Remarkable Retail

The Future of Grocery with Guests David Marcotte and Sylvain Charlebois

Episode Summary

No part of retail has been facing more transformative forces than the grocery business. In this episode we explore how the retail food business is being disrupted with globally recognized experts David Marcotte, SVP at Kantar Retail and Sylvain Charlebois (aka "The Food Professor") Senior Director, Agri-Food Analytics Lab at Dalhousie University. We dive deep into how the pandemic accelerated online shopping the profitability challenges associated with home delivery, the importance of sustainability and more!

Episode Notes

No part of retail has been facing more transformative forces than the grocery business. In this episode we explore how the retail food business is being disrupted with globally recognized experts David Marcotte, SVP at Kantar Retail and Sylvain Charlebois (aka "The Food Professor") Senior Director, Agri-Food Analytics Lab at Dalhousie University. We dive deep into how the pandemic accelerated online shopping the profitability challenges associated with home delivery, the importance of sustainability and more!

But first we open up the episode with the Top 3 retail stories that caught our attention this past week, including lots of news with Bed, Bath & Beyond, including their curious partnership with Kroger, Allbirds blockbuster IPO and Wayfair big earnings whiff.

 

Sylvain Charlebois

Dr. Sylvain Charlebois is a Professor in food distribution and policy in the Faculties of Management and Agriculture at Dalhousie University in Halifax. He is also the Senior Director of the Agri-food Analytics Lab, also located at Dalhousie University. Before joining Dalhousie, he was affiliated with the University of Guelph’s Arrell Food Institute, which he co-founded. Known as “The Food Professor”, his current research interest lies in the broad area of food distribution, security and safety. Google Scholar ranks him as one of the world's most cited scholars in food supply chain management, food value chains and traceability.

He has authored five books on global food systems, his most recent one published in 2017 by Wiley-Blackwell entitled “Food Safety, Risk Intelligence and Benchmarking”. He has also published over 500 peer-reviewed journal articles in several academic publications. Furthermore, his research has been featured in several newspapers and media groups, including The Lancet, The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Washington Post, BBC, NBC, ABC, Fox News, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.

Dr. Charlebois sits on a few company boards, and supports many organizations as a special advisor, including some publicly traded companies. Charlebois is also a member of the Scientific Council of the Business Scientific Institute, based in Luxemburg. Dr. Charlebois is a member of the Global Food Traceability Centre’s Advisory Board based in Washington DC, and a member of the National Scientific Committee of the Canadian Food Inspection Agency (CFIA) in Ottawa.

Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his       website.    The expanded and revised edition of his bestselling book  Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at  Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a      Forbes senior contributor and on       Twitter and       LinkedIn. You can also check out his speaker "sizzle" reel      here.


Michael LeBlanc  is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice.   He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career.  Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast,       The Voice of Retail, plus        Global E-Commerce Tech Talks  and       The Food Professor  with Dr. Sylvain Charlebois.  You can learn more about Michael       here  or on       LinkedIn. 

 

Episode Transcription

Michael LeBlanc  00:05

Welcome to Remarkable Retail podcast, Season 3, Episode 15. I'm Michael LeBlanc.

Steve Dennis  00:11

And I'm Steve Dennis.

Michael LeBlanc  00:12

Oh Steve, in this episode, we're talking about the future of grocery retail and we have two of North America's pre-eminent experts. My podcast partner, I have a podcast called The Food Professor podcast, Dr. Sylvain Charlebois, from Halifax, Dalhousie University, and the one and only Dave Marcotte, Senior Vice President Operations, Strategic Advisory Services for the global consulting firm Kantar. And one of the nicest guys in retail, what a treat talking to them both.

Steve Dennis  00:38

I thought I was the nicest guy in retail, but I'll get over it.

Michael LeBlanc  00:41

One of the nicest guys. 

Steve Dennis  00:43

You did say one.

Michael LeBlanc  00:43

You are the other one.

Steve Dennis  00:44

Okay, I think Dave's quite a bit nicer than I am. But anyway, what most importantly, though, is, is leaning on their expertise. So, I 

Michael LeBlanc  00:55

Yeah.

Steve Dennis  00:56

You know, I think, when we're talking about this, this episode, obviously grocery is becoming an incredibly hot area in terms.

Steve Dennis  01:03

Of digital transformation. There's a lot of things going on. And grocery is one of those categories where I've spent probably the least amount of time on, I, you and I have worked in quite a wide variety of formats and, and sectors but not.

Michael LeBlanc  01:03

Yeah.

