New standard: how COVID-19 could forever change the Canadian grocery landscape

0
147


TORONTO –
Canadians have never thought of securing their groceries as much as they do today.

They line up to enter stores, spend more money on food at home, and express new appreciation for the essential food chain that keeps the country fed during this pandemic.

But the long-term effects of prolonged locks and fear of public spaces could permanently change how and where we shop, says Sylvain Charlebois, professor of food distribution and policy at Dalhousie University.

“The grocers are doing very well right now, but the future is very uncertain. What the post-COVID landscape is hard to read right now, “Charlebois told CTVNews.ca in a telephone interview.

It is not that the grocery industry did not serve Canadians well during the pandemic. Charlebois, who studies the country’s food supply chain, was impressed with how the system has responded to the surge in demand.

He compares the pandemic race to December 23, a traditionally hectic shopping day before Christmas, and says that grocers see this level of demand “three times a day for a month”.

“Managing this type of growth in such a short time is a miracle. There is no other way to say it. “

Almost overnight, going out of the grocery store went from a routine outing to a surreal experience, requiring careful planning and vigilance.

This is sure to have a lasting effect, says Charlebois.

But for now, the massive success of the restaurant industry is paying off for grocery stores.

Empire Company, Sobeys’ parent company, announced on April 15 that same-store sales jumped 37% in the four-week period beginning March 8. Metro said second quarter revenues jumped 7.8% to C $ 3.99 billion from the previous year. and estimated that more than 43% of its C $ 287 million gain in sales was due to the pandemic.

Loblaw Companies Ltd., Canada’s largest grocery conglomerate, will report its first quarter financial results on April 29. But some retail analysts predict that Canada’s major grocery chains will post higher earnings per share in 2020 than in 2019.

Charlebois says he believes Canadians now have a better understanding of all parts of the food chain, including farmers, transportation companies, food processors, distributors and retailers.

“Something very transformational is happening. I think there is a new appreciation for the whole system. “

One result, the so-called hero salary that supplants the salaries of front-line grocers, is likely to remain.

“We have heard that most grocers will pay their hero salaries until May 8, but I don’t think the wages will go back to where they were. It will be very difficult to remove this now. “

But the grocery industry is high volume and low margin, he says, and the increase in operating costs through wages and intensified cleaning up in stores will achieve results. He expects this will likely lead to the closure of less profitable locations and possibly even the loss of some banners.

Charlebois expects the fallout from COVID-19 to challenge the central business model of the food industry. With a profit margin of 1 to 2%, grocery chains have little room to absorb the increased costs.

The average grocery store sells 15,000 to 18,000 separate products (called SKUs in retail). This has doubled or tripled in the past decade, he says, and contrasts with Costco’s strategy of offering 3,400 referrals at a 15% margin.

“This choice for consumers comes at a cost. It is more expensive to manage more referrals, but that has been the strategy of the grocery industry, “he said.

“So I think we could see retailers making changes in the future. “

ONLINE TRAVEL

Diane Brisebois, CEO of the Retail Council of Canada, says Diane Brisebois, CEO of the Retail Council of Canada, will bring the pandemic back to normal.

“I expect we will see ourselves catching up with the United States and Europe,” she said. “There is a lot of thinking about what e-commerce means for traditional groceries.”

An April 15 survey commissioned by the Dalhousie Agri-Food Lab, where Charlebois is Scientific Director, found that 22% of Canadians plan to buy food online after COVID-19. Compare that with just 4% of Canadians who even considered buying food online regularly a year ago.

The lab also found that only 24% of Canadians are comfortable shopping today. When three-quarters of your customers consider grocery shopping to be risky, it’s bad for business, says Charlebois.

This will have a lasting effect on brick and mortar stores, he said, in a country that has been slow enough to abandon the grocery cart in favor of online shopping. Fears about health and safety lead to new habits in a practical way and the saving of time not.

“Some of these effects will be permanent. 22% will they regularly buy their groceries online? Maybe not, but it certainly won’t come back to the 2 or 3% it was before. “

But many consumers trying to use delivery services for the first time have been frustrated by the weeks of waiting for delivery windows, broken platforms, and orders that are canceled or disappear.

