For food producers, it’s also a strange new world with restaurant and food-service orders abruptly nixed and the sudden consumer desire to stockpile. For some, this is a boom time. For others, it’s a definite bust.

Why it matters: In a matter of weeks, food demand has radically shifted as events cancel and people are forced to eat at home due to measures taken to limit the spread of the coronavirus.

The busts

“There’s simply no playbook for this,” said David Weins, chair of Dairy Farmers of Manitoba. “All of this (dairy supply chain) has been designed for normal times.”

On April 3, media was reporting that dairy farmers in Saskatchewan and other areas of Canada were dumping raw milk due to a drop in demand.

Weins said in Manitoba raw milk hasn’t been dumped yet, but skim milk byproduct has been discarded. As part of the Western Milk Pool, dumped milk in Saskatchewan costs Manitoba farmers, he said.

Much of the drop in demand is owing to the shutdown of the food-service industry, which required a lot of cream and cheese, Weins said. Demand has shifted somewhat to retail, but this hasn’t made up the deficit as supply chains struggle to adjust.

Meanwhile, said Weins, the cost of some supplements used in feed, like cornmeal from ethanol plants, has gone up as some of those plants have shut down.

Unlike a factory, it’s not as simple as reducing production, Weins said. The cows must still be milked. If they reduce cow numbers, it may be tough to ramp back up when demand regulates.

Fish producer Rudy Reimer said demand for his steelhead trout was cut almost in half when restaurants closed doors.

“That is a huge impact,” said Reimer, who owns Watersong Farms near Warren.

Reimer direct markets some vacuum-packed, frozen fish and has seen direct sale demand increase as people seek to stock up. However, he said retailers aren’t accustomed to getting fish frozen, preferring “just in time” delivery so he hasn’t been able to capitalize on shoppers’ desire to buy bulk.

Reimer added that some retailers have stopped getting fresh fish from other countries, which has boosted local demand for his fish somewhat.

The booms

Meanwhile (probably in part due to all those folks baking bread at home and posting it on social media), Prairie Flour Mills in Elie said demand spiked around 30 per cent in the last few weeks.

“We are actually starving for bags right now,” said Clayton Manness, the company’s president and CEO.

“We are moving bags around. We’re telling customers we’re out of 2-1/2s (kilogram bags) so you’ll have to take fives. Basically we’re out of 10s right now so you’re going to have to take fives. We can’t do anything about it,” he said.

Manness said they’ll get a fresh stock of bags soon, though he suspected demand would settle out soon.

“I expect it to fall back and maybe drop below the normal,” he said. “There are a lot of questions waiting to be answered.”

There’s also been an increased demand for eggs, said Cory Rybuck, general manager of Manitoba Egg Farmers. With flocks in barns for a year, there’s no need to ramp up production and he hasn’t heard of shortages yet, he said. Manitoba generally exports eggs to other provinces.

Manitoba Egg Farmers’ chief concern is that supplies continue to go to farmers, Rybuck added.

Pasta has also been flying from shelves. Italpasta, based in Brampton, Ontario, reported a 30 per cent increase in demand.

“They’re taking everything we’re manufacturing. As a matter of fact, our warehouse is empty,” said Joe Vitale, Italpasta owner and president.

Italpasta has cut production to the six most popular cuts of pasta (spaghetti, spaghettini, penne, elbows, lasagna and fusilli) from its usual 63.

“Because every time we have to change a die to make different pasta we lose about three hours,” Vitale said.

The plant has expanded its work week to seven days from five and hired more workers, Vitale said. Workers’ temperatures are monitored each day, and they’re provided masks and gloves along with other safety precautions. They’ve also been given a raise, Vitale said.

Vitale said he hoped that as Canadians and retailers thought more about the food system than they might normally, they’d see how Canadian producers are keeping the shelves full.

“When it comes to pasta, there is no difference between our pasta and some of the best pasta that comes from other parts of the world,” he said. “In the future, we should concentrate more on buying Canadian.”

­— With files from Allan Dawson

The post Pandemic both boom and bust for food industry appeared first on Manitoba Co-operator.

Where in years gone by there were nothing but barriers, now more grocery stores are keen to stock locally produced products, says a Manitoba Agriculture business development specialist.

Gone are expensive listing fees to buy shelf space in stores, and you won’t find yourself facing daunting presentations with skeptical category managers either, Jeff Fidyk told St. Jean Farm Days.

The whole process has become very friendly for small-scale companies, with stores across Manitoba now actively looking for entrepreneurs with a product to sell, he said.

