Q3 2026 Grocery: Capacity Expands as Competition for the Basket Intensifies

By Craig Patterson

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As part of Retail Insider Reports, this Q3 2026 Grocery Report analyzes Q3 2026 developments in Canadian food retail. Drawing on Retail Insider coverage, industry research, company disclosures, government data, and broader market signals, it identifies key dynamics shaping grocers, suppliers, landlords, and consumers. These reports are designed to deliver executive-level insights across major retail sectors and can be accessed through the Retail Insider Report Hub.

This report examines the Canadian grocery retail sector, including supermarkets, discount grocers, specialty food retailers, convenience-oriented food retail, merchandising strategies, store expansion, competition, consumer purchasing trends, and developments affecting food retail in Canada.

Report Contents

Executive Summary

Canada’s largest grocery retailers continued adding and repositioning capacity during Q3 2026 even as the latest available supermarket data showed limited underlying volume growth.

Statistics Canada reported seasonally adjusted sales of approximately $9.45 billion at supermarkets and other grocery retailers, excluding convenience stores, in July. Sales were essentially unchanged from June and 1.2% higher than a year earlier. At constant prices, sales declined 0.3% month-over-month and 2.4% year-over-year.

Those figures do not capture the entire Canadian market for food. Grocery sold through establishments classified as general merchandise retailers, including supercentres, falls outside the supermarket category. Real sales at general merchandise retailers were 7.1% higher year-over-year in July, although the data do not identify how much of that increase came from food.

Against that backdrop, Loblaw continued a $2.4-billion capital program that includes substantial investment in No Frills and Maxi. Metro announced plans to convert 10 Ontario supermarkets to Food Basics. Empire increased its fiscal 2027 store target. Walmart is adding Supercentres to former department-store spaces, and T&T Supermarket has major shopping-centre projects planned in Ontario and Manitoba.

Retailers are also changing how they serve online customers. Metro is moving Montreal e-commerce fulfilment toward store picking and third-party delivery, while Empire is defining different roles for Voilà and on-demand delivery platforms.

Grocers can grow by entering underserved markets, changing formats, increasing their share of household spending or improving existing operations. The question is how much additional business those investments ultimately generate.

Canadian grocery retailers continued committing substantial capital to stores, formats and e-commerce during Q3 2026 despite soft real sales within the supermarket establishment category.

Several patterns emerged during the quarter:

  • Discount remained an important investment vehicle, with retailers adapting store sizes, assortments and banners to individual trade areas.
  • Conversions, relocations and acquisitions complicated headline store-opening counts because they did not all represent equivalent additions to grocery capacity.
  • Specialty and premium grocery continued attracting investment alongside discount formats.
  • Major shopping-centre projects from Walmart and T&T showed how former department-store space can add or reposition substantial grocery capacity.
  • Online grocery sales continued growing, but Metro and Empire focused increasingly on the cost and role of different fulfilment models.
  • Consumer behaviour pointed to grocery spending being divided across promotions, brands, formats and channels as households continued managing elevated food costs.

The next phase of expansion will test whether these investments generate additional sales and profit or redistribute existing grocery spending at higher cost.

Retail Insider Coverage

Grocery Inflation Slows, but Consumers Remain Price-Conscious

Food affordability remained an important backdrop to grocery competition during the quarter. Grocery-price inflation slowed to 2.8% year-over-year in August, falling below the 3.0% headline Consumer Price Index for the first time since July 2024. Grocery prices nevertheless remained approximately 29% higher than in August 2021.

Consumers were receiving some relief from the rate of price increases without reversing the accumulated increase in food costs. NIQ data cited by Retail Insider pointed to more frequent purchase occasions and lower average spending per transaction across several retail channels. Purchase occasions should not be interpreted as supermarket visits, but the pattern is consistent with consumers dividing purchases among different retailers, products and offers. The Canadian grocery basket is increasingly contested.

Discount Expansion Becomes More Localized

Loblaw’s 2026 investment program demonstrates the continued importance of discount grocery and the ways the format is being adapted to different markets. The company announced $2.4 billion in planned Canadian capital spending for 2026 and said in September that approximately $1.2 billion remained to be deployed. Its expected opening program increased to approximately 75 grocery, pharmacy and other locations during the year.

