Sobeys sees structural shift in food consumption toward grocery away from restaurants

One of Canada's biggest food retailers says the pandemic is having a lasting impact on food consumption as consumers continue to spend more at grocery stores and cook at home rather than return to restaurants.

Michael Medline, president and CEO of Empire Co. Ltd. and its subsidiary Sobeys Inc., said the shift appears to be permanent.

"We are seeing a structural change in consumption of food at home,'' Medline said during a conference call with analysts on Thursday to discuss Empire's second quarter results.

"Customers have seen and experienced the affordability and convenience of eating at home with their families,'' he said. "We believe there is permanence in this shift.''

One of the most notable changes in grocery shopping habits is an ongoing elevated basket size, indicating that consumers are buying more food with each shop.

"We're seeing basket sizes remain at elevated levels,'' Medline said, adding that in conjunction with the grocer's other data on shopping habits there is evidence of a "permanent shift.''

Empire, which owns multiple food retailers including Sobeys (which owns or franchises more than 140 Needs stores and gas bars  throughout Atlantic Canada), Safeway, IGA, Foodland and FreshCo (as well as Needs convenience), earned $175.4 million in its latest quarter, up from $161.4 million in the same quarter last year, helped by a nearly five per cent increase in sales.

Its profit amounted to 66 cents per diluted share for the 13-week period ended Oct. 30, up from 60 cents per diluted share a year earlier.

Sales in what was the company's second quarter totalled $7.32 billion, up from $6.98 billion.

Yet Empire noted that its sales are affected by fluctuations in inflation, with higher prices starting to shape what products shoppers buy.

"Inflation is unusually high right now,'' Medline said. "Where we've had unavoidable price increases, we see customers sometimes substituting products within their basket.''

Meanwhile, Empire said its sales growth was due to its acquisition of the Longo's supermarket chain earlier this year and higher fuel sales, as well as the expansion of its Farm Boy banner and Voila online grocery service in Ontario and its FreshCo banner in Western Canada.

The gains were offset by a stabilization of shopper behaviour as COVID-19 restrictions were eased across the country.

Same-store sales grew 0.4% compared with a year ago, while same-store sales, excluding fuel, fell 1.3%.