Study: Canadian retailers competing for the consumer's food dollar

1997 to 2004

Canadian grocers are holding their own in face-to-face competition with general merchandise stores for the consumer's food dollar, and they appear to be faring much better than their American counterparts, according to a new study.

Canadian consumers do not get their groceries in general merchandise stores as much as their American counterparts do. The tendency for consumers to shop in only one store is much less popular on this side of the border.

The study analyzes the competition for the food dollar between food and beverage stores and general merchandise stores. It also compares the relative situation of these stores in both Canada and the United States.

Canadian food stores still have the lion's share of consumer spending on food. South of the border, American grocers have been losing ground to general merchandise stores.

In 2004, Canadian consumers spent $61.6 billion on food. For every $100 of this spending, consumers spent $83.90 in food stores, which was practically unchanged from $85.10 in 1998.

On the other hand, they spent $10.60 on food in general merchandise stores in 2004, up only slightly from $9.00 four years ago.

In contrast, for every US  $100 American consumers spent on food, US $70.40 went to food stores in 2002, down from US $76.90 in 1997.

In order to keep their clientele, Canadian food retailers have been offering more diversified food products. They also offered more non-food items than American food retailers.

Between 1998 and 2004, the proportion of non-food sales in all food stores rose 5.1 percentage points in Canada. This growth was nearly five times the pace of 1.1 percentage points in the United States between 1997 and 2002.

Non-food sales consist primarily of necessities, such as health and personal care items. Sales of these items in food stores jumped more than 10% per year, which reduced the market share of other retailers.

In Canada, food stores increased their market share of sales of health and personal care items from 13.9% in 1998 to 16.8% in 2004. Food stores had the biggest gains in market share for medication (prescription and over-the-counter), vitamins, medicinal plants and other health supplements. This market share rose from 10.3% of total sales in 1998 to 14.1% in 2004.

These gains are partly due to more supermarkets with pharmacies as well as increased consumption of prescription and over-the-counter drugs. Food stores sold proportionally more of these health items than general merchandise stores.

One possible reason why Canadian food stores were more successful is that food stores invested more in their buildings than general merchandise stores. The reverse happened in the United States.

In Canada, food stores spent $1.1 billion in commercial buildings in 2005, while general merchandise stores spent $189 million. In other words, food stores accounted for 85.8% of the investment in these two sectors.

US general merchandise stores invested US $7.5 billion (69.3% of the total) in building construction while food stores invested US $3.3 billion (30.7% of the total).

Investment grew faster initially in the United States than in Canada in the 1990s as household demand was more robust. Consumption in Canada during this period was curbed by a long recession and the growth of cross-border shopping.

Canada had to wait until this decade to see investment by retailers increase rapidly, thanks to sustained growth in consumer spending and a declining dollar that kept Canadian consumers at home. This trend continued with the additional restrictions on border crossings imposed following September 11, 2001, in spite of the soaring loonie.

Definitions, data sources and methods: survey numbers, including related surveys, 2008, 2409 and 2447.

The analytical article "Canadian retailers competing for the consumer's food dollar" (11-621-MIE2006038, free) is now available online in the Analysis in Brief series.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Serge Grenier (613-951-3566), Distributive Trades Division.