Brisebois says delivery services could not absorb the value of a year of growth in a few days. Instacart, which serves 300 Canadian cities, said it is hiring 30,000 full-time buyers in Canada just to follow.

“The vast majority of the country’s grocers have invested heavily, but it was still in its infancy. So the huge demand that accelerated overnight made infrastructure difficult. “

Brisebois does not expect Canadians to hold a grudge. She predicts that many will embrace online shopping for staple foods and that grocery stores will focus on providing experience in introducing new products and ingredients, as well as learning opportunities in cooking and nutrition.

FORMING NEW HABITS

Eugene Ace is also planning a huge increase in the number of consumers ordering groceries and prepared meals online. He is the founder and CEO of the GoJava coffee and office snack delivery service. Its operations in Toronto and Ottawa saw revenues fall 90% in a matter of days when foreclosures were imposed.

To keep his business alive, Ace has aligned new suppliers and started using its drivers, vans and warehouses to deliver overnight delivery of products, meats, cheeses, baked goods and prepared foods, finding immediate traction with consumers at home. He buys from wholesalers, local producers and markets to fulfill orders.

“We cannot compete with traditional grocers on price and selection, but we can carve out a niche by offering local, high-quality products,” he said.

He also focused on quick turnaround times, providing next day service on orders placed before 4 p.m. This sets it apart from many home delivery services that can only offer deliveries weeks later.

“We had 20 to 30 orders a day right away and now we are ordering 50 to 100 a day,” he said. “New people find us every day. “

Ace says he has the ability to go even further and that he is focused on delivering a great experience to customers as he intends to continue to offer the service even after the pandemic ends.

“I think after COVID explodes, some people will return to the stores, but others will not. I think there has been a dramatic change in home delivery and we will see it double in the past. People are taking on new habits and if they like it, they will continue to do so. “

Charlebois agrees that Canadians will not stop visiting grocery stores or markets anytime soon, but he predicts that 20% of all food will be sold online in a few years, which is up to seven times more than the period before the pandemic. days.

This would represent a $ 50 billion market between restaurants and the retail industry.

This radical change could lead food retailers to invest in a system of automated micro-processing centers dedicated to ordering online, he said.

“DEMOCRATIZATION OF THE SUPPLY CHAIN”

A widespread shift to online ordering doesn’t mean that only established giants will benefit, says Charlebois.

In fact, he expects to see a post-pandemic “supply chain democratization” that could take the form of more consumers buying directly from farmers, subscribing to subscription-type services to obtain basic foodstuffs from regional suppliers and supporting a niche market in their neighborhoods.

“We received fish and seafood from a local retailer that we didn’t even know existed a few weeks ago,” said Charlebois, who lives in Halifax. “It was a little more expensive, but incredibly fresh. “

COVID-19 has encouraged and, in some cases, forced Canadians to look beyond the oligopoly of large grocery chains to get what they need, says Charlebois.

“I think consumers will consume food differently and that will force people in the food industry to take a different perspective.”

One potential victim is the paper flyers announcing grocery specials. Digital versions have been gaining popularity for a long time, but fears about the transmission of the virus led Loblaw brands to publish flyers in stores in March.

The company then announced that it would permanently end paper flyers for several of its chains.

Brynn Winegard, a marketing and retail analyst, told The Canadian Press that the move could lead other retailers in the same direction.

More and more consumers are using their phones to compare their purchases via platforms like Flipp, Salewhale and Flyerify, and retailers are offering consumers promotions via apps linked to loyalty cards.

In addition, the pandemic is leading to a “pivot or perish” instinct as retailers seek ways to eliminate costs.

“We have never seen anything like this before – no one has seen it in any industry,” she said. “But if you are not flexible and agile in the way you do business, you are unlikely to survive. “

‘BACK TO SOURCES’

Jane Devito says her approach to grocery shopping has definitely changed for good.

During the pandemic, she ordered a curbside pickup online for the first time. The experience was not flawless – her first order was deleted and when she changed it, at least a third of what she asked for was out of stock.

Either way, Devito said she appreciates convenience.

