The year 2009 was not a good one for many people and businesses. Economies in the Western world had tanked and government bailouts were the order of the day. Unemployment was high, as were bankruptcies. People who could shop, shopped differently from previous years, seeking out bargains and cutting back.

Yet, when the economy is in trouble, it has been said many times: people still have to eat. Most retail analysts say that in tough economic times grocery stores have the best chance of weathering the storm. Against this background, it’s not surprising to learn that the Canadian grocery industry rode out 2009 in relatively good shape.

Explanations:

Chain Stores: Four or more stores under single ownership. Sales Figures are Canadian Grocer estimates based on Statistics Canada data and include convenience and supermarket stores.

Voluntary Groups: Franchised independents operating in major or secondary wholesale-sponsored group programs.

Not Included: Food Sales through department stores (mass merchandisers, drugstores, club stores and specialty stores (bakeries, butchers, etc.)

Canadian Grocer’s annual Market Survey presents the first look at the previous year in the industry, and we find that Canadian supermarkets, grocery stores and convenience stores saw their sales increase by a surprising 2.8% from 2008 to 2009, to reach an all-time high of $81,493,241,000. And that was in spite of consumers shopping with extra caution, food banks pressed to their limits, sales everywhere at all retail outlets and continuing trouble in the oil patch and in the manufacturing sector.

It is perhaps a good thing that food inflation was low during the year, because to gain sales Canada’s grocers often had to rely on specials, private label and discounts in order to keep their customers. This practice keeps sales up but usually has a negative effect on margins, although grocers seem to have eked out passable margin results. Margins were helped during the year by grocers continuing to encourage their suppliers to come up with additional funds for promotions and getting them to reduce or hold their prices.

“The past year has been challenging for many businesses including consumer goods manufacturers,” says Nancy Croitoru, president and CEO, Food and Consumer Products of Canada. “Companies have had to look for new ways to continue to cut costs and streamline efficiencies in order to keep prices low for consumers during this difficult economic period. It has also been more important than ever in this environment for greater collaboration between manufacturers and retailers on industry initiatives. This collaboration is critical to ensure that added costs and complexities are not loaded onto the already strained supply chain.”

At first glance it would appear that the most successful supermarkets were Canada’s franchise grocers (voluntary groups stores). Their sales increased by 4.3% for the year compared to corporate chain supermarkets, which increased their sales by 2.3%. However, there were 31 fewer corporate chain supermarkets during the year, which clearly affected that segment’s total sales.

“It doesn’t surprise me that food stores did well during the recession,” says John F. T. Scott, president and CEO, Canadian Federation of Independent Grocers. “The recession scared everyone and restaurant sales went down. People turned to buying more food at grocery stores.”

Scott also says consumers went after value. “Hard and soft discount stores did particularly well and so did independents that differentiated themselves,” he says. “The recession changed the market.”

Nick Jennery, president and CEO, Canadian Council of Grocery Distributors, says: “Chain retailers have been innovative in their merchandising and very focused on their execution. The numbers demonstrate that consumers have responded and like what they see. Efforts to make the grocery store the destination shop for more consumers is gaining traction.”

The chart, “Canadian Food Store Sales,” combines the sales of corporate chain supermarkets and major banner convenience stores in order to determine Canada’s chain sales. Although no accurate information is available on the sales of major banner convenience stores separately, Canadian Grocer estimates that Canada’s 7,199 major banner convenience stores reached sales of some $3.9 billion this past year. That is after a reduction of 230 in the number of convenience stores from last year. To get chain supermarket sales, subtract $3.9 billion from total chain sales of $48,862,353,000. The result is chain supermarket sales in 2009 were $44,962,353,000.

In the same chart, Voluntary Groups refers to franchise independent supermarkets, while Unaffiliated Independents refers to fully independent supermarkets, grocery stores and mom-and-pop operations.

Atlantic Canada, Ontario and Alberta all experienced a reduction in the number of chain stores, primarily as major grocery distributors closed smaller, unprofitable stores in favour of newer, larger and more efficient units. In some cases, former corporate stores were either franchised or became wholly independent.

The greatest reduction in chain stores was in Ontario where the number fell to 849 in 2009, from 882 in 2008. The remaining Ontario chain supermarkets, being larger and more successful, more than made up any sales lost from the closed stores. British Columbia showed the greatest increase in chain store numbers, up by nine to 348. Alberta, which remains hard hit by the recession, saw its number of chain stores fall to 274, from 279.

The actual number of stores in Canada at the end of 2009 looked like this (2008 in brackets): corporate chain supermarkets 2,330 (2,361); major banner convenience stores 7,199 (7,429); voluntary group franchise stores 4,305 (4,311); unaffiliated independents 7,408 (7,704).

The changes also impacted the share of market of the various formats. For 2009, chain stores (including major banner C-stores), captured 60% of total sales, down from 60.3% the year before. Voluntary group franchises grabbed 35.7% of the total, up from 35.2%, and unaffiliated independents dropped to 4.3%, from 4.5%. That also changes the national share totals between chains and independents. For 2009 independent sales represented 40% of the total, up from 39.7% in 2008.