[AUDIO CLIP below] Many think selling to a store is expensive and difficult to do, but Jeff Fidyk, business development specialist with Manitoba Agriculture tells St. Jean Farm Days it’s not nearly as complicated or costly as it might seem.

“This is actually a wonderful time for someone to sell a local product,” he said.

“Safeway and Sobeys stores have initiatives right now where they’re actively looking for new, local food products to bring into their stores,” he said.

Red River Co-ops in Winnipeg and the Federated Co-ops throughout the rest of Manitoba likewise are very keen to hear from new product makers, he said.

Fidyk is with provincial Food Commercialization and Agri-Product Processing Branch and gave a talk at the early-January farm show on some of the reasons farmers in Manitoba should think about starting up a secondary value-added business on their farm.

These stores recognize that locally grown and processed foods are in high demand, and are keen to stock them for customers, he said.

Their staff are more than willing to work with new entrepreneurs, he told the farm meeting.

You also needn’t be producing large volume of products to get a meeting, he said. They’ll be interested to hear from you even if you have limited product to sell.

“If your capacity right now is such that you can only supply one store, they’re perfectly happy to work with you and to get your product into that one store,” he said, adding the goal there is to help you increase sales and production capacity so you can supply more in the longer term.

Sales in stores have specific food safety, packaging and labelling requirements which Manitoba Agriculture staff can help you figure out, Fidyk added

Fidyk will conduct several workshops in February on how to set prices, decide how much to produce, plan for associated costs, create sales materials and make pitches to stores for your product.

Dates and locations of workshops is found at the Manitoba government website (PDF).

The post Grocery store entry easier than ever appeared first on Manitoba Co-operator.

E-commerce in the grocery business was barely a thought five years ago. Most of them did not want to cannibalize sales and decrease foot traffic. The primary idea has always been to have more people in grocery stores, not less.

With Amazon, Walmart and Costco looking at cyberspace as a potent place to sell food now, grocers are looking at strategies to keep their customers. At first, it was the “click and collect” era, not the greatest idea in the world, but nonetheless a strategy. Most grocers are now looking at full delivery service whether through a partnership or by developing everything in house.

That is the case for Loblaw which recently launched “PC Insiders” which offers free delivery to its customers for a fixed fee. This program “a la Prime” is clearly in response to Amazon’s incursion into the grocery business.

The brilliance of the Prime model is based on how it can build loyalty and allow the retailers to cover delivery costs. Paying for delivery is not something consumers are keen to do, and costs could be exorbitant for grocers.

With its Prime program, Amazon has perfected the art of covering last-kilometre costs in delivery service, which is known for the most expensive when selling products online to consumers. Venturing into smaller streets, looking for addresses and transporting the product to consumers’ doors takes time and energy.

Loblaw with its $99 PC Insiders program is merely copying Amazon by doing the same, and why not? Loblaw has a database of 16 million non-paying PC Optimum members, so a loyalty loop can be executed by Canada’s No. 1 food retailer. Converting 100,000 PC Optimum members can generate enough capital to cover significant costs. It’s the first of its kind in Canada and we expect to see more in Canada in the future.

On the other hand, some partnerships look promising as well. Sobeys opted for a partnership with U.K.-based Ocado. This partnership has done wonders for European grocers willing to increase their business with e-commerce. Many countries in Europe are now seeing online food sales exceed five per cent, and in some cases up to eight per cent. In Canada, we are not even at two per cent, but the market potential is real.

More than a third of Canadians are thinking of going online regularly to purchase food. Everyone under the age of 39 in Canada right now considers the internet as an integral part of their lives. Their economic influence will only increase over time, and grocers know it. Buying online has its perks, especially when the weather is less than convenient, or you want to avoid the flu bug, or that you simply want to grocery shop for someone else who requires care and lives on the other side of town.

The “click and collect” model, the first iteration of the e-commerce play for grocers never made sense from a consumer’s perspective. Ordering online only to pick up your order on your way home is not very convenient. The dreaded step of waiting to pay for your food is avoided when using e-commerce, but “click and collect” only served the industry’s interest in playing defence against Amazon.

The e-commerce model is economically more palatable for retailers compared to home delivery as it moves inventory efficiently without the last-kilometre cost. To add insult to injury, some retailers charged consumers for home delivery.

More well-thought-out online delivery programs will ultimately make “click and collect” obsolete. Mental cyber-benchmarks are different today from those only a few years ago. And, let’s face it, consumers expect more convenience and are willing to pay for it.

