Here’s who’s really winning Canada’s grocery wars

Costco has been growing food sales at it Canadian warehouses at a faster clip than grocers or Walmart in recent years. Chris Hondros/Getty Images

Big food retailers are busy at the moment disclosing how their sales performed through the latter half of the summer and first couple months of fall.

Last week, Loblaw and Walmart Canada both revealed a modest rise in sales over that time as the discounting seen earlier this year let up a touch. On deck this week are Metro, the third-largest grocery operator in Canada, and Target Corp., which also sells some supermarket items.

MORE: Grocery sales on rise at Walmart Canada — but traffic is falling

All those big names have attracted plenty of attention this year as they’ve jostled with one another for a bigger slice of your weekly grocery budget, especially Walmart Canada.

The discount giant has poured huge sums of money into expanding dozens of its department stores into “Supercentres” outfitted to sell food.

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All that effort though doesn’t appear to be translating into the kind of growth taking place at a smaller rival whose name appears far less in the press: Costco.

Without even a fraction of the fanfare, the U.S.-based warehouse retailer, who operates 88 locations in Canada, is quietly the fastest-growing seller of food in Canada – outpacing traditional grocers and Walmart alike, experts say.

“Although Walmart has gained considerable share through its accelerating Supercentre rollout, Costco’s share gains have been even more pronounced,” analysts at financial services firm Raymond James said in a recent research note.

Costco’s market share, or amount of sales it collects as a percentage of overall Canadian grocery purchases, has surged 53 per cent in recent years, according to Raymond James. That compares to 35 per cent at Walmart through 2013.

Loblaw meanwhile has seen a 5 per cent decline in its market-leading position over the same amount of time (see graph).

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Others argue Walmart’s take has climbed in the last year to over 10 per cent. But similar to Walmart, Costco has been expanding its Canadian footprint. In May 2013, Costco said it would be building as many as 25 additional warehouses in Canada.

That pace could conceivably maintain Costco’s position as the No.4 leader in Canadian food sales behind Canada’s big traditional grocers, experts say.

Stack it high, watch it fly

Costco’s membership-based, no-frills approach relies on focusing in on a smaller number of products and selling high volumes – i.e. smaller selection of vegetables, but the customer is buying a dozen items instead two.

That bulk approach allows Costco to buy bigger volumes for less and then pass those savings onto customers, or as one analyst said, “stack it high and watch it fly.”

Washington-based Costco has about 10 million members in Canada, who collectively spent $8.9 billion on food at its stores last year. That compares with $4.5 billion at Walmart locations.

“We believe Costco’s growth, traction and impact is material and should not be underestimated,” Raymond James retail analyst Kenric Tyghe said.

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