Michael LeBlanc  01:17

Yeah.

Steve Dennis  01:17

So much on the food side. So, we needed to bring in a couple of heavy hitters.

Michael LeBlanc  01:21

Yeah, lots of interesting things happened. And of course, they had a huge tailwind during the COVID era as food service kind of shut down. And, and a lot of that still to this day, retail grocery was flat as, flat as Belgium, basically from a results perspective, which was, you know, which was quite troubling, actually, to many because the margins are razor thin the volumes, you know, the formats. And anyway, we'll get into more of that with our guests, Dr. Sylvain Charlebois, and David after news of the week. So, let's talk about our top three ideas for news of the week. Let's start with Bed Bath and Beyond opening stores or I guess, pop ups or whatever you want to call them inside Kroger, what do you think about that?

Steve Dennis  02:03

What was actually quite a lot of news is a big news week for Bed Bath and Beyond. The Kroger thing got the most attention, but they made some management changes as well. They're buying back their stock; they're launching a digital marketplace. So, they're definitely, definitely making a lot of moves as you like. But the, the Kroger thing is, you know, got a lot of attention, I'm not sure I feel about I mean; the idea is that Kroger is going to sell some of the baby and home products from Bed Bath and Beyond in its stores. So, the initial launch is going to be online only. And then they're planning to roll out kind of shop within a shop, mini shop concept at select Kroger stores. So, I don't think we really know exactly what that looks like. But it's you know, it's interesting the marrying of these two worlds, you know, you don't typically think of some of the products that Bed Bath and Beyond is known for being in a supermarket. So, I think it's interesting, you know Kroger is trying a lot of different, different things to differentiate itself drive traffic, that Bath and Beyond is a big turnaround story. So, strange bedfellows.

Michael LeBlanc  03:13

Yeah.

Steve Dennis  03:13

I guess I'm not sure I inherently get that lots of people are going to want to buy bedding from Bed Bath and Beyond at a supermarket. I mean, it's the like magnitude of, of how this could move the dial.

Michael LeBlanc  03:16

Yeah.

Steve Dennis  03:21

For either one of them seems a little bit skeptical. I don't know, what do you what do you think does this strike you as a, as a brilliant idea, or just kind of much ado about nothing?

Michael LeBlanc  03:35

Well, I think it's somewhere in between, because if I looked at some of the groceries like, like a Loblaw in Canada. They have a whole Joe Fresh line, which came out of what else can we put in the store since we have such trip frequency, right. So, that grocery 

Steve Dennis  03:48

Right.

Steve Dennis  03:48

Gets a lot of trip frequency. 

Steve Dennis  03:49

Yeah.

Michael LeBlanc  03:49

It's in many cases, a weekly shop, and it was quite successful. So, when you walk into some of the, what they call the Great Canadian Superstore, it's one of their banner formats. 

Steve Dennis  03:57

Yeah.

Michael LeBlanc  03:57

It's like, more like a Target.

Steve Dennis  03:59

Right.

Michael LeBlanc  03:59

Where you've got a whole side or a Walmart, you've got a whole side of the store that is fresh and frozen, and grocery. And then you've got, you know, traditional department stores. So.

Steve Dennis  04:07

Yeah.

Michael LeBlanc  04:08

From that perspective, I don't know if there's enough margin to go around between the two of them that.

Steve Dennis  04:12

Yeah.

Michael LeBlanc  04:13

What's interesting to me, you know, it's a higher margin product. I think it, I don't know, maybe it's a good test for Kroger to kind of get and step beyond because I think they're, they could be losing customers who go to Target and say, "Well, I'm going to go, you know, I need some baby clothes and some groceries".

Steve Dennis  04:28

Right. Yeah.

Michael LeBlanc  04:29

These things, you know, it's mom, right? 

Michael LeBlanc  04:30

So, it actually pulls back the lens in my mind and says, let's look at the customer, not the commodity. So, from that perspective.

Steve Dennis  04:30

Yeah.

Steve Dennis  04:37

Right.

Michael LeBlanc  04:38

As you said, I think it's somewhere in between could work. Alright, let's talk about number two. Let's talk about Allbirds. Their IPO hit the skies. Sounds pretty good. Pretty good results actually from a, from a, from a stock performance perspective. I guess. I read that some were saying that that was a bet or a forecast on the overall concept of sustainability and ESG in retail, which seems a lot of responsibility to freight on little Allbirds shoes.

