How grocery stores decide what you eat

Consumers in Canada got a taste of power recently, and they liked it.

The recent Loblaw’s ketchup kerfuffle shows how social media gives consumers a voice.

A social media campaign convinced the national grocery chain to quickly reverse their decision to pull French’s ketchup from their shelves.

“It made business sense to make the change, but it equally made sense from a business point of view to reverse that decision based on the collective outcry we saw on social media,’ said Dr. Sylvain Charlebois, Marketing & Consumer Studies at the University of Guelph.

ALSO READ: French’s ketchup was ‘cannibalizing’ sales of PC brand, Loblaw memo says

A leaked internal memo said that the product would be delisted because it was cannibalizing the sales of President’s Choice brand ketchup, but a spokesman for Loblaw said that French’s ketchup wasn’t selling well.

“Customer preference was the single reason the product was removed from our shelves, and the single reason it is back,” said Kevin Groh, Loblaw’s vice-president of corporate affairs and communication in a statement.

Do The Math

In 2014, the average Canadian household spent $5,880 on groceries, not counting meals in restaurants, where another $2,229 was spent on dining out. That’s a grand total of $8,109.

With that expenditure in their local markets, it’s understandable that consumers feel they should have a say in the selection. Fair enough, but will bringing French’s ketchup back work?

“When they [grocery stores] see that a product is a laggard or doesn’t work, they’re quick to replace that product,” says Charlebois.

“When it comes to food marketing, what people say and what they buy are two different things.”

Who Decides What’s On The Shelves?

Product decisions vary depending on how the stores are operated. Loblaw, a large chain, works on a corporate model with decisions made centrally. Sobeys and Safeway have independents in their system, so there’s more flexibility.

“Most grocers do allow a small percentage to be purchased at store level so that they can capture local sales,” wrote Thomas A. Barlow, President and CEO of Canadian Federation of Independent Grocers in an email.

“Consumers do have a voice and producers are always trying to discover what their needs are,” says Barlow.

“Grocers also do a lot of research on what their customers want, however the draw of big listing fees sometimes overrules what the customers want,” he says. “It is rare for a corporate chain to reverse a delisting decision. Welcome to the new age of social media.”

Recently Sobeys replied to request from a Yahoo Canada writer for LaCroix carbonated water that was getting rave reviews on a Facebook page. The corporate office suggested that we speak to a local store manager as some flavours of the sparking water were available for individual stores to order if there was demand from customers.

Introducing A New Product

“The buyers dictate what we eat,” says Charlebois.

To get into a big chain like Loblaws, first a new product must be listed, he says. This involves meeting strict conditions such as delivery dates, food safety standards, traceability and packaging.

To get a product listed can cost thousands and thousands of dollars. To play that game you have to be well resourced and patient, as the process can take a year.

“If you’re creating a new category — Red Bull, for example, fifteen years ago they wouldn’t know what you do with you,” says Charlebois.

“Coffee pods 10 years ago, where do you fit coffee pods? You would have to argue that there’s demand for that product, so it really depends.”

“Loblaw makes or breaks companies, that’s really how it goes,” says Charlebois. “If you do business with Loblaws and they de-list you, you can go out of business, it’s as simple as that.”

Paying For Placement

The best-sellers and popular brands are at eye level on grocery store shelves. When deciding what products to put in their stores, grocery stores manage shelf space like real estate, says Charlebois.

“New product listings in large corporate grocers comes with a large upfront listing fee,” says Barlow, who says that most independent grocers do not charge a listing fee to launch new products.