Monday, January 27, 2014

Pet Food in Discount Retail: Canada’s Dollarama Bets on Consumers Enjoying Bargain Shopping



 Content Provided by: Euromonitor International

 

 
Although the Canadian economy has improved, and the labour market has shown signs of recovery, many Canadian consumers have grown accustomed to price discounts and promotions rampant during and well after the recessionary years.  Dollarama Inc, the leading dollar store operator in Canada, remains one of Canada’s fastest-growing retailers, with store count increasing from 360 outlets in 2004 to over 800 outlets in 2013. In addition to physical outlet growth, the company has been working to improve the store shopping experience. New and revamped outlets offer bright, clean, spacious shopping aisles, a wider selection of merchandise, price tiers of C$2 and C$3 for better-quality products, and modern checkout stations with an increased number of purchases made using debit cards rather than cash.  Pet food and pet care products carried by Dollarama are among the categories that have seen more investment, with an improved product assortment featuring key brands in the mid-priced and premium segments of pet food, as well as private label and exclusive brands manufactured for Dollarama. While Canadian pet owners have long used Dollarama stores for pet supplies like toys, cat litter and other non-food items, expanding the selection of pet food aims to further draw the attention of extreme bargain hunters.

Dollamara’s Pet Select goes head to head with branded pet food
Over the review period, the retailer added a number of mid-priced and premium-positioned brands to its selection of pet food, such as the Cesar brand of premium dog food.  The expanded selection of pet food is certainly drawing the attention of pet owners, and postings on social media feature reviews and bargain finds from those seeking pet food products at a lower cost.
For instance, a popular www.smartcanucks.ca website post, dated September 2013, reads: “For those who like shopping at Dollarama and feed their dogs Pedigree bags of food. I found an 850g pouch of Pedigree Vitality+ Original at Dollarama, at $3. It's perfect size for me as I usually don't have much storage space for dog food, and what's great is it comes with a resealable zipper!” More consumer feedback, published on www.chickadvisor.com and reviewing a Dollarama store in Halifax, reads: “I love this store! I am on a tight budget and get paid monthly along with my husband. We buy all the dog treats there and they are all name brands at decent prices”.  The finds and reviews bode well with a number of trends in Canadian pet food shopping: quality food (Pedigree Vitality offers added nutrients for enhanced nutrition and is a well-known brand); competitive prices; and smaller bag sizes. While many Canadian pet owners do look for high-quality products, the tendency towards purchasing “mass premium” has been gaining traction in the marketplace. The shift of some consumers to discount retail, and Dollarama in particular, for extreme savings attests to further polarisation and the ability of the retailer to respond adequately and quickly to consumer trends.  In addition to featuring branded products, the retailer has been working to develop its own lines distributed exclusively through Dollarama. In
dog food, an example can be found in the Pet Select brand. Going beyond basics, the brand (imported from Thailand) is well presented and packaged in aluminium trays (similar to premium brands like Cesar). It features flavours like grilled chicken and retails for C$1 for two packages (100 g each). Shelf positioning is advantageous too – at the front and at eye level – and right next to the Cesar Entrées brand which occupies a similar shelf space and retails for C$1 a package of 100 g.

Opportunities and caveats for further growth – issues of quality
control
Dollarama’s expansion into pet food has been reasonably successful and has fitted well with the value end of bargain shopping in Canada.  Adding exclusive and private label brands to the portfolio, coupled with a large number of outlets within convenient distance and a tendency to
stock smaller packages, can further solidify the retailer’s position in the pet food and pet care marketplace. While not likely to become the key shopping destination for the majority of pet owners, the retailer is increasingly well positioned to cater to the needs of those on a tight
budget and in search of extreme bargains.  Potential caveat to growth includes pet food and ingredient sourcing.  While steadily gaining the trust of many consumers, especially with the
upgrade of its outlets and merchandise selection, Dollarama is still often criticised for the quality control of foods stocked. Coupled with pet food recalls and consumer reports in Canada that have raised issues of ingredients and sourcing for the industry, Dollarama will have to pay
closer attention to the pet food it imports and stocks to reassure consumers that products are safe, and cheap does not mean a compromise on the health and wellbeing of pets.

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