Steve Dennis  05:06

I was gonna say they're definitely punching above their way. Yeah, well, this first of all, they should fire their underwriters because the stock popped 90% on the first, the first day. But yeah, so it was certainly viewed as a successful IPO. Their market cap, I think the day they closed was over $4 billion, which I took some heat on Twitter for saying it's a crazy, that's a crazy valuation. But here's a brand that is going to do about $250 million in revenue this year. Negative 18%, I think 17% operating margin planning to open a bunch of stores, they've only got a few. So, there's a lot of speculation on how successful their growth strategy is going to be. It's pretty niche product at this point. But yeah, I think for you to believe that, frankly, anything above a billion dollars makes any kind of sense, you have to believe that they are going to build some sort of lifestyle sustainability brand, you know, far bigger than then what their aspirations appear to be right now. So.

Michael LeBlanc  06:12

Yeah.

Steve Dennis  06:12

A lot has to happen for them to grow into that valuation. So, I'm pretty skeptical on this one. But buy we shall see it's gonna take some time to be able to understand whether this is, you know, sort of the Boston Market or we work from valuation of our.

Michael LeBlanc  06:29

Right, right, right. Alright, well, let's talk about our third and final. Our favorite you and I talked about this off the mic a lot of times, Wayfair. So, Wayfair, I think you described their earnings as, as a wiff,  a swing and a miss. Let's talk about Wayfair. And what, what does this say? Well, does this all say.

Steve Dennis  06:46

Well, the spirit of full disclosure, full disclosure, if people go back a little bit, they have that kind of time, which I hope they don't. I've been, I've been kind of negative on, on Wayfair. Again, not, not as a good business and not as having done a lot of great things. But the valuation on this company has been pretty crazy. For a number of years. They've been in business; I think this is their 18th or 19th year. A couple years ago, they lost a billion dollars in one year. And yet the stock kept going up because this is great growth story. COVID came along. 

Michael LeBlanc  07:20

Yeah.

Steve Dennis  07:20

And they made their first profit in the history of the company that had several quarters where they actually made money. But kind of the perfect storm right. A lot of stuff moved online because stores were closed.

Michael LeBlanc  07:32

Yeah.

Michael LeBlanc  07:32

People were investing in the home like everything was going their way.

Steve Dennis  07:36

The stock went up to like, I don't know, 350 bucks or something market cap $35 billion dollars. And then along comes this quarter, sales down have to look, 19% year over year.  $250 million swing and profitability from making money to losing $78-$80 million in the quarter. So, I think this, you know, number one just sort of speaks to the really the challenges of Wayfair, as a business really being sustainable at the levels they've been at. But I think the broader point is where we start to see some headwinds in these businesses that are eCommerce dominant, that got a gift, basically, from COVID, in terms of traffic.

Michael LeBlanc  07:36

Right 

Michael LeBlanc  08:18

Yeah.

Steve Dennis  08:18

They got in just the shift in spending patterns, which we'll get into a little bit because grocery certainly had some of those effects as well. So, it's going to be interesting to see because we're kind of, you know, this rebalancing of eComm versus physical, as well, as you know, maybe the stimulus starting to wear off and some of the things that cause people to spend a lot more money on their home is only so many sofas you can buy right?

Michael LeBlanc  08:43

Yeah, yeah. I also think people were just returning to stores, you know, because they can and, and, you know, you see that in some of the sales in the in the full line furniture retailers. There's probably also, by the way, some supply chain challenges coming up the works for Wayfair. 

Steve Dennis  08:57

Yes.

Michael LeBlanc  08:57

As they are for everyone. I think that's a drag on everyone's performance in that category one to one degree or another. Anyway, it's a nice segment into our grocery section. Our grocery focus because grocery, "Right Place, Right Time", you know, they had a huge immense tailwind. So, it's a nice segue before we get to that I wanted to remind everyone to take this opportunity, remind everybody to subscribe in your favorite podcast platform and check out our YouTube site. We've got a bunch of videos up there now when you and I do this or we when we do our solo episode, we put it all up on, on the YouTube. So, we also do some bonus content in the YouTube so make sure and go and smash that subscribe button.

Steve Dennis  09:38

And smash it.

Michael LeBlanc  09:39

As kids would say.

Steve Dennis  09:39

Very important to smash it. 

Michael LeBlanc  09:40

Smash it.

Steve Dennis  09:41

Click it and smash it.

Michael LeBlanc  09:43

Alright, well let's get to our segment now with on grocery with Dr. Sylvain Charlebois and our friend Dave Marcotte. Alright, welcome to Remarkable Retail podcast. Gentlemen. It's so great to, to listen to you both, Sylvain and Dave. We're going to talk about the future of grocery here. So, Sylvain, why don't we kick it off with you, you and I, of course know each other well, we are podcast partners, but to introduce yourself to Remarkable Retail audience.

