Canadian supermarket group Sobeys last week announced plans to open a chain of discount stores in Ontario, with the aim of capturing a greater share of the cut-price market in the province.
The company opened eight stores under its new FreshCo banner on Wednesday (12 May).
Go deeper with GlobalData
Sobeys said its aim is to broaden the appeal of the discount format by offering a wider range of fresh produce, meat and baked goods in a brighter, more modern setting.
Speaking on a conference following the announcement, president and CEO Bill McEwan said that the move reflected a “retooling” of what discount retailing means in the “diverse” and “rapidly changing” Ontario market – the “most competitive in Canada”.
Discount grocery sales currently account for around 40% of Ontario’s total grocery market. And, despite some clear signals that Canada’s economy is picking up, commentators have argued that the sector will continue to grow as the downturn has encouraged the emergence of the ‘frugal consumer’ in the country.
Sobeys’ attempt to improve the ‘weak link’ that is its lacklustre answer to growing demand in discount retail sector – its Price Chopper banner – is a long-overdue move.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataMarket leader Loblaw has long been beefing up its No Frills discount chain, while Metro Inc has also been investing in the development of its Food Basics chain and US giant Wal-Mart has been opening Supercentres with grocery sections in a bid to woo grocery bargain hunters.
The discount space is clearly becoming increasingly crowded and Sobeys will have to act quickly to regain some momentum.
In a bid to do just that, Sobeys said that it intends to rapidly expand the format, with plans to convert the majority of its existing 87 discount outlets operating under the Price Chopper banner in Ontario as well as actively looking for new locations.
However, Sobeys is really hoping to differentiate itself by boosting its appeal to the local communities served by its stores. The company said that it will tailor its product offering to local demands in a bid to increase its appeal to ethnic shoppers.
Sobeys, Canada’s second-largest retailer, said that it would adapt its offering on a store-by-store basis and plans to reach out to different demographic groups by offering specialised products, including adapting its range around various religious and cultural celebrations.
According to StatsCan, by 2031 one in three Canadians will belong to a visible minority and one in four will be foreign-born. Moreover, this rapidly expanding group tends to have a lower-than-average income and larger-than-average family. In other words, precisely the group attracted to discount grocers.
In this context, it is clear why Canadian retailers are stepping up competition to attract ethnic shoppers as they look to take advantage of the massive demographic change the country is witnessing.
Nevertheless, it could prove tough for Sobeys to get the drop on its competition by emphasising its ethnic appeal. After all, Loblaw is also the market leader in this sector following its acquisition of Asian food retailer T&T Supermarkets last year.