That total should not be interpreted as 75 new supermarkets. Shoppers Drug Mart, Pharmaprix and other formats form a substantial part of the program. Within grocery, No Frills and Maxi have received significant investment. An approximately 8,000-square-foot No Frills opened in Dutton, Ontario, on July 30 with a curated assortment of roughly 4,000 products, creating a smaller format for a rural trade area.

A larger No Frills in Komoka tests another version of the concept, including a broader fresh and prepared-food offer. The stores show how the same discount banner can be adapted to different local opportunities, with the longer-term economics of the newer formats still to be established.

Metro Uses Banner Conversion to Rework Existing Capacity

Metro is pursuing discount growth through its existing Ontario network. The company announced plans in August to convert 10 Metro supermarkets to Food Basics, including locations near Yonge and Finch in Toronto and at Southgate in Ottawa.

Management described the program as a location-by-location review of markets and underperforming stores, with the expectation that Food Basics can produce stronger sales and store contribution at the selected sites. These are existing grocery locations being repositioned under a different banner, price proposition and operating model. Metro has said individual stores could close for approximately two months during construction, with financial benefits building over subsequent fiscal years.

Metro reported food same-store sales down 1.5% during its fiscal third quarter, but the result was materially affected by the strike at its Laval produce-distribution facility. The company estimated an after-tax impact of approximately $66 million from lost profit and direct costs.

The sales decline should therefore not be treated as an equivalent measure of underlying grocery demand. The conversions address a separate question of which proposition is best suited to each local market.

Empire Expands Across Multiple Grocery Formats

Empire is increasing store-development activity across several banners and price positions. The company raised its fiscal 2027 target to more than 25 stores from an earlier expectation of more than 20 and plans approximately $850 million in capital spending. Roughly half is allocated to renovations and store development.

The increased target includes four acquired Mayrand locations, meaning the total cannot be treated as an entirely new-build program. FreshCo entered Atlantic Canada in August and continued expanding in Ontario and Western Canada. Empire is also investing through banners including IGA, Safeway and Mayrand.

Management has said recently opened stores were meeting or exceeding expectations and has argued that long-term property decisions should reflect individual market opportunities instead of the current national demand cycle alone. Discount is attracting capital, but retailers continue to see opportunities across multiple grocery formats.

New Capacity Isn’t the Same as New Store Count

Some of the largest grocery projects announced during the quarter demonstrate why store counts alone can misrepresent competitive change. Walmart plans an approximately 115,500-square-foot Supercentre at Place d’Orléans in Ottawa, occupying former Hudson’s Bay space and adding a full grocery assortment. Projects at Lime Ridge Mall in Hamilton and Bramalea City Centre in Brampton are also bringing Walmart into major shopping-centre locations.

These projects can add substantial fresh-food and grocery capacity even when relocations or conversions produce comparatively little change in Walmart’s overall Canadian store count. T&T Supermarket provides an even clearer example. Its planned CF Markville location in Markham will occupy approximately 68,000 square feet of former Hudson’s Bay space and is expected to replace the existing approximately 50,000-square-foot Unionville store when it opens in 2028.

The project represents a relocation and approximately 18,000 additional square feet instead of an entirely new 68,000-square-foot supermarket in the trade area. Its shopping-centre position could also alter traffic patterns and customer reach. T&T’s planned 48,000-square-foot store at CF Polo Park in Winnipeg represents a different type of expansion. Expected in spring 2028, it will be the banner’s first Manitoba location and introduces T&T to a new provincial market.

Openings, relocations, conversions, acquisitions and expansions can all appear in development pipelines while producing very different changes in local grocery supply.

Grocery Sites Can Survive the Failure of an Operator

Q3 also provided examples of grocery locations remaining viable after a previous operator departed. Valleyview IGA reopened on August 20 at 9106 142 Street NW in Edmonton, returning a familiar supermarket banner to a longstanding neighbourhood grocery site after L’OCA closed earlier in the year.

