Grocery stores are taking on a new strategy

There’s an article in the current issue of Canadian Business about how some grocery chains are taking on a new strategy in order to boost their profit margins. James Cowan describes how big grocery chains are negotiating with major brand players to be one of a few brands they offer on their shelves, besides their own store brands.

In the good old days, when I actually shopped at Costco, I totally noticed this. If you wanted peanut butter at Costco, they offered Kraft. Full stop.  That was fine with me. I’m a Kraft or nothing kind of gal, when it comes to peanut butter. I was often frustrated that Costco rarely offered light or lower fat versions of brands they already carried though. No, they didn’t carry fat reduced Kraft peanut butter. Nor crunchy  🙂

Friends, who are much smarter about broader business strategies than I’d ever pretend to be, have often told me that grocery stores have one of the lowest margins of profit around. They exist (so I’m told) on volume. The stores that hope to reel you in with their guaranteed lowest prices on the basics, like milk, bread, eggs and sugar, hope you’ll cruise up and down the aisles and throw a bag of cookies, or a box of Cheerios in your cart too.

In my neighbourhood, I can walk to about 5 grocery stores. Only two of those five get the bulk of my business. I will go elsewhere if there are advertised specials of items I need. Recently, my local Food Basics, which is a discount grocer, has been undergoing some major renovations.

I have totally noticed the changes that Mr. Cowan is writing about as this store renovates. Just today I went with hopes to come home with some strawberry jam, the kind with less sugar than ‘regular’ jams. There were big brands like E.D. Smith and Smuckers of raspberry, grape, peach, apricot, etc.  The only strawberry jam they offered, with reduced sugar, was their store brand.  One option. I wonder what the sales statistics are among flavours of jam. I’m willing to bet, based on that wee observation, that strawberry jam out sells the others by a good margin.

Now, I’m thinking that not only will I have to keep a list of what the basics cost at each store, and if I’m faithful to a particular brand, I’ll have to keep track of which store I can find it at!

Are you noticing a change in your grocery store?

I’m not really complaining here. To be frank, there are many store brands that I actually prefer over the big brand version, and I appreciate paying considerably less for it too. It’s great to have a choice. Seems like our choices will be different store by store in the very near future!

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One response to this post.

  1. I think we’ve gotten used to a pretty good variety at our U.S. grocery stores. People I know who have traveled even to our neighboring Canada were amazed at the limited choice in grocery stores in certain parts of the country. There were like…5 cereals on the shelf.

    It very well may be that grocers are finally consolidating and improving their internal price efficiency…who knows. I’ll definitely miss all the choices, though.

    Reply

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