Why grocery stores will never be the same
More than five months into the pandemic, we can start to see how life will look on the other side. At the grocery store, some changes will disappear while others will stay with us for the foreseeable future.
Food is getting more expensive everywhere, including Canada. Products like beef have gone up by as much as 20% since January. We are expecting food prices to increase by 4%. Additional costs to do anything these days are too much for farmers, processors and distributors to absorb. Financial results were impressive for the first few quarters, to be sure, but sunny days for food companies will not last. Many companies are pivoting and trying to reach consumers who are looking for new options. The foodservice industry is barely at 60% of what it was before COVID-19, but starting to pick up, and consumers are finding new ways to get food by adopting fresh habits.
Food security was a challenge in Canada even before COVID and the pandemic has made matters worse. The ratio of Canadians who have experienced food insecurity at least once in the last 12 months went from one in eight to one in seven. In other words, nearly 700,000 more Canadians have now experienced food insecurity. That is why organizations such as Second Harvest and Food Banks Canada play such a critical role. No government programs, not even CERB, can help Canadians so quickly. And, given that CERB will end in September, we desperately need food rescuing to help those in need.
Perishables are more popular now since we spend more time in the kitchen. Non-perishables were highly popular at the start of the pandemic, but consumers got more acquainted with fresh ingredients. With more people working from home, we are expecting to see more consumers buying fresh more often.
This spells bad news for the brands you find in the middle of the grocery store. Portfolios are likely to shrink and less choice will be offered to consumers in months to come. Carrying more than 39,000 food items in one store can be expensive, so “less is more” will be our grocers’ new motto. But who needs Twinkie-flavoured milk, really? And yes, it exists.
Another massive change is online food sales. In only five months, we have seen many markets in Canada go from being severely underserved to being offered several options. Liquor stores, specialty stores, and of course mainstream grocers are out there delivering food within two hours, sometimes even faster. That is the new benchmark, and orders are being fulfilled with accuracy rates higher than 95%.
In 2017, grocers got their wake-up call when Amazon acquired Whole Foods, but they barely committed to online delivery. Now, the online game is on. Of all food sales, online purchases were under 2% before the pandemic, but by the end of this year online food sales could reach nearly 4%.
However, if you do order online, expect to pay more. On average, including delivery fees, consumers will pay 7% to 10% more for delivered food compared to a regular visit at the grocery store. Quite the difference, perhaps even problematic for those who are stuck home. The disabled, elderly, and people in self-isolation are compelled to pay more. Optics may make things appear to be unfair, but the socioeconomics of home food delivery will evolve and likely become more competitive.
As for the Plexiglass, arrows on the floor, masks, and cart-cleaning staff, they will go away. Maybe. Eventually.