At Toronto’s Bayview Village, McEwan Fine Foods announced a 9,326-square-foot store for 2027 in the former Pusateri’s space. Prepared meals, fresh departments and specialty food will form part of the offer, maintaining a premium grocery component at the property under a different operator.

Sunterra’s Bower Place market in Red Deer closed September 26 while the company was in court-supervised restructuring. Those company-specific circumstances do not establish a broader retreat from premium grocery.

The examples separate the viability of a grocery location from that of a particular operator. A retailer’s failure does not necessarily establish that a trade area cannot support grocery, and an established grocery site does not guarantee that every concept will succeed there. Crombie’s results provide additional real estate context. The landlord reported 97.5% committed occupancy and an 11.3% increase in first-year rents on second-quarter renewals in results published during August.

The rental increase applied across Crombie’s portfolio and should not be interpreted as an 11.3% increase specifically on Sobeys or Safeway stores. Grocery anchors nevertheless support frequent property visits, while surrounding units provide additional leasing opportunities.

Broader Industry Coverage

Online Grocery Growth Doesn’t Settle the Profitability Question

Online grocery continued growing at Canada’s major supermarket companies during their latest reported fiscal periods. Loblaw reported e-commerce growth of 19.3%, Metro reported online food sales growth of 16.3% and Empire reported online growth of 11.3%. The reporting periods differ, so the figures are indicators of company activity instead of a comparable Q3 ranking.

More significant are the decisions being made about how those orders are fulfilled. Picking groceries, operating automated facilities, acquiring customers and delivering orders all carry costs. Higher digital sales do not establish that an online operation has become more profitable, and both Metro and Empire are adjusting their networks accordingly.

Metro Moves Fulfilment Back Toward Stores

Metro plans to close its dedicated Montreal e-commerce facility and shift fulfilment toward store-based picking and third-party delivery. Management linked the decision to growing demand for same-day service and the opportunity to reduce fixed costs. The company expects its combined network measures, including the Ontario store conversions, to generate approximately $15 million in recurring annual after-tax earnings by the end of fiscal 2028, with roughly half attributable to each component.

Moving orders into stores makes use of inventory, labour and locations already positioned close to customers, although store picking introduces its own operating costs and requirements. Metro is changing the cost structure of its online business, with the financial benefits expected to develop over several fiscal years.

Empire Redefines the Role of Voilà

Empire’s evolving e-commerce strategy provides a larger example of matching infrastructure to demand. The company invested heavily in automated customer fulfilment centres as it built Voilà, but later concluded that Canada’s grocery e-commerce market was smaller than previously anticipated.

Empire closed its Calgary customer fulfilment centre and kept a proposed Vancouver facility on hold while retaining dedicated facilities serving Toronto and Montreal. Its earlier restructuring was expected to improve annualized e-commerce operating income by approximately $95 million.

The company is now describing the next phase as “e-commerce 2.0.” Voilà continues to serve planned grocery orders in markets where dedicated infrastructure remains in place, while third-party platforms can address more immediate purchases and provide delivery coverage without requiring the same infrastructure in every market.

The approach resembles the localized physical-store strategies seen elsewhere in the sector. Different markets and shopping occasions can support different formats when demand is sufficient to justify their costs. For e-commerce, order density, basket size, frequency and cost to serve will determine where each model makes economic sense.

Technology Adds Another Layer

Instacart launched Clementine for most Canadian and U.S. customers in September, offering assistance with meal planning, shopping lists and cart building. The launch establishes the service’s availability in Canada, but early claims about changes in basket size were not Canada-specific and do not establish improved Canadian conversion or profitability.

Its relevance will depend on whether tools of this type materially change purchasing behaviour, basket composition or customer retention.

Competition Extends to Property and Pricing Rules

Competition in grocery is also being shaped by rules governing real estate and promotions. A September consent agreement with Empire made earlier commitments concerning grocery property controls legally binding, including restrictions on the use of certain restrictive covenants and exclusivity clauses.

