Shift to cheaper groceries to grow: Loblaw president

Wed Mar 4, 2009 9:57am EST
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TORONTO (Reuters) - Canadian consumers will increasingly turn to more inexpensive items as the downturn in the economy deepens and consumer confidence weakens, Loblaw chief Allan Leighton said on Wednesday.

Leighton, president and deputy chairman at Loblaw Companies, the country's biggest grocery store chain, also said consumers will cut back on discretionary spending, including restaurant visits and high-end goods in a bid to save money during the recession.

"There is a flight to value and the flight to value is long-haul and not short-haul. This is not going to be a temporary thing that happens for two or three months," Leighton said during a retail conference held by CIBC World Markets in Toronto.

"The flight to value is going to be a period of time and actually may be there for a long time."

Leighton said shoppers have "all of a sudden become very value conscious" as dwindling consumer confidence has forced Canadians to change their spending habits.

This bodes well for Loblaw which is well known for its Presidents Choice line of value-priced private label items as well as its no-name brands, Leighton said.

"I see PC and no-name playing a slightly bigger role than they do today more in profitability than in sales," he said.

This comes as Canadian retail spending slipped to its lowest level in 17 years in December. Retail sales fell 5.4 percent in December, Statistics Canada said, more than twice the amount forecast by analysts in a Reuters poll. It was the biggest drop since Statscan began using its current survey methodology in 1991.

However, profits at some of the biggest grocery chains, including Loblaw and Metro Inc, rose in the final quarter of 2008, despite the slowing economy.

($1=$1.28 Canadian)

(Reporting by Scott Anderson, Editing by Maureen Bavdek)