CIBC's Mark Petrie talks hard discounters at GSFW

Despite all the noise being made about e-comm and Amazon, particularly since its purchase of Whole Foods last year, CIBC World Markets analyst Mark Petrie said the bigger disruptor to the North American grocery industry is the hard discounters.

At a presentation at Grocery and Specialty Food West show in Vancouver earlier this week, Petrie said that while hard discounters like Aldi and Lidl aren’t a reality “yet” in Canada, he believes these retailers are “way more disruptive in the U.S. today than e-commerce, in terms of wreaking havoc on the larger grocers.” He noted a recent report that ranked Aldi as the third-favourite grocer in the United States currently, trailing only Publix and Trader Joe's and putting it neck-and-neck with Wegmans. "It's a stunning result."

Hard discounters, of course, are known for their low prices and while gross margins are also lower, these retailers offset this by being “obsessed” with costs through every element of their supply chain.

READ: The discount disruptors to watch through 2020

Interestingly, said Petrie, recent research has shown that when Aldi and Lidl open up a store in the U.S. their impact on pricing in that market is greater than when Walmart opens up a supercentre. “It’s a pretty incredible statistic considering how disruptive Walmart was in that market for so many years.”

READ: Lidl drives prices at U.S. rivals down to 'unprecedented' levels: Study

Although Lidl has had some execution stumbles out of the gate in the United States, Petrie said we shouldn’t count it out. “They’re adapting,” he said, adding that he doesn't see the German company retreating from the U.S. as Tesco did with its Fresh & Easy format earlier this decade.

And Canada? “The question we always get is: are Aldi or Lidl going to come to Canada? I don’t have any news to break today, but I think it’s a matter of when not if,” he said. "There are all kinds of reasons why the Canadian market is less attractive just structurally, but I do think there are opportunities for them in Canada."

To those who think these retailers are too busy in the United States to bother looking North, Petrie said don't be so sure. Aldi has held trademarks in Canada for almost 30 years, he said, and it added some more last summer.

“So, yes I think they are busy in the U.S., but they’ve not forgotten about Canada by any means.”