Most of us wouldn’t know if we were in an independently owned and operated grocery store unless a notice is posted somewhere as you enter the store or you ask someone.
Canada regularly loses an independent grocer these days. Last week, we learned that Empire (Sobeys) would purchase one of Canada’s top premium independent grocers, Longo Brothers Fruit Markets, located in the greater Toronto area.
The $357-million deal allows Empire to immediately acquire 51 per cent of Longo’s and it will control all of the business in a few years. Longo’s operates 36 beautiful stores in southern Ontario.
Like most independent grocers, Longo’s was truly a family business. Three Longo brothers founded the company in 1956 and more than 25 family members across three generations continue to work in the company.
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Canada is home to about 15,500 grocery stores. Less than 34 per cent are independently owned and operated, and that percentage is continuously shrinking. Independent grocers are known to offer something different to customers – products you wouldn’t find elsewhere.
The service is often highly personalized. Some managers know many of their customers on a first-name basis. The experience is often very different and no duplicates exist elsewhere.
Most Canadians wouldn’t know that a lot of the innovation we’ve seen in food retailing in Canada has come from independents.
Longo’s has been in the e-commerce game since 2004, when it acquired Grocery Gateway, at a time when few believed buying food online was even a thing. New products, novel store design – they have brought so much for years.
Farm Boy Markets and Longo’s are just two examples of how independent grocers have a different way of looking at things. It’s refreshing.
Loblaws, Sobeys and Metro are selling almost 75 per cent of all the retailed food in Canada right now, and that percentage has continued to rise. And Costco and Walmart sell a combined $32 billion in food to Canadians, so the pressures on independents are real.
To make matters worse, here’s another pressure point for independents:
Most major grocers are charging more fees to suppliers to finance key strategic initiatives. Just last week, we learned that Walmart plans a $500-million distribution facility to support its e-commerce platform. Some of the funding likely came from suppliers like Kraft Heinz Canada, PepsiCo Canada, Unilever Canada and Lactalis.
Independent grocers are slowly becoming less competitive, since they can’t bully their way through the supply chain as major grocers are doing. They just don’t have enough power and influence.
Empire is the only major grocer in the country to express concerns about extra fees imposed on food manufacturers. It’s affecting our food processing sector’s competitiveness, of course, and it’s affecting how independent grocers keep up with the rest of the field.
This is likely why the Longo family opted to sell. But also given that they had to choose one buyer, it had to be Empire, due to its stance on supply-chain bullying.
The good news is that major grocers are starting to value the uniqueness of some of these retailers.
Years ago, Loblaws destroyed Ontario-based Fortinos and completely changed the in-store experience. And Empire alienated some shoppers in Western Canada when it acquired Safeway in 2013. It scrapped the Safeway loyalty program, and many cherished products were either hard to find or disappeared completely.
All grocers have implemented such drastic changes and massacred a brand or two in the past. At the time, it was all about consolidation and synergies, at all costs.
But in recent years, the approach appears to have changed. Loblaw’s acquisition of TNT, a unique retailer in Ontario serving the suburban Toronto market, was executed with few hiccups. Most shoppers at Ontario’s Farm Boy, acquired by Sobeys in 2018, have barely seen a difference.
And as in the Farm Boy deal, the Longo executive team will remain at the helm of the company and operate separately from the main company. Longo’s will likely become more profitable by using Sobey’s buying power across the supply chain.
In the meantime, Canadians should be concerned about the fate of our independent grocers. A federal committee is looking into the outrageous fees charged to suppliers by some grocers. For the sake of the independents, let’s hope the committee comes up with some good ideas when it tables its report in July.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.
Sylvain is one of our Thought Leaders. For interview requests, click here.
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