Continued Market Shift

As of June 4, 2024, the Canadian government population tracker reports that Canada’s population has reached 41,272,500, an increase of almost 4.3 million people since the last census in 2021. This growth, equivalent to adding a city like Ottawa each of the past three years, highlights a significant demographic shift. Over the next 20 years, Canada, now the fastest-growing country in the G7 and among the top 20 globally, will continue to see rapid population growth, primarily driven by immigration. Understanding where these new residents settle and shop and why they make these choices is crucial.

The top four ethnic groups – South Asian, Chinese, Black, and Filipino – will continue to grow, collectively reaching an estimated 14 million by 2041, double the 7.1 million in 2021.

What do we know so far?

Compared to the overall population, these groups over-index in discount stores by +15% and ethnic banners by +200% (such as T&T, Oceans, Nations, and Adonis). Convenience, lower prices, and loyalty programs influence their shopping destinations for consumer-packaged goods (CPG) products.

Ethnic stores have a 31% penetration rate, with the average shopper making 17 trips per year and spending $37 per trip. These trips are often for specific products, whereas larger baskets are typically found in discount formats, which continue to gain momentum across all regions and households in Canada.

So, what trends are we observing in discount stores?

The average basket size per trip in discount stores is $16 larger versus the average spend/trip in conventional stores. When excluding the impact of club stores (like Costco), the discount basket is still $8.53 larger than conventional and is growing faster in both dollars and trips.

With GDM discount stores like RCSS, Walmart, No Frills, Food Basics, Super C, and FreshCo outpacing total discount growth (excluding Costco and Dollar stores), manufacturers and GDM discounters must note these trends. For some manufacturers, club stores provide a significant share of business, but for the majority, brand and item selection is still much bigger in the GDM channel, and GDM remains a vital part of their retail business.

Here are some considerations for planning in GDM.

GDM discounters typically have slightly more trips than Costco, but the basket size is a key difference. One trip to Costco is nearly twice the size of a GDM basket, and for many brands, the pack size reduces the need for frequent repurchases. Growing trips and basket size in GDM discount should be a focus for both retailers and manufacturers. The dollar channel basket is about one-quarter the size of GDM, but is growing faster, especially in the centre of the store.

We’re also seeing the emergence of known and unique branded CPG items in the dollar channel.

Promotions like multi-buy deals (BOGO, Buy 2 Get 1 Free, Meal, and Event bundles) can drive larger baskets.

Loyalty programs are also effective strategies, such as offering 5,000/10,000 points for spending $100 (equivalent to a 10% discount, depending on the program). Targeting key shopping days (e.g., Fridays and Saturdays) can help win trips and increase basket size.

As inflation stabilizes and normalizes, the gap between conventional and discount formats may narrow, but the higher growth and market share of discount stores are likely to persist. Discount stores have become a destination for every Canadian demographic – young, middle-aged, boomers, all ethnic groups and income levels. With half of the current volume being promotional, planning carefully and balancing regular price versus promotional strategy is essential.

Finally, plan for the holiday calendar throughout the year, which may vary by province. Key holidays drive 25% of annual CPG spend in Canada. Are you leveraging the potential for each? They are important store choice drivers, and planning by province and store location is crucial to maximize potential and reach targeted consumers.