“Where people will be working and how the economy will perform are some macroeconomic factors which keep our grocers up at night. But due to the pandemic, another factor will likely bring more sleepless nights to our grocers: our population growth.”
Grocers have racked millions in profits as they increased revenues during the pandemic, but numbers in 2021 are telling us tougher times are tougher for our grocers.
The economy is just one part of the story. Nobody really knows how the economy will look this coming fall and winter as normalcy progresses. To add to the confusion, few appreciate how the workforce will look like as we exit the pandemic. Many will likely continue to work from home, either part-time or full-time. Where people spend their days matters a great deal to grocers and restaurant operators. For years, marketing gurus have stated that location is king. If you do not know where people will work, this mantra’s importance is almost impossible to gage.
According to Statistics Canada, about 69% of our food budget was spent on food bought at retail during the first quarter of 2021. The remaining 31% was all food service. In April 2020, early on during the first phase of lockdowns, food service represented barely 9% of our food expenditure. We should be back to a 65/35 split by the end of the year, if not sooner. People will become nomads again, for a while. By fall, we should have a better sense of how the economy can hold itself together without Ottawa’s substantial handouts. This is what our grocers are up against.
These factors are a given, but it was pointed out recently by Francis Parisien from NielsenIQ that the demographic fabric of our country is another factor starting to worry grocers. Canada has had one of the steadiest fertility rates of any developed country; it was at 1.51 in 2020, which is obviously far short of the 2.1 need to maintain our population. The decline is largely due to women playing a more meaningful role in our economy. Many more women chose to have fewer children or no children at all. But the pandemic and its severe impact on young Canadians’ professional career paths appears to be accelerating this trend.
According to United Nations World Population Projection, Canada’s birth rate could drop by up to 4% by 2026. It is projected to increase in later years, but we are looking at a few years when many Canadians will likely put baby plans on hold. It’s unclear how long this might last, but most young adults are trying to figure out their place in a post-pandemic world.
The effects of our lower birth rate were always offset by our open-door immigration policy. In April of this year, Canada welcomed less than 22,000 new immigrants, the lowest monthly count this year. Canada was aiming to welcome 341,000 new immigrants in 2020 but only managed to admit 184,000 due to COVID-related disruptions such as the travel restrictions set in March of 2020. Over the last three quarters, our country’s population was under our three-year trend-average, going back to 2018. This could also mean that our population’s average age could creep higher. For a grocer, that’s important information. Canada’s current population is a little over 38 million according to Statistics Canada.
Our demographic cliff generated by the pandemic will become one of our grocers’ major headwinds to maintain and support their growth strategy. We did experience a population bump at the end of 2018 proving things can always turn around for us, population wise. But the pandemic has made most benchmarks completely useless.
For a while, grocers will need to navigate through these demographic challenges. For one, immigrants tend to move to major urban centres. The pandemic made many people’s addresses less relevant and pushed many to leave their city homes. With fewer immigrants moving to cities, maintaining stores in some markets will prove difficult. Expect conversions or even closures as parts of the Canadian market may become overstored.
Canada is home to a little more than 15,000 grocery stores and 19% of them employ over 50 people. That is one store for every 2,500 Canadians. With higher food prices and sluggish population growth, grocers will be compelled to revisit their real estate portfolios.