The emergence of more e-commerce in food retailing signals the end of the big-box stores. More retailers are looking at smaller stores which require less inventory and maintenance.

A big store with nobody in it is bad for business; therefore, it makes little sense to build more of them. Sobeys’ acquisition of Farm Boy this year in Ontario is consistent with such a strategy. Farm Boy offers a great in-store experience while providing Sobeys with high-quality products to be delivered at consumers’ homes.

E-commerce in food also offers more opportunities beyond retailing. This is happening in service as well. An increasing number of consumers want to “go out by staying home.” No overpriced wine, no extra tips, no standing around waiting to be seated, instead, more consumers want to enjoy a meal in the comfort of their homes.

Although home delivery by restaurants has been around for decades, there are now new options available to them. New are apps, such as UberEats and Winnipeg’s Skip The Dishes, that allow consumers to have access to more choices.

Some restaurants can’t afford a driver or to operate a fleet of cars. These apps act as brokers between restaurants and the curious consumer. As a result, some restaurants are now virtual, operating without a dining room while exclusively selling online.

Brokering online relationships between consumers and the food industry could get interesting in years to come. With drones, some are predicting to see more farmers selling directly to consumers. The sky is the limit, literally.

During this holiday season, malls were packed, but don’t let that fool you for a second. Throughout the year an increasing number of consumers will spend time in front of a screen purchasing presents instead of parking kilometres from the mall’s entrance and working their way through the cashiers. So uncivilized. That rule increasingly applies to food.

Now if only we can figure out a way to have someone clean up the dishes for us, that would be such bliss. That would clearly be e-commerce’s next frontier in food.

The post Comment: The unavoidable death of ‘click and collect’ appeared first on Manitoba Co-operator.

A survey conducted for the centre found 69 per cent of consumers consider themselves most responsible for reducing food loss and waste, followed by restaurants at 65 per cent, grocery stores 61 per cent, food processors 58 per cent, government 50 per cent and farmers 46 per cent.

“Everyone in the food system can play a role in finding solutions, right through to each of us in our own homes,” said CCFI president Crystal Mackay. The survey found throwing out leftovers was the main cause of household food loss and waste, followed by food reaching the best-before date and buying too much food.

The survey also found only 39 per cent of consumers are strongly concerned about the amount of food loss and waste in Canada overall, 58 per cent make every effort to reduce the amount of food thrown away at home and 42 per cent say they waste less food than a year ago.

Mackay said the survey results demonstrate a clear need to provide more information and advice on how to reduce their personal food waste. Seventy-one per cent wanted tips to reduce food waste, 68 per cent sought a guide to reduce food waste and ‘recycle food you can’t eat,’ and 67 per cent said information ‘to show me how reducing food waste can save money.’

“The attention on grocery stores to reduce food waste is warranted as the volume of it all in one concentrated location is significant,” she said. “So all efforts to create systematic options to get food to people who need it most can make a big difference. Food safety regulations and requirements require very serious consideration in any solutions.”

CCFI and Provision Coalition have led the creation of the Tackling Food Loss + Waste program with funding from the Walmart Foundation.

Mackay said a lot of food “is thrown away after it is purchased, or even prepared, because of its perishability. Much of the foods we buy — fruits and vegetables, roots and tubers, fish and seafood, dairy, meat and cereals — are easily damaged and have short shelf lives.”

Mackay said a good starting point for finding answers is with www.bestfoodfacts.org which offers more than 200 university and independent experts “who answer questions about anything on your plate across all major social media channels.”

She cited a Best Food Facts presentation by Robyn Barefoot, a registered dietitian, who starts her advice with the simple suggestions of plan ahead and shop often.

“Planning meals in advance can help utilize the food purchased,” Barefoot said. “Using tools such as websites, paper and pen, calendars or even something as simple as a chalkboard can help to make meal planning possible. Making a shopping list and sticking to it goes hand in hand and can help to avoid unnecessary purchases that may not get eaten. Another personal favourite is shopping at bulk food stores. This can help reduce waste of dry storage items such as spices, dry pasta and crackers, grabbing only how much you’ll need … while saving money too!

“Reducing food waste starts with planning meals in advance and smart shopping at the store. Utilize your refrigerator and freezer to extend the life of fresh foods and keep food storage areas organized so you know what you have on hand. Using as much as possible of the foods you purchase helps to save money and helps the environment.”

The post Consumers acknowledge they are the biggest food wasters appeared first on Manitoba Co-operator.

