in this industry range from
by the number of people employed, their cashiers to store managers and marketing
wage rates and operating hours. executives. The number of employees in

Capital Intensity the industry has decreased over the past large supermarkets implemented new
continued five years due to the introduction of technology. For instance, the
self-checkout systems and an increase in introduction of computerized point-of-
the minimum hourly wage rate, coupled sale systems and self-checkout systems
with persistently low profit margins, has increased supermarkets’ dependence
which has prevented industry operators on capital to improve operating
to hire more workers. efficiencies. Advancements in the internet
While most industry operators and the development of online ordering
invested relatively small portions of their capabilities also increased capital
revenue on capital goods, many of the expenditure for many large operators.
Technology and Pay by Touch operational hurdles that companies

Systems One of the latest technological experience, self-checkout lanes are
innovations to be used by operators in beneficial for supermarkets because they
Level the Supermarkets and Grocery Stores lower the number of cashiers needed per
industry in Canada is Pay by Touch store, lowering wage costs for operators.
The level
of scanners, which make payment at
technology change checkouts quicker and safer. Through the Online retailing
is M
edium system, a customer can set up an e-wallet Despite the growing popularity of online
that contains his or her bank account, retailing, supermarkets are still behind in
reward card and credit card information. realizing the full benefits of electronic
Grocery payment is made by simply commerce. However, grocery stores are
scanning a fingerprint and keying in a taking advantage of the growing use of
password linked to account details. smartphones. Many grocery stores have
created smartphone applications that
Self-checkout systems consumers can use to improve their
Self-checkout systems continue to be very shopping experience. These applications
popular in grocery stores. Consumers display the latest coupon offers, weekly
that buy one or two products prefer specials and store locators. Some
self-checkout lanes because they are independent grocery applications also
usually the fastest way to make a provide store layouts to help customers
purchase. However, as any new shop efficiently. IBISWorld expects more
technology, the self-checkout systems consumers to use mobile applications for
contend with some hurdles, such as proof cost savings in coming years as more
of age and bar-coding issues. Despite the Canadians transition to smartphones.
Revenue Volatility The Supermarkets and Grocery Stores fluctuate drastically with minor
industry in Canada has exhibited a low changes in product prices and
level of revenue volatility over the five disposable income levels.
Level
years to 2019, with year-to-year revenue Industry revenue increased slightly
The level of growth rates ranging from growth of during the period with the exception of
volatility is L ow 2.6% in 2016 to a decline of 2.5% in 2017. 2017, despite intensifying price-based
Industry operators sell nondiscretionary competition among retailers and growing
items, and therefore, demand for external competition from alternative
products sold at retail stores does not retailers. Specifically, the growing

Revenue Volatility popularity of discount stores and of disposable income during the
continued supercentres, which generally offer lower current period caused many
prices than industry operators, has consumers to limit their purchases
pressured grocery store operators to at grocery stores or turn to more
lower their prices. Furthermore, large affordable, alternative retail channels.
chain operators have offered more Furthermore, some customers have
promotional sales to drive foot traffic into begun trading up to branded goods
their stores, placing additional downward and premium products, such as organic
pressure on revenue growth. and all-natural varieties. As a result,
In addition to intensifying industry revenue has grown modestly
competition, limited growth in the levels and steadily since 2014.
Regulation and Policy The Supermarkets and Grocery Stores prepared for inspections and can be held
industry in Canada is subject to a low liable if any regulations are broken.
level of regulation and policy. No direct The CFIA protects Canadian
Level & Trend licences are required to operator consumers from unsafe food products or
he level of
T supermarkets or grocery stores, however, fraudulent food claims and labelling, and
Regulation is L ight industry products are regulated by the agency performs audits where it
and the trend various organizations and decrees. samples and tests products on a regular
The industry is primarily regulated by basis. In addition to the CFIA, the Food
is I ncreasing
the Canadian Food Inspection Agency and Drug Act and Regulations controls
(CFIA), which is the governing body the use of food additives to ensure that
responsible for the administration and food products are safe for consumption.
enforcement of Canadian food laws. Food claims printed on labels must also
However, most of these regulations apply be permitted by the agency. Furthermore,
to upstream manufacturers, rather than claims that relate to general health,
retailers. At the same time, retailers are function, disease risk reduction,
subject to various laws that apply to the therapeutic, probiotic and heart health
appropriate handling of food products. must be substantiated by the agency
Industry participants must also be before they appear on food labels.

