How Costco Is Becoming #1 Grocery Store In Canada

[00:00:00]Costco's controversial shopping policy will officially take effect on Monday.

[00:00:04]Something unusual has been happening [music] inside Canada's $115 billion grocery industry. It has been building for a few years, and most Canadians have no idea it is already done. [music] The country that built its grocery identity around Loblaws, Sobeys, and Metro, three chains [music] that have controlled Canadian kitchens for generations, just ranked a store that charges you money before you can buy a single thing inside it as its top grocery performer in a major [music] national study. Not a government initiative, not a new discount app, not a scrappy local co-op, a membership warehouse club from Seattle that sells 30-lb bags of rice in the same aisle as cashmere sweaters. [music] According to a nationwide brand equity study published by Dunnhumby, a [music] global leader in customer data science, Costco ranked first in Canada's retailer preference index for the [music] second consecutive year. The index combines customer perception data from 6,000 Canadian shoppers with hard financial [music] metrics, including market share and long-term sales growth. Across 28 major grocery banners representing 97% [music] of Canada's entire grocery market. Number one in Dunnhumby's national grocery preference ranking, >> [music] >> not just for price, across a combined customer and financial index for the second year in a row. And [music] here is the question that should be keeping every traditional grocery chain in this country up at night. How does a store that charges an annual membership fee just to walk through its doors rank above grocers [music] who hand out loyalty points, mail weekly flyers, and have been in this country for over a century?

[00:01:35]Stay with us. By the end of this video, you will understand exactly how Costco pulled this off, why this ranking may help certain Canadian households [music] cut their grocery bill, and what it means for the weekly shop.

[00:01:48]We are going to break down the strategy, >> [music] >> the trust collapse that opened the door, and the one private label brand so effective it reportedly generates more revenue than Procter & Gamble. Let's get into it.

[00:02:01]To understand why Costco is winning, you first have to understand what everyone else was losing. Starting in late 2023 and running hot [music] through 2024, something snapped in the relationship between Canadians and their major [music] grocery chains.

[00:02:15]It did not start with a policy, it started with a Reddit post.

[00:02:18]>> [music] >> A group called Loblaw's is out of control began as a place where frustrated shoppers could post [music] pictures of $37 packages of chicken breasts and $9 butter and $30 feta cheese that, according to reporting by CBC News, was allegedly [music] double the price of a competing store selling the same product. The group grew fast.

[00:02:37]The anger was real. By May 2024, that frustration had become an organized boycott. A Leger poll from that period found approximately 18% [music] of Canadians either joined the boycott or had a household member who did.

[00:02:51]According to Leger's published [music] findings, 70% of respondents were aware of the boycott and 58% of those said they supported it. But the deeper wound was [music] not just about high prices, it was about history.

[00:03:03]Loblaw had previously admitted to participating [music] in what the Canadian Competition Bureau described as an industry-wide scheme to artificially inflate the price of certain [music] packaged bread products from 2001 to 2015. The company received immunity from prosecution in exchange for cooperating with investigators. [music] Customers, as reported by CBC News, received $25 gift cards.

[00:03:25]>> [music] >> Then responding publicly to the boycott, Loblaw's CEO was reported by The Globe and Mail to have said words to the effect that shoppers can choose to shop elsewhere tomorrow. Whether that comment was taken fully in context or not, observers noted it did not land well with [music] a public that was already stretched thin. Canadians were not just looking for lower prices, they were looking for a store they could actually [music] trust. And Costco was already there. This is not a small thing.

[00:03:50]Trusting grocery retail is slow to build and fast to break. When the big chains spent years defending their margins in front of parliamentary committees while Canadians were standing in checkout lines [music] doing math on their phones to see if they could afford to keep the same items in their cart, >> [music] >> something shifted permanently in how Canadians think about where they spend their grocery dollars. Costco did not cause this crisis, [music] but it benefited from it in ways that the numbers now confirm.

[00:04:18]Here is the thing that should not make sense [music] on paper. Costco charges you money before you buy a single item.

[00:04:24]A basic Gold Star membership in Canada runs approximately 65 Canadian dollars per year. The executive tier costs more.

[00:04:31]You pay that fee up front and then you go shop. By any conventional retail logic, that is a barrier. Consumers do not like paying for access.

[00:04:39]>> [music] >> They should resent it. But here is what actually happens instead. Because members have already paid, they are committed. They visit [music] deliberately. They spend more per trip.

[00:04:48]And critically, they feel like they are part of something rather than just being processed [music] through a transaction.

[00:04:54]That sense of belonging is not accidental.

[00:04:57]It is the foundation of Costco's entire business [music] architecture. Publicly available information about Costco's philosophy indicates the company caps [music] markups at approximately 14% on standard items and 15% on Kirkland Signature products. Industry observers note this is dramatically lower than standard retail margins.

[00:05:16]>> [music] >> Here is why that number matters so much.