Picking up groceries and lugging them back home is work, something most would rather avoid. On the other hand, many of us do enjoy visiting food stores and discovering new products or new flavours. But most Canadians would agree on one thing. Waiting in line to pay for your items, no matter how patient you are, is the single most frustrating part of grocery shopping.

For decades, the most mismanaged part of the grocery experience has always been leaving the store. As you enter, many stores have greeters, sometimes even the owners, who go out of their way to make sure you feel welcome. There are usually staff available, somewhere, when you need help finding what you are looking for. But leaving the store, and specifically going through the checkout, can often turn into a nightmare.

To avoid getting stuck in line waiting to pay for their items, all the while being forced to take in the news of the latest Elvis sighting in the National Enquirer, Canadians will opt for the often dysfunctional self-checkout machines. Poorly designed self-checkout lanes have been a source of frustration ever since the technology first appeared in Canadian stores in 2000.

Something always goes wrong, which then requires an employee with a portable scanner to come to the rescue. The experience is, most often, embarrassing and annoying. But, despite all the flaws, Canadians are still using self-checkouts. According to a recent survey by Dalhousie University, a full 66 per cent of us have used self-checkout lanes at some point in the past, and 11 per cent use them consistently.

Grocers have had a love-hate relationship with technology in general for decades. Most feel that technology gets in the way of connecting with customers inside the store. It has long been believed that the only way to build customer loyalty and increase foot traffic is to interact with visiting customers, as much as possible.

Many of us have wondered whether the poor quality of self-checkout machines was by design, to force customers to interact with staff in the end. Grocers also feared losing sales by going virtual. But the time pressures of our modern lifestyle and our constant quest for convenience have not only forced grocers to think differently about how they manage the grocery experience, but have also compelled them to seek different channels to reach more customers, such as online delivery and meal kits — it’s just not as simple as it used to be.

Wanting to humanize the grocery experience is just one thing grocers grapple with. Encouraging impulse buying is an art that grocers have mastered in the brick-and-mortar environment. While you wait in line to pay for the items in your cart, you’re surrounded by candies, gum, magazines, and other small temptations. These bring much-needed additional revenues to retailers who are desperate to increase their razor-thin profit margin. However, getting customers to buy on impulse in front of a screen is another story.

But grocers recognize what’s coming. According to the same Dalhousie University survey, nearly two per cent of Canadians buy food online regularly, and more than 34 per cent are thinking about doing so. This is an astonishingly high number compared to just a few years ago. This means Canadians are paying attention and are slowly being drawn to solutions which can save them time, and avoid the hassle of grocery shopping. Meal kitting is also on the rise in Canada, as more than 14 per cent of Canadians have ordered ready-to-cook products from meal kit providers, a number which is likely to increase.

External disruptors like Amazon want to remind Canadians that technology can serve a purpose in the grocery business and make any visit a civilized endeavour. Amazon Go is a store in which you don’t need to talk to or even see anyone. You essentially get your groceries and walk away without paying.

Sensors detect what you have picked up, and the appropriate amount is automatically deducted from your bank account. No waiting, no browsing through tabloids, none of that. Lessons such as this are being given by non-traditional grocers that there is a better way to implement technological solutions to enhance our shopping experience.

The industry is going through a significant transition period in terms of enhanced technology, whether it is in store or online. Canadians are demanding more convenience, and not just the younger generations. People with children, married people, divorced people, boomers, the middle class, anyone who doesn’t want grocery shopping to be a slog.

Grocers know that consumers are expecting seamless solutions that will make grocery shopping a pleasant experience for all. But grocers also recognize that no one wants to pay more for better technology, or delivery for that matter. So, patience is a virtue.

Grocers will get there, but it may take awhile. If you opt for that self-checkout aisle, you can expect the dreaded “wait for an assistant” message to keep popping up on that screen for a little while longer.

Sylvain Charlebois is senior fellow with the Atlantic Institute for Market Studies, dean of the faculty of management and a professor in the faculty of agriculture at Dalhousie University.

The post Comment: A painful experience appeared first on Manitoba Co-operator.

Vegetarianism and veganism are both coming into their own, allowing more people to “come out of the cupboard” to speak openly about and affirm their commitment to a self-imposed diet. They’re doing it for animal welfare, the environment, health — whatever factor is deemed personally important. But make no mistake: this trend is an indication that the current economy is strong.