Sylvain Charlebois  10:09

Yeah, absolutely. So, I'm, I'm at Dalhousie University. I'm a food Professor and Director of the Agri-food Analytics Lab. The lab was created in partnership with, with four different faculties, agriculture management, health and computer science. And it was created about five years ago, basically to, to better understand the future food essentially from, from both ends of the food continuum, we look at a lot of different issues, eCommerce, labeling food fraud, retail, we look at processing different consumer trends. Most recently with plant base, we work with provinces, the federal government, we look, we work with companies as well, mostly in Canada. We don't do much work outside of Canada, but it's been great. We are supported by some key partners, Angus Reid and Nielson IQ, Better Carts. They all provide us with some great data that we can work with.

Michael LeBlanc  11:18

Fantastic, and you're a very prolific writer. I mean, how many times, how many? You're, you're certainly in the media here in Canada. You've got some reports that go around the world, how many articles have you published? If you had to put a round number to it? 

Sylvain Charlebois  11:30

Or in the last, like year?

Michael LeBlanc  11:33

See, there's an answer right there.

Sylvain Charlebois  11:36

Well, I basically. So, obviously, I'm an academic. So, I have to publish peer reviewed articles. So, I have about 500 of them. And over the years. So, obviously, I've been doing this for 25 years, I guess and but for, for like publicly consumable stuff. It's, it's basically two a week. So, we, I have, I have an agent for English, op eds. And I, I'm a columnist for La Presse in Montreal. So, my columns appear once a week on Thursdays.

Michael LeBlanc  12:11

And David, the one man in the world who's read every single thing that Sylvain has ever written. Welcome.

Sylvain Charlebois  12:19

What, do I have a virtual stalker?

Michael LeBlanc  12:25

David, tell us, tell us about yourself and the work you do at Kantar.

David Marcotte  12:29

Sure. So, in Kantar, I'm the lead for Kantar, by the way, is a global company that covers retail and all of its shapes, forms and clients and I'm the Global lead for inside, outside across industry cross border. Essentially, anything that's complex winds up being in my purview. Prior to this, I was IBM's lead for business intelligence computing. So, very large data management. Prior to that, I was retail for 20 years in Canada, the United States, doing just about everything imaginable from the floor, all the way up to executive. 

David Marcotte  13:02

I'm a fourth-generation retailer before me, is my father owned a pharmacy. My grandfather owned a restaurant, and my great grandfather ran a Hudson Bay station. And most of them were smugglers too. So, that's a whole other discussion on. You know, it's, it's important with a name like mine to be able to keep your hand on these things. Yeah, I'm focused not on like Sylvain, I'm kind of focused into a range of different industries and such I have dealt with governments. And, and still do, although I don't, I'm not allowed to talk about unlikely Sylvain. As of late, I've been on the radio a lot, which is kind of bizarre, and also in print for interviews. So, if you do a quick search, I'm going to show off a lot of stuff on some really bizarre topics also late, but mostly focusing on supply chain.

Steve Dennis  13:51

Well, I'm curious of what the statute of limitations is for smuggling and whether you're going to get busted after your performance here. Hopefully, hopefully not.

David Marcotte  13:59

It wasn't, it wasn't my case of cigarettes, I, I, I, I plead the fifth in the wrong country. Yeah.

Steve Dennis  14:07

Well, let's well first of all, I'm really, I'm excited to have you guys here. I'm excited to talk about grocery for a bunch of reasons. One is, I know really very little about grocery. I've worked in just about every product category, in a fair amount of depth, but very little about grocery. So, it's great to bring in this outside expertise. But also, as everybody knows grocery is a huge part of the retail world. And it's arguably the industry or the sector of retail that's undergoing the most transformation. So, we'll dive into the, the impact of COVID and some of the things that are on the horizon. But Dave, I wonder if you could just give us kind of your, your landscape view of how the grocery industry has evolved in general over the last few years, and then we'll talk about some of the big changes we're going through today.

David Marcotte  14:55

On a global basis, it's become far, far and away more efficient, more capable of managing untill the supply chain fiasco's that we're going through at the moment. So, the ability to manage that and capital outlays for commercial real estate and such, there was a slow growth going into Omni channel that exploded in 2020 with a pandemic. And now we're getting into 2021, where there's an interesting discussion whether to continue the investment. Look at as a competitive issue, which is clearly as in Canada, or to kind of slowly back out of it, which I'm seeing a lot of, seeing in a lot of markets at the moment. But aside from that, it's just become a much more polished, much more professional industry overall on a global basis.

