Grocers will need to recalibrate as customers flock to the country

People seem to want to flee urban centres these days. Recent real estate reports suggest sales are up 20% in many rural markets and prices have increased by at least 5% since the start of the pandemic. Cottage countries are exploding for two main reasons. First, many have realized that space can be an issue especially when dealing with a pandemic. Spending three months in a two-bedroom apartment can make you think differently about space. Second, telecommuting is an emerging factor. This is something the food industry will need to keep a close eye on in the months to come.

Just six months ago, telecommuting was barely on anyone’s mind. Today, according to a recent Angus Reid survey, most Canadians now plan or want to work from home regularly. In other words, commuting becomes less of a factor when making career choices. People in Northern Ontario could think of working for a company in Regina, Saskatchewan.  And financially, the case for more telecommuting is very strong. Both employers and employees saving money on such things as business travel, lunches and dinner meetings.

The food service sector has already gone through a period of great upheaval. Some estimates for 2020 predict the food service sector will generate less than 40% of the revenues it achieved in 2019. According to Restaurants Canada, more than 25% of restaurants (roughly 24,000 establishments) in the country that closed in March will never open again. It's a staggering number and it will likely increase over the next six months or so.

Food retail will not be spared. Because of COVID-19, the market is likely overstored as management costs have gone up. Also, more are ordering groceries online and this will take up more space. For their survival, performance measures for grocers will change and focus more on efficiency, safety, and public health, and less on brands and market presence. Physical market presence will be less of an issue moving forward. For regions where we may see more customers looking for a place to grocery shop, e-commerce comes in handy. We can easily see grocers setting up pickup stores to support a growing rural market without committing to more costly outlets, which cannot move once built.

Leaving cities to telecommute from a more affordable home is indeed a compelling argument. It is still unclear how COVID-19 will impact the real estate market over time, but if this summer is any indication of what is to come, the entire food industry is in for a complete recalibration.