Canadian consumers are increasingly flocking to discount grocery stores like Maxi or Super C because of the ever-increasing cost of living.
The biggest Canadian channels have noticed it. They do not hesitate to invest to convert a more traditional branch into a discount grocery store.
Experts say moving a grocery store to a discount banner isn’t that complicated. This allows chains to stabilize profits despite consumers’ desire to spend less money.
“People try to cope in many ways. One of them is to study the least expensive solutions. So they go to a discount supermarket,” says Michael von Massow, a professor at the University of Guelph.
“Movement towards discounts”
Major Canadian grocery chains are present in the discount market. Loblaw has Maxi and No Frills, Metro has Super C and Food Basics while Empire (the chain that owns IGA) owns FreshCo, a banner absent in Quebec.
All three chains report that sales at their discount supermarkets are growing.
Loblaw opened 31 new Maxi and No Frills locations last year. The chain recently announced plans to open more than 40 new discount stores.
“There is a movement towards discounts. We see the opportunity presenting itself for discount supermarkets,” says Melanie Singh, president of the Discount division which includes Maxi and No Frills.
Lisa Hutcheson, an industry expert, says it’s a good strategy for the chain from a financial perspective.
“The chain is investing in a strategy that recognizes that consumers want solutions that will help their wallets,” said the JC Williams Group analyst.
Metro has 247 Super Cs and Food Basics, 11 more than in 2020, reports spokesperson Stephanie Bonk. Three Super Cs were opened during the last quarter.
Empire has launched 52 new FreshCo stores in the West and Ontario over the past six years. The number of stores in the country stands at 147, says spokesperson Tshani Jaja.
A margin similar to traditional grocery stores
Discount stores often use a simpler display and storage system, says Mme Hutcheson. They offer more of the chain’s private label products, which have higher profit margins, and employ a smaller staff.
However, discount supermarkets offer few promotions, notes Professor von Massow. They are often located in areas where rents are cheaper.
All this means that these stores have a margin similar to those of traditional supermarkets, he adds.
“Grocers don’t care where you shop, as long as they can adjust, and that’s what we’re seeing right now. »
According to Mr. von Massow, the chains will convert stores whose results are below forecasts into discount supermarkets.
On this subject, Mme Singh says Loblaw has noticed that sales increase when a location is converted. And other discount stores located in this area are not affected.
Converting a store costs less than building a new building, she says. Often, this business may remain open during the work or be closed for a very short period.