Steve Dennis  15:41

When you talk about, maybe we'll dive into this a little bit more brought bring Sylvain into the when you talk about kind of backing out what tell, tell us a little bit more about what you mean and why you think that is.

David Marcotte  15:51

Well, cost to serve becomes a big issue. And in during the pandemic, as long as you have product on the shelf. And you could get it to people's homes who made money. Every retailer in the world basically made outrageous profits last year. So, it covered up a host of costs associated to going into an e-Grocery format. As you go into 2021, and costs start to change, and customer behaviors change and everything else. Actually, a huge issue that's rising, which we're all acknowledged is labor that gets it into a place where I have to seriously sit back and go, Okay, what is my return on investment? Am I in the right place as a company to do this so and so it becomes a strategic investment as opposed to a return on investment? And that's the same as true in most of Europe when you're going to other markets. However, if you do get the serious, jaded eye looking at it going, you know, is this the best way for me to make money? And then the second part of that, which I think we should acknowledge is a good retailer creates shoppers. And so what am I going to do to retrain my shopper to a habit to have other expectations?

Steve Dennis  17:01

Interesting, interesting. Well, I would love, love to come back on that in a second. But Sylvain, why don't we bring, bring you in and, and get your some of your perspect, some of your perspectives, but particularly perhaps what you're seeing in Canada, which is your, your primary area of focus.

Sylvain Charlebois  17:15

But just listening to David, I, I must say we're, I think a lot of grocers are tempted to tell their customers, you know, what, change your expectations. Cause, because right now, things are pretty chaotic, upstream. And, and really, since the beginning of COVID, I've never spoken about supply chains ever in my entire life, that's my (inaudible), distribution and policy. 

David Marcotte  17:43

Lord we are so lucky.

Sylvain Charlebois  17:46

I, I've been looking at the obscure part of our food systems forever, no one cared really, all they wanted to know was the next flavored bagel or the next, you know, pumpkin spice trend. And that's when we, when we talked about food, that's really what we were talking about before COVID. And now, people are concerned about labor and farming and, and processing. And so, there's lots of discussion we're having now that we weren't having before. So, people walking into grocery stores are really looking, I think at grocery stores very differently. The garden rate has gone up 20% In Canada, that changes things, we've cooked more. By 2024, we expect the gain workforce to work more from home, 70% of Canadians we think are going to be working from home at least five days a month, at the very least, that changes everything. I mean, really.

Michael LeBlanc  18:46

Yeah. 

Sylvain Charlebois  18:46

And so as a grocer, you got to wonder what kind of customer am I going to be dealing with?

Michael LeBlanc  18:52

So, then let's, let's switch gears a little bit for the for the listeners and talk about some developments that are happening here in Canada that have happened other places in the world. And I think it may or may not be on the radar screen of American retailers this so-called Code of Conduct. So, I don't want to get in the nuances of public policy. But basically, what's happening here is there's a big push to have government step in between vendors and grocers, because it seems that many would say including some retailers, who would say that the power dynamics have gone awry, and there's some described as abusive behavior. And it's just a fascinating thing. I think not everyone has on their radar screen. Maybe you could speak to it a little bit. What, what, what, what is this kind of percolating around because I think it's gonna happen, but you tell me what do you, what do you, what do you see on the horizon?

Sylvain Charlebois  19:48

Oh, yeah. I mean, that's another good example of something that I'd never would have thought would become politicized really. I mean, how can you possibly get the gain public to care about a Code of Conduct, and spats between grocers and processors. It's, it's amazing. And so, a working group was created at the federal level co-chaired by the Federal Minister of Agriculture and the Quebec AG Minister. And they just basically provided some a bit of a roadmap, I guess, industry saying, you know, what, get to work, get to the bottom of this, create some sort of code for yourself. If not, we'll, we'll get involved. The reason why a Code of Conduct I think, was necessary, was it to, to support and encourage discipline? I guess? I don't think that processors mind paying fees, it's the unpredictability, the unpredictable nature of the fees that really became a problem. What was really fascinating is that forever, there was some denial among amongst grocers, not all of them. But among grocers, who was just know what this is how we do business in Canada. Only to see a bit of a reversal, more than a year ago, saying no, we do have a problem. And we need to fix this. And so, you saw most major stakeholders in Canada, getting involved in discussing, including the Retail Council of Canada, which is great. I mean, that's, that's kind of what we needed here.

