A Discounter Reinvented Around Consumer Trends

A Discounter Reinvented Around Consumer Trends

What if you learned that a major food retailer had just remade its discount format with retooled pricing and more attention to local market trends in multicultural, perishables and health and wellness.

You'd probably think this format will be a winner and a prime example of how U.S. retailers are remaking their outlets around the needs of local shoppers.

Except that this isn't a U.S. retailer at all, it's a Canadian one.

Well, you might say, in that case any lessons aren't applicable to the U.S. market. But, in fact, the specifics are relevant, although they need to be interpreted for the U.S. audience.

The retailer cited is Sobeys, and the discount format is called FreshCo., which just launched in the Ontario market a few weeks ago with the opening of eight units and plans for many more. The new units are replacement stores for the prior Price Chopper outlets that Sobeys operated in that market. Price Chopper (no relation to U.S. stores operating with that name) was underperforming and was a late arrival with a me-too concept trailing the entrenched, market-leading discount formats: No Frills from Loblaw, and Food Basics from Metro. Those two chains have been leaders in many of the merchandising strategies mentioned earlier, from fresh foods to local marketing.

Sobeys had a big challenge on its hands, and its solution was to start from scratch rather than tweak Price Chopper. It embraced the most important customer needs and incorporated the solutions into a discount format that didn't necessarily feel like a discounter. In fact, FreshCo. combines a discount experience with some elements typically found in a more upscale environment. It also succeeds in differentiating from the competition in some important ways.

“It could have just copied the best of the competitors, but it did more,” said Perry Caicco, an analyst with CIBC World Markets, Toronto. “It appeals to a broader, higher-income population group with elements like upgraded meat and broader tiers of product. It's a vast improvement over Price Chopper.”

This issue of SN focuses on global retailing, and it's interesting to consider whether the FreshCo. format could work in the U.S. It would require some tweaking and, even then, it would take awhile to catch on because the dynamics of retailing are different in the two countries, Caicco explained.

For example, as with other Canadian discounters, FreshCo. has a much greater share of private label and fresh foods than is typical of many U.S. discounters, he pointed out. Also, while FreshCo. targets the fast-growing multicultural, immigrant population in Canada, that segment is primarily Asian, as compared to largely Hispanic in the U.S.

Still, there are lessons here for U.S. retailers. If a format isn't right, fix it. If it can't be tweaked, reinvent it. Make sure to base the concept on local consumer trends, even if that requires significant customizing by region and store units. And, finally, make sure to produce a concept that differs in some important ways from competitors, especially if they were there first.

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