Regulation and Policy In recent years, the Competition Bureau conditions set forth by the Competition
continued has been an increasingly important Bureau under the Competition Act. For
regulatory body for industry operators. example, in order for Sobeys Inc.’s
Due to high market share concentration, acquisition of Canada Safeway to be
large companies that wish to engage in approved by the bureau, the company
acquisitions usually have to comply with had to divest 23 retail stores.
Industry Assistance Operators in the Supermarkets and At the same time, supermarkets
Grocery Stores industry in Canada do receive substantial assistance from
not engage in international trade and industry associations, which promote
Level & Trend therefore, do not receive assistance in the industry by providing professional
he level of
T the form of import tariffs. Conversely, networks, government lobbying and
Industry Assistance tariff rates apply to downstream food advertising assistance. Notable industry
is L owand the manufacturers and can influence the associations include the Canadian
performance of Canadian brands within Federation of Independent Grocers
trend is S teady
grocery stores. Additionally, higher tariff (CFIG), the Packaging Association of
rates increase purchase costs for retailers, Canada and the Canadian Produce
which are often passed onto consumers Marketing Association. In particular,
in the form of higher prices. For instance, CFIG helps retailers form relationships
in 2018, Canada imposed tariffs on a with suppliers and fosters innovation
variety of food products imported from in the industry through the annual
the United States such as coffee, maple Grocery Innovations Canada trade
syrup, certain condiments and more. show. The organization has also
While this was done in retaliation to the played a pivotal role in influencing
tariffs on Canadian steel and aluminum government decisions related
exports to the United States, these tariffs to food safety and nutrition-
have since been lifted. labelling regulations.

Key Statistics
Industry Data Industry Per capita dispos-
Revenue Value Added Establish- Wages Domestic able income
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand ($)
2010 87,062.8 12,200.8 10,925 6,954 410,091 -- -- 9,509.2 N/A 31,344.7
2011 84,486.5 11,624.5 10,988 6,991 391,945 -- -- 9,174.1 N/A 31,169.7
2012 83,740.5 11,860.0 10,880 6,924 394,184 -- -- 9,668.8 N/A 31,662.1
2013 85,211.3 11,622.4 10,958 7,008 398,145 -- -- 9,672.7 N/A 32,165.2
2014 85,090.3 11,370.1 10,769 6,884 391,770 -- -- 9,611.2 N/A 32,679.9
2015 85,919.2 12,143.6 10,678 6,770 384,580 -- -- 10,052.2 N/A 33,709.2
2016 88,113.6 11,904.7 10,614 6,694 379,753 -- -- 9,812.3 N/A 33,132.6
2017 85,947.6 11,829.4 10,499 6,609 382,318 -- -- 9,968.2 N/A 33,384.8
2018 87,693.6 12,078.4 10,448 6,564 385,857 -- -- 10,082.6 N/A 34,046.2
2019 87,811.7 12,124.8 10,409 6,536 385,711 -- -- 10,082.3 N/A 34,140.8
2020 88,104.9 12,151.7 10,383 6,516 386,062 -- -- 10,096.4 N/A 34,786.1
2021 88,265.7 12,159.2 10,343 6,487 385,852 -- -- 10,095.7 N/A 35,837.8
2022 88,478.8 12,176.9 10,318 6,467 386,055 -- -- 10,104.8 N/A 36,971.8
2023 88,682.6 12,196.8 10,297 6,451 386,477 -- -- 10,118.3 N/A 38,155.5
2024 89,009.5 12,227.4 10,285 6,441 387,440 -- -- 10,145.9 N/A 38,915.7
Annual Change Industry Establish- Domestic Per capita dispos-