Michael LeBlanc  21:27

And, and to be clear, for the, for the folks at home two issues, and then we'll kind of move off of this because it's, you would spend many podcasts on this.  One, you know, this is we're talking the PNGs. We're talking big, big vendors here who are on the side of a Code of Conduct, which is, you know, we're all capitalists here. But, you know, this isn't a movement that is alone in terms of, you know, big global companies supporting it, there is a Code of Conduct in the UK. And it's important because, you know, there are American operators in Canada, Walmart, Costco, for example. So, this is not a, you know, this may or may not be a Canadian issue. So, anyway, I just, I just wanted to bring that.

Sylvain Charlebois  22:03

Well just, just briefly Michael, just add to your comment. That SM, many SMEs care about this. Farmers who sell direct care about a Code of Conduct also. And don't forget the Canadian Federation of Independent Grocers. Independents don't have the influence, like Walmart or Loblaw. So, their apps are very supportive of a Code of Conduct as well, because they can't really enforce fees the way Loblaws or Walmart would.

Michael LeBlanc  22:29

Right, and Dave.

David Marcotte  22:32

I was gonna say, from an international perspective, two-fold. One, when I, when I mentioned, I've been contacted by governments to work. One of them was in this context a few years ago by one of the provinces in Canada. And I opened the conversation, which kind of sunk at this that, you know, everything I'm seeing in Canada at the moment would be against the law in the United States for monopolies. So, that's your first point is you have an over concentration and companies that can turn around and do this type of thing.

But the second side of this is I've seen Codes of Conduct in very similar markets come into being in Chile and Australia. Which are two markets that have a remarkable parallel to Canada in some ways. You have very large dominant retailers, and then, you know, a number of smaller players that are basically at, at victim if you wish. So, just to expand the conversation there. There are other countries to point at. But it is like to your point it is quite complex. And I have full expectation and believe that any retailer and manufacturer can probably beat the Code of Conduct if they're really creative enough. So, being cynical, as I'm supposed to be, I would just point that out. The Code of Conduct would be great, but the means of beating it are just infinite. So.

Michael LeBlanc  23:47

Right.

David Marcotte  23:47

Put it in the background.

Michael LeBlanc  23:48

Yeah, well, while I've got you on the mic, let's, let's talk a little bit about it. Let's get back to the, the trends and the future of grocery. So, you know, we all witnessed the great acceleration in the grocery space, but is this, and you're kind of hinting at it that not everyone is exactly happy? Or are they? You described it as a strategic investment. But, you know, this is a big, big trend, whether it's curbside, whether it's you know, home delivery, whether its delivery to a third party. What are your, what are your thoughts on, you know, the rapid growth of eCommerce and how that's impacting groceries bottom line from a financial perspective, and where do you think the future lies?

David Marcotte  24:24

Well, you know, first in the Canadian perspective, I think Metro and especially Sobey's made a strategic decision to make the investment of getting the product to the door, which is when you do surveys overwhelmingly Canadian shoppers come back and say, I want it delivered to my door. Which is absolutely the most expensive thing you can do. Loblaws shifted and has been overwhelmingly pushing a curbside which is a far more profitable activity. So, that's what I meant by strategic in other markets. You don't have.

Michael LeBlanc  24:54

Let’s talk about the US, you know, for example, we got you know Kroger, Target, Amazon. Talk about the US market, and, and (inaudible).

David Marcotte  25:02

For the US market, there's two things going on one is curbside. And pickup in store is being encouraged, then if you want other options, they turn it to three P services. So, if you want, if you want in an hour or two then you know contact Instacart, DoorDash, whatever and we will participate with you. And that's kind of a mixed bag. The other side of that is you really only have two national grocers in the United States. One is Costco, and the other one is Walmart. And they're not anywhere, you know, as pervasive as one. So, what you're seeing from Kroger is an interesting touch as Albertson's which is to go into Cato type solutions, like I said, Sobeys and get automation for in-home delivery into markets where they're not currently participating, you know, so setting up a fulfillment center and then deliver as opposed to opening 100 stores. So, that's the other side of that, that I'm seeing. And that’s a little bit, you know, that gets you into some of the future grocery commentary. 

The one thing I would warn as I was like grocery shop a couple of weeks ago, which was, you know, first thing in person anyplace was (inaudible). But I talked to 30 different vendors doing automation there. And they're all have amazing automation solutions. They're all over very practical. They all were proven. And I asked each one of them as such, you know, so how long would it take before I could get this in my, my company? And the answer was anywhere from 18 to 24 months. And I said, ‘Well, you have that type of backlog’. I said, ‘No, no, no, once we get going as four to six weeks to make it live, we just have no materials to build from to actually build the solution’. 

