Cheap Frills

Loblaw is bringing its powerful No Frills discount format to Atlantic Canada.

Neil stands outside the No Frills location in Halifax’s Spryfield neighbourhood, a hardscrabble suburban patch far away from the downtown core. He pushes his shopping cart into the rows of identical wheeled metal cages. The items in his cart include microwaveable dinners, pop and cereal–the food staples of a man in his early 20s who hasn’t been buying his own groceries for long. Neil has been shopping long enough, though, that he’s able to compare this discount store to its predecessor, the Atlantic Superstore that Loblaw Companies–which owns both banners–converted to No Frills this summer.

“I like No Frills better because a lot of stuff’s cheaper here,” says Neil, adding an emphatic “Oh yeah” when asked whether the store is living up to its low-price promise. With that, Neil (who didn’t give his last name) takes his shopping bags in hand and steps out into a blustery day–his head protected from the cold by a toque emblazoned with a green Sobeys logo.

That a bargain-hunting former Superstore shopper would roam the No Frills aisles in a rival grocer’s hat is ironic, but also representative of how Loblaw’s introductions of its harddiscount format to the Maritimes will likely shake up the region. The Spryfield store is one of two currently operating in Nova Scotia. The other is a converted Save Easy in Bridgewater.

Loblaw has also switched over Save Easy and Superstore locations in New Brunswick and Newfoundland, with two new No Frills banners now flying in each province. Loblaw plans more of such conversions, including a Supervalu in Sydney, N.S. While customers in other parts of Canada, especially Ontario, are plenty familiar with No Frills, the discount grocer is a new and relatively unique addition to the Maritime market.

“It’s going to be a real game-changer in the Maritime region,” says Carman Allison, director of industry insights for The Nielsen Company. “It’s going to definitely shake some things up there.”

“I really thought the prices, for what I was looking for, were good,” says a Halifax shopper who’s become a No Frills convert. “I don’t need to run around to all the other grocery stores”

An ugly juggernaut


No Frills will never win any store beauty contests, but the format, launched by Loblaw, in 1978, in Ontario, is as fierce a competitor as they come. In Ontario, No Frills has been the recession’s clear winner for consumer dollars. A report in Grocery Trade Review last June estimated that No Frills’ 152 Ontario stores are pulling in $3.4 billion a year. That’s nearly as much as its two closest rivals put together: Sobeys’ Price Chopper and Metro’s Food Basics.

What’s more, sales and earnings per store at No Frills were much higher than Food Basics and Price Chopper (the latter of which Sobeys is retooling under a new banner: FreshCo). Loblaw declined to comment for this story, but it’s not difficult to divine the strategy behind bringing No Frills to the East Coast, which until now has been underserved in terms of discount grocery options.

“If you think about the foothold that discount has in the Canadian grocery market right now, it has about onethird of all retail sales in Quebec and Western Canada and as high as 45% of sales in Ontario, but in the Maritimes it’s only 12%,” says Allison. He also says Maritimers take advantage of coupons and promotions at a higher rate than other Canadians, with 34% of tracked sales in the region involving some form of price cut compared to 32% in the rest of Canada. Customers are clearly looking for discounts, so it stands to reason that a store format based entirely on low prices will be a hit.

If shoppers like Cephise MacDonald-Pye are any indication, No Frills has already made an impact. As she pushes a cart around the Spryfield store’s aisles, MacDonald-Pye explains how she used to shop in another part of the city, but feels No Frills is worth the trip. “I really thought the prices, for what I was looking for, were good,” she says, adding that No Frills’ policy of matching competitors’ prices on those rare occasions when another grocer sells an item for less is a major draw. “The other stores don’t do that. That’s why I come here with my other flyers and get the best discounts,” says MacDonald-Pye. “I don’t need to run around to all the other grocery stores.”

A price comparison of several items indicates No Frills’ pricing is indeed competitive. A four-litre jug of Farmer’s brand milk costs $5.29 at No Frills. At Walmart it’s $5.59 and at Sobeys $5.73. No Frills’ price for 12 large eggs ($2.49) also beats Walmart ($2.54) and Sobeys ($2.66). With prices nearly as good, and occasionally better, than No Frills, Walmart is the incoming discounter’s biggest rival for Atlantic Canada’s budget-conscious shoppers. But other competitors are also reacting. Bruce Holland, executive director of the Spryfield and District Business Commission, says he’s heard people in the area talk of a “price war,” with the nearby Sobeys among those engaged in battle with No Frills.

For richer or poorer


Existing retailers do have one advantage. “In the Maritimes, tend to be fairly loyal to their existing retail banners,” says Allison. “So there is an existing shopper loyalty challenge that retailers are going to have to overcome.” Loblaw is banking that customers looking to preserve their savings accounts will shift their loyalties, and in turn boost the company’s own financial situation.

Allison believes Loblaw will get a boost not only from low-income consumers, but also from a consumer population that is becoming more value-conscious overall. He says households that pull in $70,000 or more per year already account for 23% of discount grocery sales in the Maritimes. “What we’ve learned over the last year is that the face of the discount consumer has changed. The low-income households need the low prices, but the higher-income houses love the low prices.”

After watching Canadians in other regions gorge on low food prices, Maritimers now have an opportunity to show their own love. By bringing No Frills to the region, Loblaw is hoping to stoke consumers’ passion for bargains. It’s a move that could turn the Atlantic Canadian grocery market on its ear. After all, it’s the logo on the customers’ shopping bags, not their toques, that counts.

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