Brutal competition and deal-hungry consumers took a bite out of traditional grocery stores in Canada last year, leading to the industry’s first sales decline in 17 years, according to Canadian Grocer’s just-released Market Survey.
Sales at so-called traditional grocery stores (chain and independent supermarkets and convenience stores) dropped 0.4% to $87.54 billion in 2013 compared to a year earlier.
Several factors contributed to the fall. There was the usual competition from mass merchants, such as Walmart and Costco. Plus, a new rival, Target, opened–though based on Target Canada’s early struggles it’s difficult to gauge what impact, if any, it had on supermarkets here.
Regardless, the amount of square footage devoted to grocery grew by around 3% last year, much faster than Canada’s population growth rate. That gave food shoppers more choice of where to buy.
To attract consumers in 2013, grocery stores had to offer better deals than their rivals. More than a third (37%) of dollar sales in Canada came with some kind of price cut during the 52 weeks up to June 29, 2013, according to figures from Nielsen. That’s up from 27% in 2007, before the recession.
Heavy price promotion certainly helped drive down dollar growth. But a drop in the number of food stores also contributed, especially among chain convenience stores. The number of chain convenience stores in Canada nosedived by 317 last year compared to 2012. The number of chain supermarkets, however, went up by 45.
The 0.4% decline in sales was the first decline in Canadian grocery sales since 1996 when the industry contracted by 0.5%.
But some parts of the industry did experience growth. Voluntary group stores (independents that belong to franchises) managed a 0.8% hike in sales.
Specialty food stores, which include meat markets and fruit and vegetable shops, grew sales by 6.6%.
The fastest growing regions in the country last year: Alberta and Manitoba, which both experienced a 2.1% hike in sales at grocery and convenience stores. Ontario, Atlantic Canada and Saskatchewan, on the other hand, saw sales fall.
Canadian Grocer’s annual Market Survey is based on Statistics Canada data and provides the first real snapshot of the state of the industry in 2013.
The full Market Survey is published in the February issue of Canadian Grocer, out now in print and available to subscribers on iPad this Friday.
Print copies can also be purchased by contacting Canadian Grocer’s group sales manager of circulation, Michelle Iliescu, at Michelle.Iliescu@canadiangrocer.rogers.com