Grocery industry is stable despite 'a couple black eyes,' expert says

During a conference session at SIAL in Montreal last week, Sylvain Charlebois, dean of the faculty of management at Dalhousie University, sat down with Paul Uys, senior director external of the Arrell Food Institute of the University of Guelph (and a former Loblaw executive) to discuss the current state of the Canadian grocery industry.

The two touched on everything from blockchain technology to Amazon and the rise of the halal food market. Here is an edited version of their conversation:

Charlebois: How do you see the overall state of the food distribution industry in Canada?

Uys: Other than a couple black eyes from a consumer trust point of view, I actually think the state is very stable. A year ago we heard about the Amazon impact potentially around Whole Foods, but I think generally  has been consistent. The reason I'm saying what I'm saying: if anyone saw Loblaw results for the first quarter, as the biggest retailer in the country they actually improved their same store sales by nearly 2%. That’s significant for a business of that size.

Financial statements of most grocers are pretty healthy right now. Loblaw is particularly surprising given the headwinds it had to face with the price-fixing situation, distribution challenges and people are converging online. The Amazon effect is real. You can feel it.

There’s no question if anything is keeping Galen Weston up at night, it’s what’s happening , and focused a lot on where they're going with the whole e-commerce piece. But it's a very complicated story, and what Amazon has to say and what they're doing is going to have a profound effect. But forget the Amazon effect for a minute … consumers are gravitating toward fresh product, they're gravitating to preparing more foods at home, they want to know what’s in their foods, they want to trust their foods, they want their foods to be clean. When you start to put that all together … The last five years have been the most dramatically changing and I'm predicting the next five years are going to bring even more change.

Do you think consumers are willing to pay for everything you just said? 

I used to talk about the Walmart versus Whole Foods, but they became the epitome of what is the dichotomy in the industry. You have to be the most efficient player in the commodity business—and commodities can be fresh chicken—all you have to then offer the consumer is something different for which they will pay some form of premium. But, even then it's a very competitive environment because I think even organics are becoming commodity products, and with that they’re in the same fight everybody else is in.

The organic segment is growing. We just did a study at Dalhousie that asked Canadians if they identified as vegetarians or vegans. In Canada, 52% of Canadians who see themselves as vegetarians are under 35. Another interesting result we found from our study is looking at halal and kosher: Older Canadians tend to leave the kosher diet, but with halal it's the opposite, they seem very committed. 

At Loblaw as head of product development, we focused a lot on kosher and at the time kosher probably had a halo effect about the fact it was coming from a regulated process. But—and this is a generalization—within the Jewish community, kosher became important around high days and holidays. With the Muslim community it’s very different, it’s every day. Therefore, the purchasing power of  community, which of course is three times the size of the Jewish community or the kosher community ... It's a very powerful economic engine.

What are your thoughts about blockchain? Do you think it’s a concept that could work in Canada?

Carrefour has done it. Walmart has done it. It's an interesting model;  started out with pork producers in China and they're learning from that. I sit on the Marine Stewardship Council, which is a sustainable fishing initiative, and one of the critical pieces of that is verifiable and traceable movement of the products. From a food safety point of view and from a recall point of view, knowing in a nanosecond where your products have come from ... What I understand, it's information you put in and it's all the parties in the chain and it becomes a very transparent way of doing business.

But challenges are arising. Not everyone is equal across the supply chain.

When payment is involved through blockchain you have privacy factors as well. I think there's a lot to learn and I think if has us back in five years we'll be talking about it.