• Editorial: Mystery meat

Human psychology has shown us that consumers traditionally indulge, ironically perhaps, in times of uncertainty. The fear of food insecurity is a very powerful force. Consumers who may lose their professional situation will often treat themselves with sweets and other unhealthy offerings, just to forget about their own reality for a while.

It appears, though, that healthy eating habits are winning over indulgence these days. Once food security is achieved for a foreseeable future, or even if it is based on pure optics, many things can change. Science serves as a reminder that the food security concept must recognize the importance of food quality in a general sense, which includes considerations of food safety, nutrition and health as well as the experiential aspects of food shopping and consumption. This is likely where we are at in our present economic cycle.

Many years ago, conversations about food were about flavours, tastes and traditions. Today, we talk more about morals and values linked to how we consume food, simply because we can afford to do so. Stock markets are on a tear, and the unemployment rate is almost at an all-time low. Food is not just about survival, but rather more about making a socio-economic statement as much as a moral one. At social gatherings, some are now made to feel as though eating meat is a crime.

In the past, consumers recognized the limitations on their ability to influence the choices made available to them, and they often seemed doubtful about the potential for collective action to work. They made little connection between threats to global food supply and their own daily consumption practices. That has all changed, due to the abundance of time we now have.

Most of our time is spent looking at a screen, a computer, phone, television, or other portable device we have at hand. Technological advances, coupled with our pursuit of convenience, have given us a lot more time to think about food in a different way. Grocery shopping and cooking at home takes less time than the pre-industrial practices of hunting or harvesting. With ready-to-eat food, or even ready-to-cook solutions we save even more time — time now spent on developing a philosophical attitude toward food consumption. Technology makes our lives simple, and with simplicity also comes greater coherent thought and enhanced self-awareness as a consumer and particularly, as a food consumer.

In the meantime, the industry is coping, and adapting quickly. A few stunning examples: McDonald’s is offering Big Macs without the meat, and according to some sources, the Beyond Burger campaign at A&W is having great success. We also have seen changes in packaging and labels to appeal to the increasing number of consumers who are rejecting the status quo, or anything that appears disconnected with a holistic view of the world.

But it all really comes down to how the economy is doing. The current unemployment rate is incredibly low, and according to Morneau Shepell, salaries should be going up by 2.6 per cent on average over the next 12 months.

More money in the consumer’s pocket will allow them to believe they can trade up, or perhaps sideways, when making food choices. It also gives families much-needed financial help. What is also enticing consumers is a weaker-than-expected food inflation rate across the country.

Food inflation remains more than one per cent lower than the general inflation rate. So, prices have been less of an issue this year, although this is about to change.

Grocers are indicating that prices will increase due to tariffs. While the rationale of raising prices due to tariffs is highly disputable, when grocers use financial updates to let consumers know prices may go up, it is a sign. Loblaw and Metro have done it, and it would not be surprising if Sobeys follows suit.

Food inflation should reach anywhere from two to 2.5 per cent by year’s end.

Yet, even with higher food prices, the buoyant economy allows more of us to think about the ethical, environmental and moral implications of our food choices. And we can afford to — for now.

The post Comment: Why are consumers going meatless? appeared first on Manitoba Co-operator.

For example, Walmart has just partnered with Gobble to deliver meal kits. In the battle over the future of food consumption in the U.S., Walmart wants a fighting chance against the industry’s new mammoth, Amazon, after the latter acquired Whole Foods a year ago.

Don’t be surprised if more grocers do the same.

Meal kit delivery services made their debut in 2012. Most companies are still considered startups. Gobble, for example, started in 2014 with its three-step, one-pan, 15-minute meal kit.

The United States now has more than 150 meal kit companies across the country. And Canada has just under 20 significant players already.

While this is a relatively new food retail segment, it represents over US$1.5 billion in the U.S. alone and is growing. In Canada, the meal kit segment is estimated to be worth around $200 million and growing.

Metro made a brilliant move when it acquired MissFresh last year, allowing it to hit the ground running. And meal kitting is likely in the cards for other Canadian grocers but no great announcements have been made thus far. And why not?

Instead of takeout, consumers choose a meal kit that brings them pre-shopped, pre-measured, pre-everything, so they can whip up an appealing dish in minutes, even with little or no cooking experience.

Costs, however, are anywhere from $9 to $12 a meal, which makes this service prohibitive for many.

The other problematic issue is packaging. For assured freshness and food safety, ingredients must be thoroughly wrapped, making environmentally conscious buyers less enthusiastic about their purchases. This is likely the biggest hurdle that meal kits must overcome: the waste is astronomical.

