TABS Group Study on Food and Beverage Consumables Finds Discount Grocery a Major Force in Canadian Retail
Discount grocery in Canada is twice the market share as in the U.S. and online shopping is a non-factor with a 1.3 percent share according to new TABS Group study
Shelton, CT – October 29, 2015 –The TABS Group inaugural “Canadian Study on Food and Beverage Consumables” found that while there are many similarities between Canadian and U.S. consumers, the biggest differences are in the retail landscape. Notably, the study found that discount grocery stores (such as the No Frills and Food Basics chains) account for a 13.3 percent share of transactions in Canada compared to 6.1 percent in the U.S. market (primarily Aldi). Additionally, the study found that, similar to the U.S., online grocery shopping is minimal, accounting for only 1.3 percent of food and beverage transactions in Canada.
Canada, in general, has more retail channel fragmentation - each with different value positions - than in the U.S. market. Canadian consumers shop in 19 percent more channels for consumables compared to their U.S. counterparts (3.8 channels per year compared to 3.2 channels in the U.S.). The small store format is more prevalent in Canada with drug, discount grocery and dollar stores each accounting for more than 10 percent share in Canada. The U.S. has also seen significant growth in these channels in the last three years.
“The growing penetration of discount grocery stores has important implications for the U.S. market as well. This study confirms what our U.S. study last month found, which is that U.S. manufacturers need to start paying more attention to the discount grocery channel,” said Kurt Jetta, CEO and founder of the TABS Group.
“The Canadian market is likely a bellwether for the U.S, as discount grocery stores, such as Aldi, have significantly strengthened their presence and are drawing sales away from U.S. mass retailers,” added Jetta “The study also bears out that regular online shopping is a trendy concept, but not grounded in reality. Given that U.S. online grocery trends have been flat for three years, and given extremely low loyalty in the channel (only 12 percent in the U.S.), we expect it to be at least five years before online sales are a meaningful factor in the North American grocery landscape.”
The study found that while Walmart is a big player in Canada, just like in the U.S., its share of transactions is lower in Canada (14.9 percent compared to 17.9 percent in the U.S.). In addition, Walmart and traditional grocery outlets had a significant drop in market share among heavy deal buyers (9 points for traditional grocery and 1.2 points for Walmart). Heavy buyers are defined buyers who have made purchases at least 12 times a year.
”The Walmart share decline among heavy deal buyers in Canada is much less than in the U.S,” said Jetta “We attribute this to Walmart actually being an everyday low price/hybrid operator in Canada, meaning that they offer a decent level of high and low promotions, while still having low prices every day. This appears to have mitigated a big drop-off in share such as the 3.6 point drop experienced in the U.S.”
The TABS Group “Canadian Consumer Value Study on Food and Beverage Consumables” was conducted in September 2015, and was developed to uncover detailed information about Canadian consumer packaged goods (CPG) consumables categories, how consumer buying patterns in these categories are shaped by the promotions offered, and how Canadian consumables compares to the U.S. market. The survey panel consisted of 1,000 geographically and demographically dispersed consumers between the ages of 18 to 75. The 15 consumables categories analyzed were carbonated beverages, salty snacks, cereal, yogurt, water, ice cream, cookies, fruit juice, refrigerated juices, crackers, frozen pizza, frozen novelties, candy, popcorn and sports drinks.
Canadian Penetration Similar to U.S.
Overall, the study found that Canadian penetration of the 15 consumables categories is very similar to the U.S., except for a handful of categories. When analyzing very heavy buying (buying 12+ times annually), the study found in Canada, there is a higher incidence of purchases than in the U.S. for cookies (+22 percent), yogurt (+43 percent), fruit juice (+21 percent), and refrigerated juice (+18 percent). However, in Canada there is a sharp decrease in purchases compared to the U.S. for salty snacks (-19 percent), carbonated beverages (-21 percent), bottled water (-17 percent), and sports drinks (-46 percent).
Households with Children Heaviest Buyers
Both the TABS Group’s “Canadian Consumer Value Study on Food and Beverage Consumables” and the TABS Group “Third Annual Consumer Values Study”, published on September 30, 2015, concluded that the most important demographic variable for predicting heavy purchasing is the presence of children in the household. In Canada, 24 percent of adults ages 18-74 have children in their households, and these households account for more than half of all consumables’ transactions. In addition, 14 of 15 of the consumables categories demonstrated a strong skew to very heavy buying among households with children. The presence of children in the household translates into very heavy buying of yogurt (58 percent), fruit juice (47 percent), refrigerated juice (40 percent), cereal (44 percent) and crackers (29 percent).
“Manufacturers and retailers need to realize that households with children should be the top target group for any food and beverage consumables,” said Jetta. “We continue to see a misallocation of marketing investment favoring millennials (adults aged 18-34), who only have average levels of food and beverage purchasing in both Canada and the U.S.”
Active Deals Drive Purchases
The study analyzed 10 deal tactics (such as flyers, circulars, everyday low price offers, loyalty cards, and freestanding inserts) that Canadian consumers use. Ninety-five percent of consumers use at least one deal tactic regularly, with 34 percent using at least five tactics regularly. Promotional participation levels are extremely similar in Canada and the U.S. However, the study found that 56 percent of Canadian consumers use flyers (circulars) to shop for deals compared to just 41 percent of U.S. consumers. Loyalty programs and rebates are also more popular with 42 percent and 24 percent, respectively, of Canadian consumers utilizing them compared to 36 percent and 9 percent of U.S. consumers, respectively. Just as in the U.S., heavy deal usage was positively related to heavy purchasing behavior.
”Looking at the results of this study, it is now very clear why Target failed in Canada,” stated Jetta. “While there are high similarities between consumers and retailers in both Canada and the U.S., the differences are enough to require distinct promotional and go-to-market strategies. There is more competition in Canadian retail, not from a major retail chain standpoint, but from a retail channel output, each offering distinct value propositions. The retail landscape in Canada is framed by a shopping culture that is even more deal-search oriented than is seen in the U.S., and Target did not seem to adapt to that fundamental difference.”
Jetta continued, “U.S. manufacturers and retailers should also take note of the size and growth of discount grocery in Canada, the U.S. and the U.K. A retail battle is being fought over small format and value grocery. Online grocery is an unproductive sideshow that just wastes resources.”
About TABS Group, Inc.
Operating since 1998, TABS Group, based in Shelton, Conn., is a technology-enabled analytics firm. Its mission is to simplify and improve the way analytics are conducted in the consumer products industry. Primary services are TABS CatMan Advantage™, an outsourced category management solution, TABS WorldView®, a global business intelligence tool, and TABS Promo Insight™, a cloud-based software and consulting service that helps companies measure, plan and optimize trade spending. Please visit www.TABSGroup.com.