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Small Format Grocery Stores are the Future in Canada: Report/Experts

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The grocery store is in the midst of a great transformation, powered by Canadians’ changing food consumption patterns and preferences and accelerated by the impact of the COVID-19 pandemic.

The speed at which Canadians’ lifestyles and behaviours have changed—and continue to change—is forcing food retailers to accelerate change. The impact can be seen across the grocery store through: Changing formats; Updating product assortments; Embracing online shopping; and Reimagining interiors, says a new report by Deloitte called The future of food: a Canadian perspective.

Sangeetha Chandru

Sangeetha Chandru, National Operations Transformation and Retail Transformation Practice Leader, Deloitte Canada, said there were certain trends existing pre-pandemic that started to accelerate during the pandemic.

“The shift to omnichannel for example and how we use our brick and mortar stores as well as the ecommerce experience to be an extension of each other. That started to accelerate once the pandemic set. And that’s actually been the primary driver of the findings that we have in the study,” she said.

One of those includes the shift away from large format stores to smaller footprints. Chandru said there will be more focus on localization of product assortment, a huge value on fresh food and an expansion of plant-based alternatives.

“Food is truly a reflection of the cultures we serve and grocery stores are really sort of cluing into that and so we’re obviously going to be seeing more of a double down in that area.”

Chandru said as ecommerce starts to grow the necessity to have “incredibly” large stores starts to reduce “because customers are now starting to lean into what I call more convenient options.”

“Even from a shopping perspective, they want to be in and out fast. They want to get everything on their list. They want to do a hybrid shopping of online and in store depending on the types of categories they’re shopping for,” she said.

“Stores are going to become much more fresh focused. They’re going to have much larger departments that are focused on home meal replacement. So think of your ready to cook and ready to eat category, especially given the huge rise of meal delivery solutions that have happened through the pandemic. Grocery stores obviously want a piece of that action. And they want a piece of the QSR (quick service restaurant) action but they want to do it in a healthy way. And healthy and sustainable is going to become a huge need for customers.

“In order to serve that type of a customer you don’t need these humungous footprint stores. A large amount of your dry grocery stuff can be done online and you just go into the store for a fresh experience for example . . . Bigger stores mean higher costs. The retailers can re-use that footprint in another way, so think about micro fulfillment centres for example. There’s a big opportunity for retailers as omnichannel becomes more and more important, ecommerce becomes more and more important, the one big question that grocery retailers always grapple with is the last mile fulfillment economic equation. They’ve never really been able to balance that quite right. So if they start to have micro fulfillment centres where let’s say 25 to 30 per cent of the store gets dedicated to ecommerce . . . they could have inventory in the back of the store to be able to do that without depleting the front of the store inventory.”

The report found that:

  • 66 per cent of Canadian consumers are cooking more meals at home than they did the previous year and 36 per cent are baking more often too;
  • 88 per cent of consumers say they buy fresh produce each month and 76 per cent buy fresh meat;
  • 25 per cent say they’ve taken more interest in learning about how food affects their health and immunity;
  • 25 per cent ordered online for curbside pickup for the first time in the past year while 15 per cent ordered online and had their food delivered;
  • 71 per cent feel it’s important to know where their food comes from, and 42 per cent say they’d buy more locally sourced items going forward; and
  • 37 per cent of consumers expect food retailers to be low-carbon or carbon-neutral, and 29 per cent make an effort to shop at food retailers that help them reduce their own carbon footprint.
M&M Food Market (Image: Shikatani Lacroix)

Andy O’Brien, CEO of M&M Food Market, said consumers today are looking for a quicker shopping experience.

Andy O’Brien

“So when you go to a smaller format like M&M you can get in and out much quicker than going into a large 100,000 square foot place where you have to walk the halls to find what you’re looking for,” said O’Brien.

“I think people also feel safer in a smaller environment where there’s not as many people and they can get in and out. I also believe, especially retail like ourselves, who offer some really added value products are attractive to a lot of consumers who are now looking for meals that they have at home that are different and unique.”

Shopping online has also helped expedite the consumer experience.

O’Brien said people’s perception of frozen food has also dramatically changed over the last 16 months. They realize it’s something they can have in the freezer as a go-to. In addition, he said the company conducted some major research recently trying to figure out consumer attitudes post-pandemic.

“What we’re expecting is that the frozen category is going to continue to grow at least seven per cent in the next two to three years. At least until the end of 2022,” he said. “We’re expecting to see some significant growth.

“Go back five years, I don’t think the frozen players really put a lot of innovation against frozen foods. Over the last 16 months, there’s been an increased interest in frozen foods and I figured there would be a lot more innovation from all retailers . . . We all realize now that frozen food is a major opportunity for our customers so we’re going to start innovating a lot more around added value products for them.”

Article Author

Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He now works on his own as a freelance writer and consultant in communications and media relations/training.

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