'I think grocers are fully aware that Canadians are having a hard time with food prices': Charlebois

Oblah says it will spend $2.4 billion in

2026 to build 70 stores, renovate nearly

200 others, and expand its supply chain

capabilities. The plan includes new no

frills maxi and shoppers Drug Mart

locations. Joining us to discuss this,

Sans Charawa, professor and researcher

of food distribution and policy at

Delhauszy University. Professor, thanks

as always for joining us.

>> Good morning, Roger. Uh first off, is

this a kind of normal expansion plan or

is this a little bit accelerated this

year?

>> Um actually pretty much every year we

hear from Lobla announcing that they are

spending uh $2 billion or more. Uh

supporting their fleet of of stores. U

so it's actually quite normal. They do

announce typically the number of stores

they'll be opening, the number of

conversions. Uh and of course every now

and then you'll see uh more than 100

stores being renovated. Uh what what's

unusual this year uh compared to past

years that we are seeing a groceryer

adapting to a much more frugal market.

So we are expecting more discount uh

stores. Metro actually ma made the same

announcement a couple of weeks ago in

Quebec with super. So you can see that

really uh Canadians are stronger the

grocery stores and grocerers are

adapting. So, we're we we're not dealing

with an overstored market in Canada.

There's still uh plenty uh a space for

growth. Uh but things are getting

tighter, especially when it comes to uh

discretionary revenues, the money that

people have to spend at the grocery

store.

>> Uh and I'm just looking at at one of the

numbers out there also, but they're

expecting revenue estimates for Loblaws

to be uh uh outpacing key industry data.

What I mean that's a does that seem like

an unusual mix or is that them just

putting things together perfectly?

>> What I think what they're trying to do

is optimize their supply chains. Uh so

what what was announced this morning is

that they're planning to have more of of

of shoppers drug stores right next to

their own stores, grocery stores to

basically uh build synergies uh supply

chain synergies between outlets, which

is interesting. Of course, anyone who's

been to a shoppers will have noticed

that uh slowly we're seeing these stores

or thesearmacies becoming uh more like

mini marts. And so they've been quite

successful in deploying that strategy

over the last I'd say decade or so. And

that's going to continue over the next

several uh several years. And probably

that's where the growth will come from

for Loblaw.

>> Why not merge them then? Why not just

put the the shoppers in the same

footprint?

That's a very good question, Roger,

because I mean, you go to Walmart andy's

right there. I think they just want to

keep things separate for now. I wouldn't

be surprised that they're thinking about

it, but for now, they absolutely want to

keep both brands, both stores separate

for now. But, uh, physically, uh, you

can see that they're trying to, uh,

bring them closer and closer to to the

other banners.

>> And with the shoppers, are they

approaching saturation for them? I mean,

it feels like everywhere you look, you

see a shoppers.

>> Yeah. You know, I I thought there was

some saturation, but there's still

building and there's still space for

growth. And of course, with

urbanization, people are moving around.

People are spreading and cities are

growing. Some cities are growing. So,

absolutely. I think right now you're

seeing grocerers adapting. Uh pharmacies

are in demand. uh people are getting

older andarmacies tend not to sell only

food but they sell uh medical drugs and

they sell cosmetics as well. So those

are things that older populations tend

to want as well. So there's still a lot

of room for growth for sure.

>> Now is there any concern with the the

slowing population? We even had the

negative population growth. Is that

having an impact on their plans?

>> Absolutely. Well, when you're in

business of filling stomachs, that's

certainly a number that you're looking

at. uh Canada has failed to attract new

players into the market. Uh the the the

challenge is that we have grocerers that

are really managing the game market

quite well. Marges are pretty decent,

but they are playing defense quite well.

So, we're not expecting a new entrance

anytime soon in Canada. However, we are

expecting some of our grocerers to open

up new stores as our population

stagnates or slowly grows. And and and

then going back as you mentioned about

uh it's no frills that are going in. Is

this is this the first time you've seen

where I think is it all no frills and

lower-end uh supermarkets that are being

uh opened?

>> Yeah, Maxi in Quebec and no frrills

outside of Quebec. There are some

conversions expected with supertores

into no frrills or Maxi as well. So

again, I think grocerers really are

fully aware that uh that Canadians are

having a hard time with food prices and

they're just basically uh readaptting,

changing their portfolio of stores to

adapt to a much more frugal consumer out

there.

>> Will that mean lower prices, do you

think, for consumers?

>> Uh more stable prices. Yeah, wishful

thinking there. I'm [laughter] sure

>> a man can dream, Silvan. A man can

dream. It's it's tough. I mean, right

now the food inflation rate is at 7.3%

the highest among G7 countries. But we

are expecting the food inflation rate to

drop. But it doesn't mean that we'll see

lower food prices.

>> Not even with not even with them going

with the uh the no frill more no frills

opening up.

>> No. Well, with some verticals, we are

expecting lower prices, but generally

speaking, we're expecting some section

of the grocery store to be more

expensive, like animal proteins, uh the

meat counter, dairy, bakery is is is

moving up right now, but the center of

the store, there's that center of the

store is under tremendous pressure. So,

coffee, which has been very expensive,

we are expecting prices to drop over the

next several months.

>> All right, I I'll I'll drink the coffee

getting cheaper. Um, there you go. Can

Can the independents compete with the

big boys right now?

>> I think what we're seeing right now are

small independence. I've seen stories,

Roger, around the country of of small

independents uh making a difference. It

is possible to open up a new chain.

There's one chain in Quebec called Mar.

They now have 12 stores. Another chain

that actually was in the news of late,

they have now eight stores. So if you

actually can cater to a niche market,

whether it's for an extra frugal market

or some or consumers that are looking

for premium products, I think there's

still room for these players to actually

make a difference in Canada.

>> Okay, professor. Always a pleasure

talking to you. Thank you very much for

joining us.

>> All right, take care. Svash Alibaba is a

professor and researcher of food

distribution and policy at Delhauszy