Canada, Part 2: Shoppers continue to prioritize value in grocery retail

Some interesting things are happening in the True North’s grocery retail realm and while some are tied to political happenings south of the border, others are not.

Although the retail sector is mature and has long been dominated by the ‘Big Three’—Loblaw Inc. BB #:115743, Sobeys Inc. BB #:116615, and Metro Inc. BB #:116082—it’s experiencing plenty of fresh thinking and innovation.

Canada remains a significant and lucrative market, largely split between five major retailers. Taken as a whole, the Big Three Canadian chains, plus U.S. transplants Costco Wholesale Canada Ltd. BB #:152593 and Walmart Canada Corp. BB #:277371, account for an estimated 65 percent of the retail grocery market.

Yet Canada’s grocery landscape also features a number of strong regional players, including Western Canadian companies such as the Pattison Food Group Ltd. BB #:119039 and its banners alongside Giant Tiger and smaller players like Rabba Finer Foods in the Eastern provinces.

Channeling Differentiation

According to Sylvain Charlebois, a professor of food distribution and policy at Dalhousie University in Halifax, NS, and known as the ‘Food Professor’ in his columns for Canadian Grocer, Canada’s big players differentiate along three main axes: price perception, private label strength, and store experience.

While Loblaw leads in private label innovation—including President’s Choice and No Name—and data analytics, Sobeys emphasizes fresh and store experience.

Sobeys parent Empire Company Ltd. BB #:137787 was in the news recently for acquiring discount chain Mayrand Group Inc. BB #:116080, which operates four warehouse-type stores in Montréal.

Metro, meanwhile, Charlebois continues, is operationally disciplined with strong regional execution in Québec and Ontario.

A further big, non-Canadian player is Costco, which stands apart with its membership-driven, limited-SKU, high-volume model. The other major U.S. arrival, Walmart, is continuing to gain market share, notes Charlebois, citing the chain’s grocery-general merchandise hybrid, alongside its competitive pricing.

In pure value terms, Charlebois says discount banners dominate, with key stores including No Frills, Food Basics, and FreshCo, as well as Maxi in Québec. Costco, he adds, is also perceived as a value leader, particularly for families.

“Inflation has fundamentally changed behavior—shoppers are more strategic, less loyal, and far more price-sensitive than before 2020.”

Trading Down

Charlebois describes Canada’s grocery retail sector as “financially solid but structurally strained.” Despite major Canadian grocers remaining highly profitable, he says the sector as a whole is suffering weak volume growth caused by shoppers buying less and trading down aggressively.

“Inflation has fundamentally changed behavior,” Charlebois says. “Shoppers are more strategic, less loyal, and far more price-sensitive than before 2020.”

However, he believes price is unequivocally the top driver in the market with inflation having shifted behavior dramatically.

Overall, Charlebois says shopper loyalty has eroded, its place taken by more price comparisons, more private label purchases, more store switching, and more flyers. Even higher-income households are now making trade-offs they didn’t make before, he adds.

Based in Montréal, QC, family-owned wholesaler-importer Fruits et Légumes Gaétan Bono BB #:126385 offers a full line of conventional and organic berries, cherries, grapes, and citrus, as well as asparagus, among other products.

Salvatore Lavorato, vice president, agrees with the assessment that Canadian grocery retailers have become very conscious of pricing.

“The volume growth over the last couple of years has really been driven towards the discount stores,” he observes. “Consumers are much more price-conscious than they’ve ever been.”

“Only Australia has a more consolidated retail environment.”

Riding the Whirlwind

Michael Aucoin, CEO of Veg-Pak Produce Ltd. BB #:115824, a Toronto, ON-based fresh vegetable specialist owned by Courchesne Larose Ltée. BB #:115999, says the last 12 months have been “a bit of a rollercoaster” for Canada’s produce industry.

Weather-driven crop issues, surging prices, and the imposition and removal of reciprocal tariffs have all had an outsized effect. 

As a whole, Aucoin believes there are two key elements differentiating the Canadian retail market from others, the first being a simple matter of geography. 

“Given the size of the country and our low population, food in the Canadian market simply has more transportation miles on it than other markets and, given that, costs are higher,” he explains.

A second important factor, Aucoin mentions, is customer concentration. “Only Australia has a more consolidated retail environment,” he says.

“This means the level of competition amongst retailers is some of the most intense in the world and it means that we, as suppliers, need to be on our game to ensure relevance to both consumers and customers.”

Another challenge is the presence of conventional and discount banners being offered by the same retailers. Such multi-banner strategies mean suppliers must continually tailor their offerings to succeed.

“When prices are close, consumers will lean local, but affordability still dominates.”

Selective Buying

A byproduct of the Trump administration’s tariffs and trade tensions is a bump in “Made in Canada” and “Product of Canada” grocery labels, which analysts believe reflect a broader shift toward economic nationalism, and an increasing focus on locally produced goods.

The increased demand for local, and, for some shoppers, the desire to avoid U.S. products has increased complexity in sourcing, Aucoin says. “For a certain portion of the population ‘Buy Canadian’ has surged in importance and we have and will continue to support Canadian whenever possible.

“That being said, given some of the economic upheaval, we’ve also seen a surge in demand for value as a portion of consumers are very focused on pocketbook issues.”

Similarly, Lavorato says ‘Buy Local’ is something both consumers and Gaétan Bono’s customers want, although he sees a disparity between formats. “Certain retailers will buy Canadian for their corporate stores, but then for the discount banner they allow more choices to import product because of the price point.”

Charlebois, however, is more skeptical. While there is some strong ‘Buy Canadian’ sentiment, he believes price is still the determining factor.

“When prices are close, consumers will lean local, but affordability still dominates—if imported produce is cheaper, most households will choose price over origin. Patriotism has limits at checkout.”

Compared with the United States, Charlebois says Canada has a higher concentration, fewer banners, and structurally higher costs, especially in logistics, labor, and regulation; all of which ultimately show up in prices.

In comparison, he notes U.S. grocery retail is far more competitive and fragmented, with greater price transparency and sharper price points.

“Ultimately, the sector will become even more polarized—value-driven retail at one end and premium, experience-based formats at the other.”

Where Next?

Looking ahead, Charlebois expects to continue to see price competition, alongside the further growth of discount formats, and more private label expansion.

“Retailers will double-down on automation, data analytics, and supply chain efficiency to protect margins,” he predicts.

“We may also see increased regulatory scrutiny and transparency measures. Ultimately, the sector will become even more polarized—value-driven retail at one end and premium, experience-based formats at the other.”

With Canadian shoppers already very selective about their produce purchases, Aucoin agrees consumers are likely to continue to look for exceptional quality at a fair price.  

For Lavorato, while the quality expectation almost goes without saying, discount will continue to remain the key driver in Canada. “Of course, quality goes regardless, but we really see a lot of movement on promotions, so price point is probably the biggest challenge we see.”