Another issue is profitability.

Goodfood is one of Canada’s largest meal kit providers. It has tripled its active subscribers, to 76,000, but is still losing money. Most providers aren’t making profits and that’s peculiar for a new and growing segment.

But given the excitement around meal kits, most of these companies barely sweat to raise capital. The pressure to generate revenues without spending too much on marketing is the real problem. So as the market matures, only some will survive.

Those partnering or working with large retailers have a greater chance of survival and of grabbing a decent share of the market.

Grocers have never been great at food service, so uniting forces makes sense. And grocers are starting to see meal kits as foot traffic drivers, a major advantage these days. This is what Gobble is doing for Walmart.

Despite the challenges, meal kits face relatively few headwinds. The food service and hospitality sector in Canada has been booming over the last few years, with growth exceeding five per cent in 2017 and forecasted to grow more than four per cent this year. Compared to food retailing, these numbers are spectacular.

Grocers want into the food-service game and meal kitting is one way to do it. What makes the meal kit case more compelling is the expected revenue for home delivery. In 2018, we expect Canadians to order $2.5 billion worth of food, an increase of 23 per cent from last year. And the industry expects double-digit growth to continue over the next few years.

People are eager to eat more at home while forgoing the worst of cooking. Canadians are still buying cookbooks in droves and watch a record number of cooking shows. But meal kits are increasingly popular.

Ghost restaurants are in vogue in North America and Europe. Unlike Uber Eats, for example, where consumers can directly connect with restaurants, there’s no interaction between a ghost restaurant and the consumer. These are virtual eateries for consumers who don’t want to cook at all. They order from these establishments through third-party applications, all for the sake of convenience.

All of these service models eliminate the inconvenience of waiting in dining rooms for your meal.

For the business owners, they solve the issues of extra labour costs, helping to mitigate risks related to higher minimum wages and, most important, the risk of choosing the right location.

But meal kits still don’t resolve one age-old issue: you still need to clean your dishes after you’re done. Technology hasn’t solved this problem yet but surely someone will come up with something soon.

Sylvain Charlebois is dean of the faculty of management and a professor in the faculty of agriculture at Dalhousie University. He writes regularly about food and agriculture.

The post Comment: Meal kits set the table for a new food retailing boom appeared first on Manitoba Co-operator.

Costco launched its home delivery pilot in Ontario, while Maxi’s, Loblaw’s discount stores in Quebec, were the latest to jump on the virtual bandwagon with their Click and Collect program. In other words, grocers are no longer content with waiting for customers to walk through the door, ready to spend money on food. Grocers are now accepting that they must increasingly go after and work harder for the money.

• Read more: What StatsCan and Loblaw numbers are really telling us

The proverbial wake-up call for food retailers came a year ago when Amazon purchased Whole Foods in the U.S. in August 2017. The biggest concern among grocers was that it would drive down prices, even in Canada. This has not yet happened, at least not in any direct way. Food inflation is not strong, but neither is the sector experiencing any deflationary pressures.

What is happening: consumers gradually walking away from the average traditional grocery stores. Some are drawn to specialty stores, but many are buying online, and often from suppliers selling unique products not available through the major outlets.

• Read more: Amazon set to take a bite out of the food industry
• Read more: Amazon and the slow death of the traditional grocery store

Habits are changing. Some estimate online food sales to be at about 1.5 per cent of all food retail sales in Canada, with some grocers seeing online sales growth reach double digits. Given that we are one of the most connected nations in the world, the current 1.5 per cent of sales could go up to seven per cent within the next 10 years, which equates to approximately $10 billion in sales. This would represent over 800 decent-size stores in today’s food distribution landscape.

Canada is essentially catching up to several other industrialized countries. Ireland and the United Kingdom are at 7.5 per cent in online grocery sales. France is at just over 5.5 per cent. Canadians are nowhere near that level, as most of us never considered online food shopping until just recently. Now, it’s in the media almost every week, enticing Canadians to think differently about food outlets and how they might want to shop.

Grocers weren’t overly enthusiastic in embracing e-commerce either. Other than Sobeys in Quebec and Longo’s Grocery Gateway in Ontario, not much virtual shopping was going on. Reluctant grocers were concerned about lost foot traffic and reduced same-store sales, precious metrics in the business. But Amazon’s clear commitment to food retailing changed everything.