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand able income
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2011 -3.0 -4.7 0.6 0.5 -4.4 N/A N/A -3.5 N/A -0.6
2012 -0.9 2.0 -1.0 -1.0 0.6 N/A N/A 5.4 N/A 1.6
2013 1.8 -2.0 0.7 1.2 1.0 N/A N/A 0.0 N/A 1.6
2014 -0.1 -2.2 -1.7 -1.8 -1.6 N/A N/A -0.6 N/A 1.6
2015 1.0 6.8 -0.8 -1.7 -1.8 N/A N/A 4.6 N/A 3.1
2016 2.6 -2.0 -0.6 -1.1 -1.3 N/A N/A -2.4 N/A -1.7
2017 -2.5 -0.6 -1.1 -1.3 0.7 N/A N/A 1.6 N/A 0.8
2018 2.0 2.1 -0.5 -0.7 0.9 N/A N/A 1.1 N/A 2.0
2019 0.1 0.4 -0.4 -0.4 0.0 N/A N/A 0.0 N/A 0.3
2020 0.3 0.2 -0.2 -0.3 0.1 N/A N/A 0.1 N/A 1.9
2021 0.2 0.1 -0.4 -0.4 -0.1 N/A N/A 0.0 N/A 3.0
2022 0.2 0.1 -0.2 -0.3 0.1 N/A N/A 0.1 N/A 3.2
2023 0.2 0.2 -0.2 -0.2 0.1 N/A N/A 0.1 N/A 3.2
2024 0.4 0.3 -0.1 -0.2 0.2 N/A N/A 0.3 N/A 2.0
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2010 14.01 N/A N/A 212.30 10.92 37.54 23,188.02 0.08
2011 13.76 N/A N/A 215.56 10.86 35.67 23,406.60 0.07
2012 14.16 N/A N/A 212.44 11.55 36.23 24,528.65 0.07
2013 13.64 N/A N/A 214.02 11.35 36.33 24,294.42 0.07
2014 13.36 N/A N/A 217.19 11.30 36.38 24,532.76 0.07
2015 14.13 N/A N/A 223.41 11.70 36.02 26,138.12 0.07
2016 13.51 N/A N/A 232.03 11.14 35.78 25,838.64 0.07
2017 13.76 N/A N/A 224.81 11.60 36.41 26,073.06 0.07
2018 13.77 N/A N/A 227.27 11.50 36.93 26,130.41 0.07
2019 13.81 N/A N/A 227.66 11.48 37.06 26,139.52 0.06
2020 13.79 N/A N/A 228.21 11.46 37.18 26,152.28 0.06
2021 13.78 N/A N/A 228.76 11.44 37.31 26,164.70 0.06
2022 13.76 N/A N/A 229.19 11.42 37.42 26,174.51 0.06
2023 13.75 N/A N/A 229.46 11.41 37.53 26,180.86 0.06
2024 13.74 N/A N/A 229.74 11.40 37.67 26,187.02 0.06
Figures are in inflation-adjusted 2019 dollars. SOURCE: IBISWORLD

Jargon & Glossary
Industry Jargon ELECTRONIC COMMERCEAn industry where the RADIO-FREQUENCY IDENTIFICATION (RFID)A
buying and selling of products and services occur over technology that tracks products from the time they
electronic systems such as the internet. leave the assembly line to the time they leave the store
ELECTRONIC DATA INTERCHANGE (EDI)The by releasing continuous signals from a chip.
transmission of electronic documents between
businesses from one computer system to another.
POINT-OF-SALE (POS) SYSTEMA system used at
checkout in retail stores using computers and cash
registers to capture transaction data at the time and
place of sale.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labour. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labour; medium is $0.125 to $0.333 of capital to the firm (such as commission income, repair and service
$1 of labour; low is less than $0.125 of capital for every income, and rent, leasing and hiring income); and
$1 of labour. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDEDThe market value of goods
the base year. This removes the impact of changes in and services produced by the industry minus the cost of
the purchasing power of the dollar, leaving only the goods and services used in production. IVA is also
“real” growth or decline in industry metrics. The inflation described as the industry’s contribution to GDP, or profit
adjustments in IBISWorld’s reports are made using plus wages and depreciation.
Statistics Canada’s implicit GDP price deflator. INTERNATIONAL TRADEThe level of international
DOMESTIC DEMANDSpending on industry goods and trade is determined by ratios of exports to revenue and
services within Canada, regardless of their country of imports to domestic demand. For exports/revenue: low is
origin. It is derived by adding imports to industry less than 5%; medium is 5% to 20%; and high is more
revenue, and then subtracting exports. than 20%. Imports/domestic demand: low is less than
EMPLOYMENTThe number of permanent, part-time, 5%; medium is 5% to 35%; and high is more than
temporary and casual employees, working proprietors, 35%.
partners, managers and executives within the industry. LIFE CYCLEAll industries go through periods of growth,
ENTERPRISEA division that is separately managed and maturity and decline. IBISWorld determines an
keeps management accounts. Each enterprise consists industry’s life cycle by considering its growth rate
of one or more establishments that are under common (measured by IVA) compared with GDP; the growth rate
ownership or control. of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
ESTABLISHMENTThe smallest type of accounting unit
technological change; and the level of customer
within an enterprise, an establishment is a single
acceptance of industry products and services.
physical location where business is conducted or where
services or industrial operations are performed. Multiple NONEMPLOYING ESTABLISHMENTBusinesses with
establishments under common control make up an no paid employment or payroll, also known as
enterprise. nonemployers. These are mostly set up by self-employed
individuals.
EXPORTSTotal value of industry goods and services sold
by Canadian companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in Canada.