[00:05:19]A traditional grocery chain builds its profitability around product margins.

[00:05:22][music] Every item on the shelf has to carry some of the overhead. That creates a structural incentive [music] to mark things up. Costco built its model differently. The membership fee is the profit engine. The product markups are held deliberately low because Costco does not need them to make money. Think about the implications for a Canadian family spending $800 or more a month on groceries. If a standard grocer [music] is marking items up by 25% and Costco is capping at 14, the math over 12 months [music] becomes significant. You're not paying Costco for a membership, you're paying them to let you escape the [music] markup. That reframe is everything. Anecdotally, this pattern shows up in conversations around [music] the channel.

[00:06:03]A family of four in our community described running the numbers after shifting most of their weekly grocery shop to Costco. Their monthly spend [music] dropped noticeably, they said, even after factoring in the membership fee spread across the year. [music] They did not feel like they were sacrificing quality. They felt like they had been overpaying somewhere else for a long time. That is one household's [music] experience, not a study. But it echoes what the index data points toward. That is the membership paradox.

[00:06:30]The fee is the reason the prices can be what they are. Once shoppers understand [music] that mechanic, the calculus changes entirely.

[00:06:39]At some point, if you have shopped at Costco, you have picked up something with a Kirkland Signature label [music] and wondered, "Is this genuinely good, or is it just warehouse store product dressed up to look premium?" The numbers answer that question in a way that is genuinely difficult to dismiss. Kirkland Signature generated approximately 86 [music] billion US dollars in global revenue in fiscal year 2023 to 2024, according to reporting by the Wall Street Journal and industry analysts.

[00:07:05]For context, that figure exceeds what Procter & Gamble, owner of some of the world's most recognized [music] consumer brands, earned in the same period. Let that one breathe for a moment. A private label, Costco's own brand, generating more revenue than Procter & [music] Gamble. The reason Kirkland Signature works where most store brands fail is rooted in one principle the company applies without compromise. [music] According to a 2024 Fortune interview with Claudine Adamo, Costco's chief of operations for merchandising, the standard is explicit. "We don't just put our name on products that someone else makes. [music] Any new item goes all the way to the CEO's office for sign-off.

[00:07:43]And here is the part that has been [music] reported on for years in industry and consumer media. A number of Kirkland Signature products are understood to be manufactured by well-known national brand suppliers [music] or comparable premium producers, though Costco does not publicly disclose its full supplier list. What that means in practice, according to industry observers and consumer journalists who have investigated [music] specific categories, is that you may sometimes be getting a product from the same or equivalent supply [music] chain without the advertising budget and brand premium baked into the sticker price. In a number of reported cases, you may be getting a product made by or equivalent [music] to a premium national brand supplier. The only difference is what is printed on the label and how much it costs.

[00:08:25]>> [music] >> The satisfaction guarantee that backs every Kirkland and Costco product in Canada is also a meaningful [music] signal to consumers. The policy, as described by members and reported across consumer media, [music] allows members to return virtually any product they are not satisfied with. That is not a promotional claim. That is the actual enforced policy. When a company stands [music] behind everything it sells with that level of commitment, Canadian shoppers notice. In the Dunnhumby survey, customer verbatims compiled into what the report describes [music] as a letter from Costco's membership base included the line, "The quality of your Kirkland Signature brand consistently exceeds my expectations [music] and I genuinely trust what I'm purchasing. Your return policy is industry-leading." Trust.

[00:09:08]Again, that word. In the middle of Canada's grocery trust collapse, one retailer kept accumulating it.

[00:09:20]Now, here is the part of this story [music] that is grounded in third-party research rather than brand marketing.

[00:09:25]The Dunnhumby Retailer Preference Index is, [music] according to its publisher, the only approach to ranking grocers that combines financial performance with customer perceptions [music] simultaneously. For the Canadian edition, Dunnhumby surveyed 6,000 grocery shoppers and [music] layered in market share data, near-term revenue trends, and 5-year sales growth across 28 major Canadian grocery banners [music] representing 97% of the market.

[00:09:48]Costco ranked first among [music] all 28 banners for the second consecutive year.

[00:09:53]The top nine retailers are described as almost entirely [music] club, discount, and superstore formats. Look at that list carefully.

[00:10:00]>> [music] >> Maxi, Food Basics, Real Canadian Superstore, No Frills.

[00:10:05]>> [music] >> These are the discount and warehouse formats. The traditional full-service banners, Loblaws flagship stores, Sobeys, [music] Metro, are not in that top group. The number one consumer priority identified in the survey was savings, specifically price, promotions, [music] and rewards.