The sector is now playing defence and retailers are trying to embrace their new reality. Basically, an online shopper is more rational and strategic. Senses and emotions can trick you into buying certain products you don’t need or “shouldn’t” be buying in the first place. In a physical store, want overpowers need, much more often than you might think. Online, however, impulse buying is almost impossible. Grocers are slowly having to learn how to add on sales while transacting with a customer who has access to neatly presented information in real time, all the time — a scary thought for the conservative type in the industry.

For some Canadians though, saving money through online shopping is not that easy. On the one hand, free applications allow the tech savvy to save. On the other hand, the process excludes certain consumers. It involves some research, knowledge of software use, and especially time. Some are comfortable with this, but not everyone. But since the internet and social media have become so prominent in our lives, chances are that, over time, the number of shoppers willing to buy food online will outnumber those reluctant to do so.

Location means something different in food retailing now. More competition will only make things more complicated for grocers. If it’s death by a thousand cuts for the industry, everyone wants to be the one holding the blade. Loblaw and Wal-Mart have very dissimilar approaches — no surprise — driven by in-house thinking. While Metro has been a little quiet compared to others, Sobeys has entered a partnership with U.K.-based Ocado, a powerhouse in online shopping. This could make for an interesting duo in the sector. Costco has now announced it wants to play in the online space which could also be damaging for the establishment.

Everyone wants in, but in the end, only a few will deploy an e-commerce strategy that will “click” with Canadian consumers.

The post Opinion: Amazon and Whole Foods – one year later appeared first on Manitoba Co-operator.

According to a recent survey, almost 60 per cent of all Canadian consumers consider price as one of the top three decision criteria when grocery shopping. Price is key, no matter what.

Pricing in the food-processing sector is intricate. Ingredients, energy costs, wages and so forth can weigh heavily on food manufacturers.

For decades, to keep price points low, the shrinking-package strategy has been part of the food industry. Some of us have noticed and we have seen several media stories on this issue in recent years.

But now, packages are shrinking even faster than ever before. The tactic is so widespread that some are even alluding to the phenomena as “shrinkflation.”

A recent U.K. study suggests that there are almost 3,000 food products that can be found in a typical grocery store that have shrunk since 2012. This came at a point when the annual food inflation hit a whopping six per cent.

Similar numbers are coming out of the U.S. market. Many U.S. food manufacturers have also admitted to shrinking packages to maintain prices at a competitive level. Many of these products enter the Canadian market. Rough estimates suggest anywhere between 15 per cent to 20 per cent of all packaged food products have shrunk in the last five years.

Shrinkflation, or downsizing, is almost the norm these days, which causes some consumers to find this practice to be irritating. Yet food companies are not really misleading the public. Weight and volume information can easily be found on any labelled package. Habits make us believe we are purchasing the same thing as we zoom in on the one constant that motivates our behaviour when shopping: price.

When costs rise in food manufacturing a company has basically three options: raise the price, make smaller packages, or change the ingredients. Given our competitive food industry, raising prices can be challenging. Yet changing ingredients can be deadly. For 30 years, before the 2008 bump in commodity prices, when food was considered as an afterthought compared to today, companies were egregiously reformulating food products. This was at a time when taste and the quality of ingredients were not on the radar.

Some food manufacturers have paid the ultimate price for changing the taste of certain products, just to save a few pennies. Today, with social media, companies are one poor decision away from seeing an entire product line vanish.

The only viable option really is to downsize. With the arrival of many non-food investment firms and conglomerates that value food as much as bolts, tires, or buildings, recalibrating ingredients and changing a package is almost second nature.

3G Capital, the Brazilian giant which gobbled Heinz-Kraft, Burger King and Tim Hortons in recent years, is one good example. Most of these new players in the food space are not astute to the nuances of food products. They just look at the numbers.

Whether we want to admit it or not, as food consumers we value quantities for the lowest price. It is challenging to get out of this way of thinking. There could be an opportunity for manufacturers looking at increased costs. Instead of downsizing products and hoping no one would notice, it could become a selling point. Studies show that consumers who remember how good a product tastes are willing to pay more for less if given no other choice. Showing a more transparent approach to packaging could let consumers appreciate that things do get complicated out there and some adjustments are required. But we all know that won’t happen.

What is unclear is how shrinkflation is captured by the StatsCan consumer price index. Protocols show certain quantities being mentioned, but it does not explain how data collection is adjusted as quantities change rapidly. This contributes to food inflation in a subtle way. StatsCan could assist Canadians in monitoring shrinkflation to help consumers be more vigilant and assess how it affects our food budget. Right now, however, most of us would not know. By compounding real inflation, food prices may have gone up by more than six per cent in many cases, when the reported food inflation rate was anywhere between 1.5 to two per cent.

