Independent and alternative grocers find it more rewarding to focus on their stores’ outer aisles because it is so difficult to find competitive advantages on their inner aisles.
The outer aisles are the fruits and vegetables, meats and seafoods, baked goods and prepared meals where independent grocers are most likely to find unique products to sell, sourced from local farms, or created inside the store. The inner aisles are where canned and processed foods (soups, cake mix, canned vegetables, etc.) are commonly located.
Independent grocers have limited sources of packaged goods, and are further frustrated because two of the leading providers of those packaged goods are affiliates of Loblaws and Empire (Sobey’s). As a result, independents find it difficult to secure price advantages over the larger chains and some are very suspicious that data from their stores’ orders provide valuable market intelligence to their retail competitors.
Consumers Council of Canada interviewed multiple independent grocers as part of research for a soon-to-be released report. Some of these independent grocers have been profiled in other articles on the Council’s Apple News feed.
“This is a huge issue. The large grocery chains now dominate the supply chain. Independent grocery stores have no big warehouse, and can only buy enough supply for four to six weeks, meaning they have to return to their suppliers, like Sobeys, to restock,” said one Ontario independent grocer. “Those distributors, who are also their competitors, now have data on what they’re selling and where.”
“Independents have to rely on their competitors like Sobeys and Loblaw for some of its supplies, for which they must pay more,” said another Ontario independent grocer. “That is a key part that is missing in the supply chain, unlike meat and produce.”
Sven Anders, a professor at the University of Alberta, teaches and studies the economics of food supply and distribution. He noted Canada’s food processing and manufacturing side is just as concentrated as the retail side, so there is a dual oligopoly, both retail and wholesale.
“We have two highly concentrated sectors that are aligned,” Anders said. “Canada is the land of cozy oligopolies. We have them in food retail.”
Anders said large retailers can exert power over large suppliers, because the retailers can provide sales data about who buys their product, when, where and how. Smaller retailers do not have that clout, which is one of the factors the new Grocery Code of Conduct is intended to address.
The Competition Bureau’s 2023 report on market concentration led to many legislative changes. It also observed the concern about independents having to buy groceries from competitors, and how that affected price competition. However, that report focused on retail competition, in part it said, because “competition law in Canada does not regulate imbalances in bargaining power.”