‘Attractive growth driver for food retailers:’ Experts weigh in on grocery’s pharmacy opportunity
In mid-August, Empire Company and its subsidiary Sobeys inked a deal to buy nine Morelli’s pharmacies co-located in Longo’s grocery stores in Ontario. But it’s not the only grocer looking to pharmacy and healthcare as a growth driver.
In recent years, as pharmacists take on a greater role in Canadians’ healthcare and GLP-1s skyrocket in popularity, Canada’s major food retailers are deepening their investment in health and wellness.
We asked several retail experts to share their insights on Empire’s acquisition, whether grocers are investing more in retail pharmacy and what the future might hold. Here’s what they told us:
Stéphane Drouin, executive vice-president for Eastern Canada and lead for the shopper insight practice, Leger: “The signs are clear. Empire has identified pharmacy as a growth area, while Loblaw continues to expand Shoppers Drug Mart and Metro maintains a strong presence in Quebec with its Jean Coutu and Brunet drug chains. From a consumer perspective, this makes sense.
“As pharmacists take on more clinical responsibilities, consumers have more opportunities to turn to them for convenient, accessible care. For grocers that already have pharmacies integrated into their stores, that creates a very natural growth opportunity. And for those that don’t, I suspect many will increasingly be looking at pharmacy as a potential area for growth.
“I think the future will be about more than simply having a pharmacy inside a grocery store. As pharmacists take on more responsibility in healthcare, the quality of the in-store experience will become increasingly important. Our WOW Retail Experience research shows that pharmacy retailers perform particularly well on dimensions such as staff competency, attentiveness and the importance given to customers, which are especially relevant in a healthcare setting. For grocers, I would expect the opportunity to be not just expanding their pharmacy footprint but making that pharmacy experience an increasingly important part of their broader health and wellness offering.”
Bruce Winder, retail analyst, Bruce Winder Retail: “Canadian grocers have invested significantly in pharmacy and health care clinics. As part of Loblaw's $10 billion, five-year capital plan, the grocer is opening dozens of new Shoppers Drug Mart and Pharmaprix stores as well as Pharmacy Care Clinics. Sobey's/Empire and Metro are also investing but to a lesser degree.
“There are several reasons for this trend. One is that a large population of Canadians are aging and need extra care and provincial healthcare services are under pressure from a funding perspective. Another reason is that, in some provinces, pharmacists can now carry out some of the duties that a doctor would normally do. Another reason is the growth of specialty medications such as the GLP-1s which have recently gone generic. Another reason is the pharmacies bring traffic to each retailers’ stores. From a financial perspective, the pharmacy and drug store business is growing faster than the food business and yields higher profit margins.
“I think we will continue to see strategic investment in this sector. As our population continues to age and emerging medicines arrive in the market, the pharmacy and drug store business will continue to grow faster than the food business and provide lucrative opportunities for grocers to offer a one-stop shop either physically, online or through loyalty programs.”
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Lisa Hutcheson, managing partner, retail strategy, master planning, operations, and expert witness, J.C. Williams Group: “The short answer is yes, and the commitment is accelerating. Pharmacy square footage seems to be growing faster than grocery square footage, and healthcare services are outpacing food retail in same-store sales consistently for months. We have been witnessing other players moving in the same direction, whether through capital commitments, strategic acquisitions, or network expansion.
“There are a few forces driving the trend, and together they make pharmacy a strong growth lever for grocers. Health and wellness spending is non-discretionary. Canadians will cut elsewhere before they cut their prescriptions and care. An aging population is driving structural, long-term demand that isn't going anywhere. And perhaps most powerfully, the regulatory landscape has fundamentally changed: pharmacists are now recognized primary care providers. With millions of Canadians without a family doctor, the community pharmacy inside a grocery store has quietly become one of the most important healthcare touchpoints in the country. This is a transformation.
“The pharmacy inside your grocery store is becoming something much bigger than a place to pick up prescriptions. With pharmacists now able to diagnose, prescribe and vaccinate, these spaces are turning into walk-in clinics. Grocers that invest in that infrastructure today (i.e., considering consultation rooms, digital tools, care services) are the ones who will capture the patient relationship tomorrow. But scale alone won't win it. The grocers that come out ahead will be the ones who earn real trust in their communities, not just the ones with the most locations.”
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Amar Singh, senior director, Kantar: “Empire's acquisition of nine Morelli's locations reflects a broader strategy to strengthen its presence in high-frequency, health-related services within the grocery ecosystem. Pharmacy remains one of the few retail categories that combines recurring shopper visits, relatively stable demand and expanding opportunities in clinical care, making it an attractive growth driver for food retailers.
“The convergence of health care and retail convenience is helping drive greater shopper engagement across the broader retail ecosystem. Canadians want to access prescriptions, vaccinations, medication reviews and other health services as part of routine shopping trips. For grocers, pharmacy increases trip frequency, strengthens customer loyalty and creates additional opportunities across health, wellness, beauty and front-of-store categories. At a time when traditional grocery margins remain under pressure, pharmacy also provides a differentiated service that is difficult to replicate through e-commerce alone.
“The value of pharmacy extends beyond the dispensary counter. Combined with Scene+, which ranks second only to PC Optimum in household penetration among Canada's major retail loyalty programs according to Kantar’s quarterly Canadian ShopperScape tracker, Empire can connect grocery and pharmacy journeys, deliver more personalized offers and increase customer retention across banners. This creates more opportunities to build larger baskets, encourage cross-category purchasing, and strengthen engagement across the broader Empire network. Demographic trends provide an additional tailwind. Canada's aging population is driving increased demand for prescriptions, chronic disease management, preventative care, and pharmacist-led clinical services, positioning pharmacy as a long-term growth driver for grocers.
“Another emerging opportunity is the growing adoption of GLP-1 medications for weight management and diabetes. While penetration in Canada remains relatively low today, usage is expected to increase over time as access expands and new formats of the drug enter the market. For grocers, the implications extend well beyond pharmacy. These medications have been associated with changes in food consumption patterns, including reduced calorie intake and shifts in category demand. As adoption grows, retailers will need to better understand how food baskets, trip missions, and centre-store purchasing behaviours evolve. Owning the pharmacy relationship provides grocers with a valuable touchpoint in a consumer trend that could influence food retailing for years to come.
“Looking ahead, grocers are likely to invest not only in dispensing services but in broader health and wellness ecosystems. The future will likely include expanded clinical services, more personalized health offerings, stronger integration with loyalty programs and greater use of pharmacy as a traffic and retention driver. As governments continue to expand pharmacists' scope of practice, pharmacy's strategic importance within the grocery sector is likely to increase."
Katie Bolla, partner and GTA consumer and retail Industry lead, KPMG Canada: “Pharmacy is no longer just an adjacent business for grocers. It's becoming a powerful driver of loyalty. While consumers have more choices than ever about where they shop, pharmacy services create ongoing relationships built on trust, convenience and necessity. When customers can manage their health needs and complete their grocery shopping in one place, it gives retailers more opportunities to build loyalty and remain part of a customer's routine. As the lines between retail, healthcare and wellness continue to blur, I expect grocers will keep investing in pharmacy as a way to differentiate their offering and deepen customer engagement.”