Jargon & Glossary
IBISWorld Glossary PROFITIBISWorld uses earnings before interest and tax WAGESThe gross total wages and salaries of all
(EBIT) as an indicator of a company’s profitability. It is employees in the industry. Benefits and on-costs are
continued calculated as revenue minus expenses, excluding included in this figure.
interest and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.

www.ibisworld.ca | 1-800-330-3772 | info @ibisworld.ca
At IBISWorld we know that industry intelligence

is more than assembling facts
It is combining data with analysis to answer the
questions that successful businesses ask
Identify high growth, emerging & shrinking markets
Arm yourself with the latest industry intelligence
Assess competitive threats from existing & new entrants
Benchmark your performance against the competition
Make speedy market-ready, profit-maximizing decisions
Who is IBISWorld?
We are strategists, analysts, researchers, and marketers. We provide
answers to information-hungry, time-poor businesses. Our goal is to
provide real world answers that matter to your business in our 400
Canadian industry reports. When tough strategy, budget, sales and
marketing decisions need to be made, our suite of industry and Risk
intelligence products give you deeply-researched answers quickly.
IBISWorld Membership
IBISWorld offers tailored membership packages to meet your needs.
Disclaimer
This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use the use of, or reliance upon, the data or information contained herein.
by its authorized licensees strictly in accordance with their license Copyright in this publication is owned by IBISWorld Inc. The publication is
agreements with IBISWorld. IBISWorld makes no representation to any sold on the basis that the purchaser agrees not to copy the material
other person with regard to the completeness or accuracy of the data or contained within it for other than the purchasers own purposes. In the event
information contained herein, and it accepts no responsibility and disclaims that the purchaser uses or quotes from the material in this publication – in
all liability (save for liability which cannot be lawfully disclaimed) for loss or papers, reports, or opinions prepared for any other person – it is agreed that
damage whatsoever suffered or incurred by any other person resulting from it will be sourced to: IBISWorld Inc.
Copyright 2019 IBISWorld

Supermarkets in Canada

Uploaded by

Copyright:

Available Formats

Supermarkets in Canada

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Supermarkets in Canada

Uploaded by

Copyright:

Available Formats

WWW.IBISWORLD.

CA Supermarkets & Grocery Stores in CanadaAugust 2019 1

Healthy gains: Increased sales of high-end food

IBISWorld Industry Report 44511CA

2 About this Industry 16 International Trade 30 Revenue Volatility

www.ibisworld.ca | 1-800-330-3772 | info @ibisworld.ca

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 44512CA Convenience Stores in Canada

44529CA Specialty Food Stores in Canada

44531CA Beer, Wine & Liquor Stores in Canada

45291CA Warehouse Clubs & Supercentres in Canada

Provided to: Andy Cuello (2132698972) | 24 October 2019

About this Industry

Additional Resources For additional information on this industry

IBISWorld writes over 400 Canadian

Provided to: Andy Cuello (2132698972) | 24 October 2019

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

$1.1bn $10.1bn 6,536

Products and services segmentation (2019)

Industry Structure Life Cycle Stage Mature Regulation Level Light

Provided to: Andy Cuello (2132698972) | 24 October 2019

Provided to: Andy Cuello (2132698972) | 24 October 2019

External competition for Population

Per capita disposable income Consumer price index for food

Provided to: Andy Cuello (2132698972) | 24 October 2019

Current The Supermarkets and Grocery

expects industry revenue to increase at a

Competition and Supermarkets have historically Due to the increased competition

Provided to: Andy Cuello (2132698972) | 24 October 2019

Fresh foods and fresh In recent years, many Canadians have

Provided to: Andy Cuello (2132698972) | 24 October 2019

Industry As disposable income levels continue to

Premium goods on Despite intensifying competition from

Provided to: Andy Cuello (2132698972) | 24 October 2019

Continued In a hyper-competitive industry with low

Provided to: Andy Cuello (2132698972) | 24 October 2019

Provided to: Andy Cuello (2132698972) | 24 October 2019

Provided to: Andy Cuello (2132698972) | 24 October 2019

Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products and Services Products and services segmentation (2019)

Provided to: Andy Cuello (2132698972) | 24 October 2019

Products & Markets

Provided to: Andy Cuello (2132698972) | 24 October 2019

Products & Markets

Major Markets Major market segmentation (2019)

Total $87.8bn SOURCE: IBISWORLD

Provided to: Andy Cuello (2132698972) | 24 October 2019

Products & Markets

Provided to: Andy Cuello (2132698972) | 24 October 2019

Products & Markets

Business Locations 2019

Provided to: Andy Cuello (2132698972) | 24 October 2019

Products & Markets

Business Locations The geographic spread of establishments

to imports from the United States.

Provided to: Andy Cuello (2132698972) | 24 October 2019

CA Supermarkets & Grocery Stores in CanadaAugust 2019 1