Michael LeBlanc  26:40

Wow.

David Marcotte  26:40

It's not plastics, foams, refrigeration, anything on the list of stuff I need to build an automation system is, is now subject to the supply chain problem.

Steve Dennis  26:49

Yeah, Dave, I like to just push on the profitability here a little bit, because I certainly I mean, I have worked in other home delivery businesses, and I understand route density and automation opportunities and all those kinds of things. But absent being able to deliver groceries, via a robot or drone, or something like that, you still have the, the human component, the labor cost of getting from wherever that fulfillment center is to a person's home. And just fundamentally, that's always going to be more expensive than the consumer going to the store and getting it themselves, it seems to me. In addition to strategically wanting to have that more emotional connection with the consumer, in addition to impulse purchases, and so forth, so it just seems to me even if you go past the supply chain past the labor issues that we're going to see for a while, strategically, it seems grocers are going to want to push customers to the store for both lifetime value reasons as well as just marginal economics reasons. Am I getting that wrong? Or is this just a, you know, Amazon, we basically have to respond. Amazon's driving the race to the bottom.

David Marcotte  28:01

I got asked this morning by a manufacturer CEO and he said you know, what is C-level thinking in retail? I said, well, first off, I think 90% of my assets are commercial real estate. So, you've got to get that organized in your head. And if I'm in retail, on a large on a larger scale, commercial real estate's overwhelmingly my asset. So, moving outward, and delivery to home and everything else has a buzz to it. But at some point, or another, I have to get very hardheaded and say, you know, do I want to weaken my asset? Can I re-leverage it in another way, all of that's related, and then you get to the labor side, which last time I checked is not going to cheaper. And also, as a gig, the gig economy is under attack in almost every country it's in. So, using that as a labor alternative is starting to come under fire, you know that there's stresses here, that doesn't mean that it will go away. But I think the pattern I'm seeing consistently is, if you want it in your home, we're gonna connect you to Uber, Instacart, or you know one of those players. And we'll let you work with them, and they can take the hit because frankly, they're losing money on it also.

Steve Dennis  29:17

I'm so lucky to find the people that are making money in this other than the venture capitalists and investment bankers. 

David Marcotte  29:23

Well, you, you put your finger right on it, which I got I've started when I teach finance. Now I teach finance, including venture capital, because I said it's become a distorter. If I'm in the business where I don't have to make money, I just need to make volume, which of course is the great eComm methodology. That's the VC thing. If I'm competing with a VC, they it can get very distorted because I have to make, I have to make a margin. They don't. Once they become public, like Uber does, it's it can be a little awkward when you start seeing their numbers. And Then you start getting a site underneath that, but I really you know, to your point Oh, there's a great comment, which is, you know, the artificial intelligence is neither artificial or intelligent. Which really puts its finger on something along what you're saying, which is, at the end of the day, all of this stuff is dependent on labor. No matter how much automation you put in, it recalls labor. And I'm not seeing any indication in the next couple of years, that's going to get to be a lighter load. 

Sylvain Charlebois  30:22

You need a different kind of labor, though. I mean, that's the thing. And I don't know what's going on in the US. But in Canada, I do feel that there is this recognition that labor skill set will have to change, let's face it, grocery stores in Canada are not well managed. I mean, a lot of things do happen at head office. And to operationalize anything is very difficult, with the exception of perhaps Walmart and Loblaws. And because they have a very centralized model, but for, for grocers, it's been very difficult to forecast to, to understand the consumer before or at least provide the consumer what he or she needs before he or she knows. And that's been that's been a challenge in Canada anyways. And then I think there is this recognition that we need to do more and, and, they don't necessarily have the people in place to do that to get to a different place.

David Marcotte  31:27

I think that's all true. And, and the other side of that coin, is I often feel that we should take people making those statements and put them in the grocery store and work for a week. 

Sylvain Charlebois  31:35

Yeah.

David Marcotte  31:36

Change up. By the way, it's interesting. One of my coworkers from a few years ago, changed jobs and eventually wound up working the floor at Tesco, I think was Tesco or I think it was Tesco. In the UK, Brian Roberts, and he had an absolute revelation about being a retail analyst versus being a retail worker, which can be summarized as the idea of unskilled labor is beyond stupid. If you're on the floor for more than a week, you're you become skilled back by necessity. One of the reasons that grocery succeeds and does is because it's universal, it either works across all economic groups, or it works across none. And that's actually where I think you're going to it's not understanding your market when it's shifting is when.

