The necessity for increased competition within Canada's grocery industry is a consensus that resonates across the nation. The identification of a prospective entity capable of catalyzing transformation within our food retail landscape, however, remains a formidable task. Contemplations veer towards the potential entrants, such as the Germany-based Aldi and Lidl, already ensconced in the United States, or perhaps Alimentation Couche-Tard, which embarked on a notable bid to acquire France-based Carrefour last year. Furthermore, one cannot dismiss the erstwhile anticipation surrounding Amazon, notably when it acquired Whole Foods for a princely sum approaching $14 billion USD in 2017. Yet, this anticipation has since given way to a more tempered assessment of Amazon's performance in the grocery sector.
READ: Whole Foods Market restructuring business
At the juncture of the acquisition, there was a prevalent belief among analysts that Amazon would seamlessly transfer its online successes into the realm of physical grocery markets, both in the United States and Canada. Indeed, the announcement of Amazon's acquisition of Whole Foods elicited a pronounced downturn in Canadian grocery stocks. Loblaw and Empire, the conglomerate behind Sobeys, experienced share price depreciations exceeding 3.5%, while Metro observed a nearly 3% decline in its stock valuation. Canadian grocery retailers swiftly pivoted towards the burgeoning food virtual market, marked by the proliferation of "Clicks and Collects." Despite these efforts, however, e-commerce continues to constitute less than four percent of Canada's comprehensive food retail market, even amidst heightened investments in response to the exigencies of the pandemic.
READ: Amazon searching for mass grocery format worth expanding
Yet, since its acquisition, Whole Foods has failed to exhibit substantial growth. The preceding year witnessed virtually stagnant net income growth, a stark contrast to the promising eight percent experienced in 2017. Amazon's strategic reliance on high-tech augmentations to the Whole Foods shopping experience, including self-checkout lanes bolstered by biometric payment mechanisms, garnered lukewarm reception at best. Moreover, the footprint of Whole Foods has remained unchanged since its acquisition. While the United States boasts approximately 500 stores, Canada's count remains fixed at a mere 14. It is imperative to note that the cost of the average grocery basket at Whole Foods substantially eclipses the norm, a disconcerting observation in an era marked by skyrocketing food prices.
In addressing the topic of escalating food prices, Amazon's ambitious foray into cashier-less grocery retailing, as evidenced by Amazon Fresh, has encountered its own set of challenges. This venture, perceived as a technological revolution in food retailing, eliminates the need for cashiers and employees, relying instead on sensors and smartphones. Presently, Amazon Fresh operates 38 stores, none of which are situated in Canada, although a few are scattered across Europe. Notably, Amazon temporarily halted the expansion of this venture less than a year ago, ostensibly for a comprehensive reassessment. In practice, these stores have often provided lower-quality products at inflated prices, resulting in an underwhelming consumer experience. Amazon, as it stands, is in search of a stable footing within the grocery industry, and Amazon Fresh remains, at best, a work-in-progress.
READ: What the grocery report recommends to improve competition
For those Canadians yearning for increased competition, the onus for improvement falls upon Amazon. Regrettably, Amazon is not poised to serve as Canada's culinary budgetary guardian angel in the immediate future. Nevertheless, one may ponder whether the Canadian market poses unique challenges compared to its American counterpart. Ironically, the small grocery chain T&T, under the auspices of Loblaw, is preparing to embark upon the American market, commencing operations next year in the greater Seattle area. This development stands in stark contrast to the last attempt by an American grocery retailer to penetrate the Canadian market, a venture undertaken by Target in 2014, which concluded with well-documented challenges.
In summary, the imperative for increased competition within Canada's grocery sector is irrefutable. The search for a catalyst to drive transformation within this domain continues to be a complex endeavor. While the promise of Amazon's entry into the grocery realm was a cause for excitement, its performance to date has left much to be desired. Consequently, the Canadian market awaits a formidable entrant capable of reshaping the grocery industry landscape, as the quest for heightened competition persists.