In the end, consumers can be outraged and condemn the practice of shrinking food products. But when you really think about it, food companies are really delivering what consumers are asking for.

The post Opinion: ‘Shrinkflation’ is a thing appeared first on Manitoba Co-operator.

Loblaw has reason to be particularly worried, having recently posted underwhelming 4Q results. Food retail sales dropped by 1.2 per cent and total revenues slipped by 0.9 per cent. Despite strong Shoppers Drug Mart sales, company executives indicated reforms affecting the price of generic drugs will impact profits. But it is higher wages that seem to be the big worry for the company, as provincial governments are exploring options, figuring out how an economy with a $15/hour minimum wage would work. In fact, StatsCan numbers may be suggesting where things are headed with minimum wage increases.

It may too early to tell, but Ontario minimum wage hikes likely pushed menu prices higher in January, especially in fast food, where most of the income earners are paid minimum wage. And this is likely just the beginning. After a 22 per cent hike on January 1 of this year, Ontario’s minimum wage is due to increase again to $15/hour on January 1, 2019. Alberta will join the $15/hour club in October of this year, and British Columbia intends to pass the $15 mark in 2021. Other provinces like Quebec and Nova Scotia are thinking about following suit. The $15 campaign will not go away any time soon. Obviously, most people don’t object to the concept that people should earn a decent living. The challenge with Ontario, though, is how quickly wage hikes are being implemented. A 32 per cent increase in 12 months is simply irresponsible. Restaurants, and many of them are family-owned businesses in regions across the province, will have a hard time coping.

The grocery business is also being affected by higher minimum wages, but indicators are subtler. Here’s one example. The price of tomatoes, one of the most popular produce items, jumped by more than 30 per cent in one month. It’s hard to tell, but this was likely an effect of minimum wage increases, as it is unusual to see any fruit or vegetable price increase by even four per cent in one single winter month. Even imports have a critical impact as the value of the Canadian dollar remained relatively stable against the U.S. greenback. Margins are typically much higher in this section of the store.

It would seem 2018 is turning into a very challenging year for grocers, especially Loblaw. Results we saw last week from Loblaw are indicative of what is to come. For the Brampton-based giant, it is a godsend to see food inflation rise again, so that it can tweak certain price points, and increase margins without most people noticing. Loblaw will need to get creative — very creative — in order to continue to deliver over the next few quarters. Results indicate that store traffic is an ongoing issue, so converting store sales to online activity will be critical, especially with what is on the horizon.

Meanwhile, in the U.S., Amazon is continuing to create havoc in the grocery landscape. Bloomberg just reported that two grocers, Winn-Dixie parent Bi-Lo and Tops Friendly Market, could declare bankruptcy this month. This is likely due to the ominous shakedown in the grocery industry caused by Amazon and its newly acquired Whole Foods subsidiary. This is only the beginning, and Amazon is slowly capturing more market share in groceries, destroying historically well-established players one by one, as it did in other sectors like bookstores. Loblaw is realistically concerned Amazon will make its way into Canada — a further threat to this major grocer.

• Read more: Amazon set to take a bite out of the food industry

But there is still hope. Higher menu prices may slow down the food-service sector’s string of successes in recent years. As food and labour are a restaurant’s highest expenses, this may be an opportunity for a grocer like Loblaw to commit more seriously to both ready-to-eat and ready-to-cook spaces. Increasing food retail sales will become more and more difficult. While menu prices go up, exploiting the nexus between food service and retailing may give Loblaw an advantage. This could be Loblaw’s next move, but it clearly needs to think differently about how to grow the business.

Interestingly though, while posting its 4Q results, Loblaw made no mention of its $25 gift certificate campaign, launched because of its self-confessed involvement in the bread price-fixing scheme in December. Nonetheless, StatsCan numbers confirmed what many suspected. Bread prices are dropping across the country. BMO stated earlier this year that bread prices were down 2.5 per cent since December, after Loblaw made the disclosure. According to StatsCan, bread prices dropped 1.7 per cent in January alone. In fact, it seems most bakery products are cheaper than they were a month ago.

This may be a sign that grocers are trying to make amends with the public, since the story has garnered so much attention. It is unclear whether the aggressive discounting we have seen in many stores will continue — only time will tell.

The post What StatsCan and Loblaw numbers are really telling us appeared first on Manitoba Co-operator.