Grocery stores seeing pivot in how they do business during pandemic

There is no doubt that the COVID-19 pandemic has forced changes to how grocery stores operate and what products stores were able to offer at certain times. 

At the beginning of the pandemic, grocers dealt with major supply chain issues as well as issues with customers hoarding items that were in high demand. That left those stores to have to put limits on items like hand sanitizer, toilet paper, flour, and other goods that were in high demand. 

However, that wasn't the only challenge grocers faced. There was a shift in how customers were buying groceries. 

With the first and second waves of the pandemic, we saw more and more people ordering groceries online and picking them up at whichever grocery store they preferred. 

Sylvain Charlebois is the director of the Agri-Food Analytics Lab at Dalhousie University. He says that the most overused word during the pandemic has been the word “pivot”. It rings true with the shift we saw in the grocery business model.

“That's exactly what grocery stores have done as well as restaurant operators,” said Charlebois, “the food industry is quite resilient and they adapt quite well. COVID really offered them a new environment and they changed their business model because of it.”

Charlebois said that the online model isn't perfect and it still needs some work but he notes that most companies are getting better at it. 

“Before COVID, online business was almost forced – or it felt forced (…) but COVID really made online business an essential part of their model and now they are getting better at it. They are getting better at making money selling food online. That's why I think it's not going to end,” he said. 

Canadians haven't historically been hard-wired to shop online when you look at the history of it.

“We don't have a catalogue history like the United States, we had Sears here for a while but that's about it,” he said, “in America, ordering on your phone, staying home was a thing and that's why they were ready to shop online. That's why 7 to 8 per cent of all the business in the food industry is conducted online before COVID. I suspect it's now closer to 10 per cent,” said Charlebois. 

That is now starting to translate more north of the border.

“In Canada, before COVID it was 1.7 per cent and now it's almost at 4. That's a dramatic shift and although it may not sound like a lot, but it is about $7-billion worth of business. That is a lot of stores and represents hundreds of stores. You can see that more and more people are really thinking about doing groceries online, they are thinking about meal kits, using food delivery apps,” said Charlebois. 

Charlebois said that as online shopping grows, that the online market in Canada will be over-stored.

“We could see closures especially in downtown areas where there is less traffic and with the expectation of people working from home more (…) we are expecting some closures so when you think about it, you have to admit that some stores will be closed or be converted to 'pick stores' so people can walk around and fulfill orders for those ordering online.”

Charlebois notes that even Consumer Packaged Good companies are getting into the online food sales game. 

“Kraft Heinz has actually launched three restaurants, two in the GTA and one in Montreal called 'Restaurant 57' where they are selling and delivering food meals to people's homes now. It's something that we didn't really expect perhaps before COVID.” 

The other shift that the food industry has seen is an increased demand for meal subscription services for those who feel uncomfortable physically visiting a grocery store. 

“Meal kits are interesting instruments, ten years ago that market was worth barely $5-million now it's actually close to $400-million in Canada,” said Charlebois, “I call them the 'IKEA' of food. You get ingredients delivered to your home and you have to piece them together and you feel like a chef. It's like getting furniture from IKEA, you feel like a carpenter, you can actually build the furniture but you didn't do anything other than putting things together. It's been working for families that are looking for inspiration, and looking for time to menu manage,” he said, “it works well but it is pricey. I do believe there is a fit somewhere for meal kits not just for retail but restaurants as well.”

Charlebois said that there will be different types of meal kits moving forward.

“I honestly think price will be an issue to grow the market,” he said, “right now, it's attracting people who are looking for time but can afford to pay $10 to $12 per meal, we are going to reach a saturation point very quickly if price points remain the same. That's my only concern with meal kits.”

The other interesting thing that Charlebois points out about the pandemic is that it got rid of a blurring line between retail and service.

“Some restaurants actually became retail stores and vice-versa, and a lot of rules don't apply anymore which makes things interesting,” notes Charlebois.