Major grocers invest in discount stores as customers keep budgets tight

globalnews.ca:

Canada’s biggest grocers are investing money and space in discount stores such as No Frills, Food Basics and FreshCo as shoppers look for ways to save on food amid the higher cost of living.Converting grocery stores to discount is a relatively easy move, experts say, and one that is helping the grocers keep profits steady despite consumers seeking ways to rein in their spending.“There’s all sorts of things that … people are doing, but one of them is looking for cheaper options. And so they are going to discount stores,” said Michael von Massow, a food economy professor at the University of Guelph.Each of the major Canadian grocers has several different store brands, also known as “banners” — from high-end to conventional to discount.

Loblaw’s main discount banners are No Frills and Maxi, while Metro owns Food Basics and Super C, and Empire owns FreshCo.All three Canadian grocers’ recent earnings reports have shown sales at discount stores are major drivers of overall sales growth.But when it comes to expanding, Loblaw is leading the pack with more than 30 new Maxi and No Frills stores opened last year, through new locations or converting full-service stores into discount, according to the company’s annual report.“There is a shift to discount, and we see the opportunity that exists for discount stores,” said Melanie Singh, president of Loblaw’s new “hard discount” division, made up of No Frills and Maxi.The growth shows no sign of stopping. A few days before its February earnings release, the grocer announced a capital investment plan worth more than $2 billion that will result in more than 40 new discount stores.“I think it’s a great strategy for them,” said Lisa Hutcheson, a retail analyst at J.C.