[00:10:23]Matt O'Grady, Dunnhumby's President of the Americas, noted at the time of the release that even as inflation and interest rates had eased somewhat, [music] Canadians remained more focused on value and savings in 2025 than in [music] the prior year. The pattern is not softening. Shopping behavior has structurally shifted. Here's the growth data that should concern every conventional chain in Canada. According to Dunnhumby's long-term analysis, the top nine retailers in the index grew at roughly double the pace of the lowest-ranked chains over a 5-year period. This is not [music] a short-term dip and recover situation. This is a sustained market share migration toward [music] value formats. When a company tops a combined financial and consumer trust index for 2 years running in a country of 40 million people, that is not luck. That is a system that is working.

[00:11:10]>> [music] >> One regional note worth flagging, Quebec tells a slightly different story.

[00:11:15]According to the Dunnhumby report, [music] Maxi surpassed Costco in Quebec specifically, driven by superior performance on pricing, [music] promotional strategies, and speed and convenience metrics. Quebec shoppers, the report [music] notes, have heightened sensitivity to price and tend to favor smaller, quicker shopping formats. [music] Costco's warehouse model, which requires larger quantities and longer visits, is a natural friction point for that preference.

[00:11:40]Outside Quebec, [music] the national picture holds. Costco leads.

[00:11:47]Now, here is what matters specifically for Canadians watching this. [music] Canada's grocery market is concentrated.

[00:11:53]According to reporting by Canada's National [music] Observer, the country's top three food retailers control around 57% of food sales. [music] Loblaws alone is reported to hold roughly 27%.

[00:12:05]Costco and Walmart were cited at approximately 11% [music] and 7.5% respectively at the time of that reporting.

[00:12:12]Those figures shift over time, but they illustrate [music] the scale gap between the big established players and Costco's footprint.

[00:12:19]According to Costco's 2025 annual report, [music] the company operates over 100 warehouses across Canada.

[00:12:27]Loblaws operates over 2,400 locations across its various banners.

[00:12:32]Costco does not compete [music] on location density. It competes on revenue per location, trust per member, and value delivered per visit. And yet, with a [music] fraction of the physical locations of the major Canadian chains, Costco tops the national consumer and financial preference index.

[00:12:47]That ratio is extraordinary. It means each [music] Costco warehouse in Canada is punching at a level the traditional format cannot match visit for visit. The backdrop makes this rise harder to dismiss as a trend. Canada's food [music] price report, produced annually by a cross-university research team that includes Dalhousie University, projected Canadian food prices rising between 3 and 5% [music] in 2025.

[00:13:11]For the average Canadian family of four, that pushes annual grocery spending toward approximately $16,834, an increase of up to $800 [music] compared to the prior year. Against that backdrop, a grocery model where markups are widely [music] reported to be held deliberately low and where a private label has earned measurably more consumer trust than most national brands [music] is not just an option. For the right household, it may be one of the more rational choices available in today's Canadian grocery market. [music] There is a friction point with the model and it deserves an honest mention.

[00:13:44]Costco is not a solution for everyone.

[00:13:46][music] Smaller households, apartment dwellers, and shoppers without the storage space [music] or upfront budget for bulk quantities face real practical barriers. The warehouse format either requires a car or access to delivery and the [music] quantities can simply be impractical for singles or couples. The same Dunhumby survey that praised Costco also captured member complaints [music] about weekend crowds and long checkout lines. But for households that can absorb the membership fee and the bulk format, [music] the data is consistent.

[00:14:14]They are saving money, they trust what they are buying, and they are staying.

[00:14:19]So what does all of this actually mean for you? It means the rules of Canadian grocery shopping are being rewritten and [music] the rewrite is already underway.

[00:14:27]The chains your parents defaulted to because they had the most locations and the most familiar names are no longer the ones leading on value or on trust.

[00:14:35]The store that [music] asks you to pay to get in is now the one Canadians rank highest on both counts.

[00:14:40]Here is the practical [music] decision framework. If your household can absorb the annual membership fee, has the space for bulk quantities, [music] and can access a Costco location, the data makes a clear case that you should at least be running the numbers for your regular shop. Costco's low markup discipline is widely reported across industry media, though the exact [music] figures are not always laid out in the company's own public filings.

[00:15:03]The Kirkland Signature quality [music] reports are consistent, the satisfaction guarantee is in force. If Costco does not work for your household size or geography, the broader lesson from this index still applies. [music] Discount formats and value focused chains are where the growth and increasingly [music] the trust is. No frills, food Basics, Real Canadian Superstore. These are the banners the data says Canadians are moving toward.

[00:15:28]If you have been a Costco member in Canada for years, there's a good chance [music] you already knew all of this intuitively. You just did not know that the rest of Canada had finally caught up. We want to hear from you. Are you a Costco member in Canada?

[00:15:41]Has it changed how much you spend on groceries each month? Has the Kirkland brand surprised you? [music] Drop your experience in the comments below. We read every single one, [music] and your experience is the kind of real-world data that matters for this community. If you found this valuable, stay on the channel. We are going into more of the stories behind [music] Canada's biggest consumer shifts, and the next one is something we think most Canadians have never thought to question. This is North America Crisis [music] Radar. Stay sharp.