It should be made clear that the definition of a chain in Canada is any four stores with the same ownership. This means that many of the stores counted here as chain stores are actually what the retail trade considers independents. For example, Quality Foods has 10 stores; Freson Market 15. Family-owned businesses are clearly considered independent no matter how many stores they operate. (The four-store definition of a chain goes back to the old Dominion Bureau of Statistics, the predecessor of Statistics Canada, and Canadian Grocer builds this annual Market Survey on partial data provided by Statistics Canada. However, despite Statistics Canada’s definitions, the figures make for easy comparison with previous years.)

It should also be made clear that the sales figures on these pages are Canadian Grocer estimates, based on the first nine months of data from Statistics Canada. In past years Canadian Grocer’s estimates have been extremely accurate, usually within one per cent of Statistics Canada’s final numbers available by mid-year.

All the charts on these pages are based on Canadian Grocer’s traditional universe of supermarkets, grocery stores and convenience stores, and don’t include grocery sales through mass merchandisers, drugstores, warehouse clubs and specialty stores. (Mass merchan-disers, warehouse clubs and drugstores would add at least $11 billion to the total grocery sales shown in our charts.)

The chart, “Ten-Year Food Store Sales Trend,” shows where last year’s 2.8% increase fits with previous years. It is not the lowest over the 10 years (2006 was lower). For nine of the 10 years total sales increased by more than 2.8%, but none of those years were in the midst of a severe recession. Canadian Grocer is predicting  2010 will see an increase of just 2.9%, based on the continuing competition, slow growth out of recession and grocers continuing to offer special promotions and discounts to keep their customers spending.

Franchise independents’ share increased to 35.7% of the total, from 35.2%, while unaffiliated independent stores’ share declined to 4.3%, from 4.5%, again mostly because of a reduction in the number of stores.

During 2009 per-capita disposable income increased in Newfoundland/Labrador, P.E.I., Nova Scotia, Manitoba/Saskatchewan and New Brunswick, and just crept upward in Quebec. However, because of declines in other provinces, total personal disposable income of Canadians fell 1.1% during 2009, to $28,211 while, at the same time, per capita food store sales increased by 1.5%. The result was that the percentage of income spent in food stores rose to 8.6% in 2009, from 8.3% in 2008, still among the lowest cost of food in the world.

Despite some store closures and a tough economic situation, Canada’s traditional grocery outlets survived the year on a positive note. The question now is: how will they do in 2010?

Regional Results

Atlantic Canada

Total grocery sales: $6,794,416,000 (up 0.4% from 2008). Chains sales represented 76.9% of that (down from 77.8% the year before).

Chains sales: $5,224,017,000

Voluntary groups sales: $1,336,760,000

Unaffiliated independents sales: $233,639,000

* There were five fewer corporate super-markets in 2009, 10 fewer voluntary group stores and 89 fewer convenience stores.

Quebec

Total grocery sales: $20,387,237,000 (up 4.2% from 2008). Chains sales represented 36.2% of that (down from 36.4% the year before). Quebec remains dominated by independents whose share of sales is 63.8%.

Chains sales: $7,382,812,000

Voluntary groups sales: $12,019,041,000

Unaffiliated independents sales: $985,384,000

* There were two more corporate supermarkets in 2009, 57 fewer voluntary group stores and 114 fewer convenience stores. There are 2,105 unaffiliated independents in the province.

Ontario

Total grocery sales: $25,914,676,000 (up 3.4% from 2008). Chains sales represented 59.9% of that (down from 60.3% the year before).

Chains sales: $15,513,510,000

Voluntary groups sales: $8,945,176,000

Unaffiliated independents sales: $1,455,990,000

* There were 33 fewer corporate super-markets in 2009, the result of closures and the conversion of corporate to franchise stores. There were 61 more voluntary group stores mostly as Metro completed its conversion of Food Basics to corporate. There were 31 fewer convenience stores.




Manitoba and Saskatchewan

Total grocery sales: $6,011,320,000 (up 4.2% from 2008). Chains sales represented 70.2% of that (up from 69.7% the year before).

Chains sales: $4,222,447,000

Voluntary groups sales: $1,656,531,000

Unaffiliated independents sales: $132,342,000

* There was one less corporate super-market in 2009, 14 more voluntary group stores and 15 more convenience stores.

Alberta

Total grocery sales: $11,061,001,000 (up 0.8% from 2008). Chains sales represented 75.9% of that (the same as the year before).

Chains sales: $8,397,858,000

Voluntary groups sales: $2,305,087,000

Unaffiliated independents sales: $358,056,000

* There were five fewer corporate supermarkets in 2009, three fewer voluntary group stores and six fewer convenience stores.

British Columbia

Total grocery sales: $11,324,591,000 (up 1.6% from 2008). Chains sales represented 71.7% of that (up from 71.6% the year before).

Chains sales: $8,121,709,000

Voluntary groups sales: $2,819,080,000

Unaffiliated independents sales: $383,802,000

* There were nine more corporate supermarkets in 2009, three fewer voluntary group stores and five fewer convenience stores.

* Includes Yukon, N.W.T. and Nunavut