Sylvain Charlebois  32:17

Exactly.

David Marcotte  32:17

Bad things happen.

Steve Dennis  32:19

Yep. Well, I know we're coming up on time. And there's a million things to talk about, maybe we can just do kind of a quick take. And I don't know, Michael, if you want to jump in on here, but what was the one thing we didn't talk about, that we should have talked about, or we should be paying attention as grocery evolves into the future?

Sylvain Charlebois  32:35

I'd say like store design, consumer trends, particularly with proteins in general, it's a mishmash of different things right now. And proteins are, are huge revenue generators for grocers. Prices are going up. Shoppers are, are moving beyond the meat counter. What's going on there? You can see that really, the approach is absolutely not sophisticated, or at least not enough. When you look at, at the consumer looking for different options. I mean, there was a report last week that came out, that we are expecting the Western world to double its consumption of fish and seafood by 2050, or something, which, to me makes a lot of sense, given what's going on with animal proteins or land-based animal proteins. But I think there's, it's a work in progress that is going to last for a long time. I think that's one thing that perhaps we should underscore.

David Marcotte  33:37

Yeah, they actually follow on them from personal experience is the hardest thing about running a seafood counter in any type of store, including grocery is educating the customer that there's something other than salmon. You know, salmon safe, I mean, salmon is an easy fish to cook and it’s safe and usually have people cook that shrimps another one. But you know, there's so many different types of fish that are equally nutritious, that are intimidating. Until people cook them a couple of times. So, there's an education side of that discussion.

Sylvain Charlebois  34:11

But we feed, we feed this salmon chicken in agriculture.

David Marcotte  34:15

Oh, yeah.

Sylvain Charlebois 34:16

Did you know that?

Michael LeBlanc  34:16

Yeah.

David Marcotte  34:16

Circle of life.  (inaudible)

Sylvain Charlebois  34:17

Oh yeah, that’s how sick our model is. And people will notice people will start to know more about these things and, and will ask questions about different species and where they come from. And yeah, I think we're just at the beginning of something.

David Marcotte  34:30

Yeah, you know, you actually you actually identify a real serious issue and I’ve read about it from you before, which is, you know, selling fish that isn’t the fish that you think you’re buying 

Michael LeBlanc 34:47

Yeah, food fraud,

David Marcotte 34:48

Committing food fraud either on purpose or not. But in reality, you can do that because 9 out of 10 people buying fish haven't a bleeping clue in what the hell they're buying. And that's, that's, that's a concern. It's an education. I think, you know, just to finish off what we talked about before we even got off going here was sustainability and the complexity there of. I think at some point in the grocery industry, the there's going to be a need for a clear-cut industry statement to sustainability as opposed to the pure randomness that we're dealing with at the moment.

Steve Dennis  35:14

Yeah, I agree. 100%. In fact, Michael and I have been talking about really looking up this issue of sustainability more broadly on a future episode, so stay tuned. Thanks for bringing that up. I'm afraid we're going have to leave it there. But I appreciate you guys coming on and sharing your perspectives, and perhaps have to, have you back soon as there's a lot going on in this industry. But thanks for helping us understand it just a bit better.

David Marcotte  35:39

Superior Michael, Sylvain, as always, a better Steve good hearing from you.

Michael LeBlanc  35:43

Take care guys. If you like what you heard, please follow us on Apple, Spotify, Amazon Music, or your favorite podcast platforms. And catch up with all our great interviews subscribe, so that just automatically shows up and tell your friends and also in new insights and new episodes will show up every week. So, tell your friends because that will help us share the word the good, the wood, the good wisdom. Now be sure and check out and be sure to check us out on our new YouTube channel. Not so new anymore, get a couple episodes up there and just look for Remarkable Retail.

Steve Dennis  36:15

And I'm Steve Dennis you can check out more of my work at my website stephentdennis.com or on Forbes or on Twitter. And please check out my second edition of my book Remarkable Retail How to Win and Keep Customers in the Age of Disruption available, just about everywhere books are sold.

Michael LeBlanc  36:35

And I Michael LeBlanc, Producer and Host of The Voice of Retail podcast and a bunch of other stuff. You can find me on LinkedIn learn about me on meleblanc.co. Alright Steve, great episode. Look forward to chatting again. Next week. Be safe and happy. Have a great rest of your day.

SUMMARY KEYWORDS

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