Major grocery stores are increasing their discount offerings as customers continue to watch their spending budgets closely

Canada’s major grocers are putting resources and space into discount stores like No Frills, Food Basics, and FreshCo as consumers seek ways to save on groceries in the face of a higher cost of living.

Experts suggest that converting grocery stores to discount stores is a straightforward move that helps grocers maintain profits despite consumers trying to cut back on expenses.

Michael von Massow, a food economy professor at the University of Guelph, mentioned that people are exploring cheaper options, leading them to discount stores.

Loblaw, Metro, and Empire, the three major Canadian grocers, each have multiple store brands, or “banners,” ranging from high-end to discount. Loblaw’s main discount banners are No Frills and Maxi, while Metro owns Food Basics and Super C, and Empire owns FreshCo.

Recent earnings reports from all three grocers indicate that sales at discount stores are significant drivers of overall sales growth.

Loblaw is at the forefront of expansion, with over 30 new Maxi and No Frills stores opened last year, either through new locations or converting full-service stores into discount options.

Loblaw’s “hard discount” division, consisting of No Frills and Maxi, is seeing significant growth, with plans for over 40 new discount stores as part of a more than $2 billion capital investment.

Retail analyst Lisa Hutcheson mentioned that investing in discount stores can be a strong financial strategy for grocers looking to cater to budget-conscious consumers.

While Empire is not focusing on significant expansion into discount stores, it has made strategic moves in Western Canada and converted some locations to discount formats.

Metro and Empire have also taken steps to enhance their offerings and pricing strategies to meet the changing demands of consumers.

Discount stores offer a simpler operating model with fewer staff and a focus on private label products, which often have higher profit margins.

Despite differences in approach, all grocers are closely monitoring consumer behavior and adjusting their strategies accordingly.

The shift towards discount stores is seen as a low-risk move for grocers, offering flexibility to adapt to changing market conditions in the long term.