Food Retail Industry Analysis

The food retail industry in Canada and USA plays a major role in the countries' GDP, with the Canadian market being at saturation stage. The industry faces tough competition and has witnessed decreasing profit margins in recent years. Key players in the American market include Walmart, Kroger, Costco, and others, while key players in the Canadian market include Walmart, No Frills, Loblaws, and Fresh Co. The industry's value chain starts with farmers providing fresh produce to retailers, which also source processed foods from manufacturers. Online grocery shopping is a rapidly growing trend, with the US online grocery market expected to grow to $117 B by 2023. Millennials are the biggest consumer group of organic food in Canada and USA, driven by concerns for health and environment.

Food retail industry
Food retail industry in Canada and USA play a major role in countries GDP. Food retail industry in
Canada is at saturation stage and is expected at increase 1% annually from 2018 -2023 in USA and
Canada (IBIS, 2018). The industry faces tough competition and competes on prices. It has witnessed
decreasing profit margins in past few years.
Key stats about Food retail industry
Revenue - $90.7 B (Canada) & 654.6 B (USA)
Profits – $ 3.4 B (Canada) & $10.5 B (USA)
The profit margin as a percentage of revenue in Canada is 3.7% and in USA is 1.6%, which shows that the
competition in US market is stiffer as compared to competition in Canadian market.
Supply – Retail food industry in USA and Canada offers huge range of products – fresh produce such as
fruits and vegetables (both full products and prepared cut portions), cereals, snacks, non-alcoholic
beverages, fish, seafood and meat products, frozen food, prepared food etc.
Key players in American Market: Walmart, Kroger, Costco, Ahold, Target, Publix, Whole Foods, HEB,
Albertsons, Southeast Grocers.
Key players in Canadian Market: Walmart, No frills, Loblows, Fresh Co.
Key success parameters: Price competitiveness, product differentiation, economies of scale and
international trade, health and environmentally conscious efforts.
Global market key things to consider: Trade barriers, food safety standards, perceived quality of
Canadian foods, outbreak of any disease in Canada or target market, exchange rate
Value Chain of Food retailers
A typical value chain of a food retailer starts with farmers which provide fresh fruits, vegetables
and other farm products directly to the retailer. They also source processed foods from
manufacturers, which in turn provide orders to the suppliers. End customers come at the last
step of the value chain who buy from metro for its wide variety of brands and products of fresh
produce and customer service.

Online grocery – Online grocery market is rapidly increasing. A report by NPT, states that 10% of US
consumers stated that they regularly shop groceries online. The US online grocery market has grown
more than 100% in last 2 years (from $12 B in 2016 to $26 B in 2018 )1. Online grocery market is
expected to grow to $ 117 B till 2023. This shows a huge potential for online grocers, which need
strategies to entice and attract online grocery shoppers. Major online groceries and their assessment is
shown in appendix 1.
Consumers of Online groceries – Both Millennials and Gen X are consumers of online groceries in North
American market6 who see value in online shopping. People are use both mobile apps and website to
order online grocery.

Implication for Whole Foods: Whole Foods has been acquired by Amazon, which is the biggest online
retailer. Amazon with its expertise in online retailer and established distribution channels and
warehouses can exploit the opportunity in online grocery market and promote its brand – Whole Foods
in the natural food market.
Organic Food market – Organic Food market consists of naturally produced food without the use of
synthetic or man-made pesticides, herbicides or fertilizers. These food products are grown without use
of antibiotics or growth hormones and without radiation. Since, growing these products require greater
efforts and more wastage, producers demand a price premium over organic food.
Organic products have shifted from being a fancy lifestyle choice for a small share of consumers to
healthy lifestyle choice to greater number of households. Organic food has created a buzz in the market
due to increasing health awareness among North Americans and disadvantages ( mainly diseases and
health issues ) related to use of synthetic products in farming and dairy methods.
Organic food in North America is sold through conventional grocery stores, natural food stores, and
direct-to-consumer markets.
Reasons for buying organic food
Source: Food distribution guy website6

Key Insights
 Organic food and non food market in 2017 USA was $49.4 B, which was 6.4% higher2 from 2016.
 Accounts for 2% of Food sales in USA3.
 Organic food market in Canada in 2017 was $ 5.4 B, which was $2.8 B in 20124 with 8.7% CAGR.
Consumers of Organic food: Millennials are the biggest consumer group of Canada and USA. They are
driven by concerns for health and environment and have more information about the industry5.
Canada’s Top weekly buyers, 2017. Source: Source: Food distribution guy website6
Implications for Whole Foods: Both the organic food market and online grocery market has witnessed an
upward trend in Canada. Therefore, it can be inferred that the amalgamation of online retailing
expertise with a brand with a promise to deliver natural foods has great potential. People will higher
disposable income, busy lives and technical sophistication can be a good touch point for the company.
Whole Foods can target tach savvy millennials with increasing disposable income to pay premium over
these products.
References
1. Magana, G. (2019, February 01). THE ONLINE GROCERY REPORT: The market, drivers, key
players, and opportunities in a rising segment of e-commerce. Retrieved from
https://www.businessinsider.com/the-online-grocery-report-2019-1
2. Chait, J. (2019, June 25). What Are the 6 Major Organic Retailers in North America. Retrieved
from https://www.thebalancesmb.com/organic-retailers-in-north-america-2011-2538129
3. Organic Market Overview. (n.d.). Retrieved from https://www.ers.usda.gov/topics/natural-
resources-environment/organic-agriculture/organic-market-overview.aspx

4. Canadas organic sector continues to capture market share ... (n.d.). Retrieved from
https://www.foodincanada.com/food-in-canada/canadas-organic-sector-continues-capture-market-
share-report-138272/
5. CANADA'S ORGANIC FOOD SECTOR – PROSPERING MARKET WITH CONSUMERS! (2018, February
27). Retrieved from http://fooddistributionguy.com/canadas-organic-food-sector-prospering-market-
with-consumers/
6. Thakker, K. (2019, February 11). Consumers are warming up to online grocery, report says.
Retrieved from https://www.grocerydive.com/news/consumers-are-warming-up-to-online-grocery-
report-says/548136/
7. Charlebois, S. (2018, October 18). Online groceries change retail business. Retrieved from
https://www.producer.com/2018/10/online-groceries-change-retail-business
Appendix
Source: Business insider