“I think once everything has calmed down, the service will improve,” said Flamborough, Ont. resident, although she added that she is not entirely dependent on online shopping.

She and her husband take turns hitting the stores. They took advantage of the hours of the elders and hope to become permanent, noting that the aisles are well-traveled and less crowded.

Looking for options, the couple also discovered farmers’ markets in their area, which they hadn’t noticed before, where they bought eggs, meat, pastries, canned goods and vegetables.

“It’s kind of fun to shop this way and we can stay close to home. “

Julie Melanson thinks that physical distance in stores should continue even after the threat of COVID-19 has disappeared.

“Maybe it shouldn’t be six feet, but people should stay away anyway. “

The mother of three has both asthma and a heart condition that required surgery. She found the grocery shopping difficult and stressful during COVID-19, but the options for delivery to her home in rural Hamilton, Ontario. are limited.

Although Melanson does not expect to continue wearing a mask after the crisis has passed, she is waiting for her other new grocery habits – use a hand sanitizer, wipe the cart, use debit instead of cash and disinfect or wash what she buys when she’s home – are here to stay.

Her family took a “back to basics” approach by planning meals, shopping for a few weeks of food, baking bread, and coping when they were short of something.

All of this can last, she says, but the pandemic will not convince her that online shopping is an answer.

Aside from insufficient delivery, Melanson, a primary school teacher in a French school, says it is difficult to shop for sales and assess quality. Also, she says, the selection is not as vast as what is available in the store.

“SOLID AND RESILIENT”

For Heather Ferguson and her husband Cam Turner of Victoria, British Columbia, COVID-19 has temporarily changed their buying habits – but they don’t expect many permanent effects.

“Really, it hasn’t changed our buying behavior a bit, except that we’re going to be shopping a lot less,” said Ferguson.

They already made a large part of their purchases in the independents of the district and used a subscription for cleaning products which automatically sends a new order after a certain time.

“We can consider using subscriptions for more basic items, but I don’t think we will do much else online,” said Turner.

“I hope stores have a habit of restricting what people can take. It was a huge mistake from the start, ”he said. “Who needs six

Toilet paper in Costco format? It would last a year. “

Although panic buying has tested the industry, small and large grocery chains have made investments in logistics and inventory control that are currently paying off, says Brisebois.

“Our supply chain has proven to be very strong and resilient. It adapted very quickly when it came to responding to empty shelves and the suppliers were great at shifting production to important products. “

Brisebois says retailers of all kinds are working with RCC to establish best practices that will last – at least for the foreseeable future. They consult with governments and learn from experiences in other countries and in grocery stores across Canada.

“This virus has changed everything in the way we live and interact. The measures that we see in place in grocery stores, we will see in other environments. “

This includes physical distance marks on the floor and special disinfection stations. She says retailers will certainly listen to customers on other measures they want to see implemented, whether it’s one-way aisles or hours for the elderly.

Nor is all the extra cleaning and disinfection going on a bad thing.

Aside from viral pandemics, a 2017 study found that grocery store shopping carts contain hundreds of times more bacterial units per square inch than bathroom surfaces.

SELF-SUFFICIENT FEEDING

Many Canadians have never had to deal with empty shelves in grocery stores or worry about adequate food production. But factory closings as growing rows of workers fall ill with COVID-19 and fears about labor shortages in agricultural fields have shaken complacency.

According to the Food and Agriculture Organization of the United Nations, Canada is one of the few food self-sufficient countries in the world.

Others include the United States, France, Australia, Russia, India, Argentina, Thailand and Burma. The organization does not measure whether a country feeds its own people – after all, Canada exports a large part of its food production – but if it can.

According to the 2016 census, Canada produces about 1.5% of the world’s food while consuming about 0.6% of global production. This is reflected in the fact that in most food categories the share of imports is less than 20%, with the notable exception of fresh fruit and vegetables.

Brisebois hopes Canadians will continue to enjoy the country’s food chain long after the conquest of COVID-19.

“I hope one thing comes out: Canadians realize how proud we should be of our farmers, processors, distributors and retailers. The availability and affordability we have is not found in many parts of the world. “

LEAVE A REPLY

Please enter your comment!
Please enter your name here