USDA report looks at Canadian retail market

A new report on the Canadian retail industry reviews market share numbers for major supermarket operators and examines the growth potential for U.S. fresh produce exports.

The report, published by the U.S. Department of Agriculture’s Foreign Agricultural Service, said that Canada is the largest overseas market for U.S. high-value, consumer-oriented products, with exports reaching nearly $17 billion in 2020. That, the report said, represents  25% of the total value of U.S. consumer-oriented exports worldwide.

The report said:

• Canada’s retail market is mature and largely consolidated, with five retailers comprising more than 75% of the total retail grocery market;
• The remainder of the market is represented by smaller regional retail chains that include 6,800 independents and 27,000 small and independent convenience stores;
• Approximately 90% of Canada’s nearly 38 million consumers live within 100 miles of the U.S. border;
• The top three consumer-oriented agricultural product categories were bakery goods, cereals, & pasta ($2.2 billion), fresh vegetables ($1.9 billion), and fresh fruits ($1.6 billion);
• U.S. products dominate in imported goods in the Canadian market, but recently implemented Canadian trade agreements with 3rd country trading blocs – CETA (Canada-European Union Comprehensive Economic and Trade Agreement) and the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) – have contributed to increased agricultural export competition in the Canadian market;
• By surface area, Canada is the second-largest country, but over 80% of Canadians live in the country’s 15 largest cities;
• In 2020, Canada’s food and beverage retail sales surged by a record 10% from the previous year – reaching $109 billion, including alcohol sales of $20 billion – as COVID-19 response measures drove double digit losses in food service; 
• Consumer demand and established distribution channels with U.S. suppliers continue to fuel produce sales growth, with Canadians spending 21% more on fruits and vegetables than U.S. consumers;
• Online sales in 2020 were up 105% over 2019;
• Investment in e-commerce will be vital to keeping up with consumer demand, and several of Canada’s largest retailers announced new supplier fees in 2020 to offset the cost of fulfillment center investments;
• Unable to develop online fulfillment capabilities independently, many smaller grocery retailers also partnered with delivery platforms (e.g., Instacart) or offered in-store pick-up services;
• The rise in e-commerce has also led to an increase in data and loyalty memberships;
• The success of loyalty programs has been attributed to the customization of promotional outreach (e.g., newsletters, coupons) to targeted customer demographics. KPMG’s 2019 Customer Loyalty Report underscored this fact before the pandemic, noting how Canadian consumer loyalty programs like Air Miles, Triangle Rewards, and P.C. Optimum are enmeshed in Canadian consumer culture.
•  Canada’s leading grocery retailers continue to consolidate ownership of the segment and increase their bargaining power relative to suppliers, enabling retailers to set more favorable terms, fees, and requirements.
• The consolidating nature has left multiple suppliers feeling pressured and powerless in their relationships and contract negotiations with grocers. Following new fees suppliers’ associations and politicians began calling for a legislated retail grocery code of conduct to restore greater balance to negotiations with retailers. Some retailers have been advocating for a voluntary code rather than have one imposed upon them.

Top 10 Canadian Food Retailers (by retail sales)

1. Loblaws/Shoppers Drug Mart (27%)
2. Sobeys/Safeway (22%)
3. Metro/Jean Coutu (11%)
4. Costco (9%)
5. Walmart (8%)
6. Overwaitea Food Group (4%)
7. Co-ops (3%)
8. Couch-Tard (2%)
9. North West Company Inc. (1%)
10. Dollarama (1%)

Source: Canadian Grocer