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GAIN Report #CA9142

Page 4 of 19

Distribution segmentation and Key trends

A) Traditional Grocery Super Markets - Chains and Independents ( 81.1% ) The vast majority of high value food products are sold through traditional grocery supermarkets. This segment accounts for over 81% of western Canadian consumer’s grocery basket purchases (see A.C. Nielsen Trade Track

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    table 1).

Traditional grocery includes four major corporate chains who market across western Canada. These major players include - Canada Safeway (24.9%), Loblaws Companies (19.8%), Overwaitea Food Group (13.7%), and Federated Co-op (7.9%). Supermarkets across western Canada vary in size from the large format stores such as the Real Canadian Superstore ( RCSS) at more that 100,000 square feet to some of the very small IGA independents at 10,000 to 15,000 square feet.

Up until approximately 5 years ago the trend was to the larger format stores led by the Loblaws Company (RCSS banner) and the Overwaitea Food Group (Save-On-Foods banner). More recently a renewed focus has been placed on ‘neighborhood’ stores that are 30,000 to 35,000 square feet.

Recent trends in this channel has included the focus on the ‘fresh departments’ (meats, produce, and bakery) as well as natural food sections and deli and take out sections all typically located around the perimeter of the store. These trends, especially in the new smaller foot print stores, have placed a significant amount of pressure on the space allocated to the grocery departments in the center of the stores.

    • B)

      Warehouse Clubs ( 9.4% )

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    The warehouse club channel (Costco Wholesale) has grown significantly over the last five years and now accounts for over 9% of western Canadian grocery basket purchases. With over 25 locations across the west, continued growth through new outlets will be difficult (most major and minor markets have been covered). As a result, it is suggested that future growth will be focused on same store increases. This will be achieved through a continued focus on private label (Costco’s, Kirkland Signature), new departments and reallocation of warehouse space (e.g. expanded photo sections, fresh foods, take out foods), and a renewed emphasis on building ‘unique’ product offerings. It should be noted that the traditional grocery channel has taken a very aggressive stance to warehouse clubs. All major chains (Safeway, RCSS, Save-On-Foods) developed warehouse club strategies to compete with this channel. Two key strategies included building their own stand alone ‘warehouse club’ stores, and adding warehouse club sections to the traditional store layout. In all cases the traditional grocery channel was able to place enough pressure on the warehouse club suppliers to supply them with the ‘identical’ club pack product that was being sold by the club’s. Recently there has been less emphasis placed on competing with warehouse clubs as traditional grocery has shifted their attention to a new competitor, the mass merchant Wal-Mart.

C) Drug Stores ( 1.9% ) Drug store importance of high value food products has diminished significantly over the years and currently accounts for less than 2% of purchases. Two major chains dominate this channel in western Canada: Shoppers Drug Mart and London Drugs.

D) Mass Merchants ( 3.0% ) There are two major competitors in this channel: The Canadian owned Zellers and Wal-Mart.

UNCLASSIFIED

Foreign Agricultural Service/USDA

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