Reducing those barriers can make entry into some trade areas easier, but it does not create suitable grocery space, provide capital or logistics, or guarantee sufficient local demand. The Competition Bureau also opened an investigation in September into minimum advertised pricing policies, examining whether restrictions on advertised prices make it more difficult for consumers to discover offers and for retailers to compete. The investigation is ongoing and does not constitute a finding that a particular supplier or grocer violated competition law.

Supplier negotiations provide another constraint on how quickly new costs reach consumers. Empire said on its September results call that the immediate tariff impact was minimal and only a handful of suppliers had submitted related cost increases. Management said it intended to challenge requests where sourcing alternatives were available. New cost pressures therefore do not automatically translate into equivalent increases at the grocery shelf.

Editor’s Take & Outlook

What Retailers and Landlords Should Watch

The expansion underway in Canadian grocery requires more context than a count of announced stores. T&T’s CF Markville project replaces and expands an existing nearby store. Metro’s 10 Food Basics conversions reposition existing supermarkets. Empire’s higher opening target includes acquired Mayrand locations. Walmart can add substantial grocery capacity through Supercentre projects without a proportionate increase in net store count.

Retailers will need to determine whether those investments produce additional traffic, transactions and household spending or shift sales among existing locations. Real sales, average basket, transaction frequency, gross margin, store contribution and cannibalization provide a clearer picture than opening counts alone.

Online grocery requires a parallel assessment through order density, repeat use, basket size, picking and delivery costs, and customer acquisition. For landlords, the analysis occurs at the trade-area level. A grocery opening can fill a major vacancy and increase property traffic while redistributing food spending from nearby stores.

Outlook: Measure the Return on Added Capacity

The next six to 18 months will provide clearer evidence on the returns from the industry’s current investment cycle. Metro’s Food Basics conversions will test whether changing the banner and price proposition can improve sales and store contribution at selected Ontario locations. Loblaw’s smaller No Frills formats will provide evidence on whether discount can economically serve communities that may not support conventional supermarket footprints.

Empire’s development pipeline will test its ability to add stores across several formats while maintaining returns. T&T’s major projects and Walmart’s shopping-centre Supercentres will introduce or reposition substantial grocery capacity in individual trade areas, although several projects extend into 2027 and 2028.

Online grocery faces a similar test. Metro’s move toward store-based fulfilment needs to produce the expected cost benefits, while Empire will need to grow digital sales without recreating the fixed-cost challenges that led it to restructure its original fulfilment network.

Performance at existing stores around new openings will be particularly important. A successful new supermarket can still derive part of its sales from nearby locations operated by the same company or its competitors. The central measure is how much additional household spending each investment captures and what it costs to win and serve that business.

Editor’s Take

Canada’s largest grocers continue to see opportunities for investment even as the latest available supermarket data show limited underlying volume growth. National averages can obscure population growth, underserved communities, changing shopping patterns and shifts between channels. Retailers can also grow by taking market share or improving locations they already operate.

Q3 showed how local that competition is becoming. Loblaw is testing different versions of No Frills, Metro is converting selected stores to Food Basics, Empire is expanding across several grocery formats, and Walmart and T&T are adding or repositioning substantial grocery capacity through shopping-centre projects.

Online grocery is undergoing a similar adjustment. Metro is reducing dedicated infrastructure in Montreal, while Empire is assigning different shopping occasions to Voilà and third-party delivery platforms.

The Canadian grocery basket is being contested across more formats, locations and fulfilment models. An opening, relocation, banner conversion, acquisition and expansion can each produce a different competitive effect, just as digital sales growth can have very different economics depending on how an order is fulfilled.

The next phase of Canadian grocery expansion will be determined by what happens after the announcements: how much additional business new and repositioned formats capture, how much they take from existing stores, and whether the cost of winning each basket produces an adequate return.

Representative Articles

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Craig Patterson
Craig Patterson
Located in Toronto, Craig is the Publisher & CEO of Retail Insider Media Ltd. He is also a retail analyst and consultant, Advisor at the University of Alberta School Centre for Cities and Communities in Edmonton, former lawyer and a public speaker. He has studied the Canadian retail landscape for over 25 years and he holds Bachelor of Commerce and Bachelor of Laws Degrees.

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