3 Top Canadian Food and Grocery Stocks for February 2025

ByDan Kent Published On:

Key takeaways

Grocery stocks provide stability in any market – No matter the economic climate, people need food, making grocery-related businesses a reliable investment choice.

Companies with diversification and efficiency outperform – Loblaws benefits from pharmacy exposure, Metro thrives on cost control, and Premium Brands Holdings leverages specialty food demand to drive growth.

Key trends like e-commerce and premium food are shaping the sector – Online grocery shopping, private-label growth, and rising demand for high-quality, specialty foods are driving long-term industry changes.

3 stocks I like better than the ones on this list.

Prominent food and grocery stocks from Canada, traded on the Toronto Stock Exchange, tend to perform well across both weak and strong economies. This is mainly attributable to the implementation of a strategy that focuses on low margins and high volume.

This allows the retailer to lower costs and outperform smaller food companies.

Remember when you first learned how to invest in stocks, and people would tell you to “invest in what you know.” Food and grocery stocks fall under this category and, as such, are extremely popular.

But don’t get the wrong impression. Some can give Canadian investors pretty solid growth. In fact, one of the largest chains in the country, Loblaw, has been one of the best performing Canadian blue chip stocks over the last while.

Humans need food to survive. As such, the food and beverage sector of the stock market is often looked at as a staple.

In addition to this, the cost of living crisis we are facing here in Canada is resulting in a significant spending shift when it comes to groceries. Higher cost grocers are getting crushed, while discount brands are thriving.

In this article, I’ll be going over 3 Canadian stocks that focus on food and grocery that investors need to look at. Each food and beverage stock will bring something different to the table (no pun intended).

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Canada’s largest grocery chain

Loblaws (TSE:L)

Loblaws is a dominant force in Canada’s grocery sector, operating under multiple banners like Loblaws, No Frills, and Real Canadian Superstore. The company also owns Shoppers Drug Mart, giving it exposure to the pharmacy market. With strong private-label brands like President’s Choice and No Name, Loblaws enjoys pricing power and customer loyalty.

Valuation: 47/100

Profitability: 62/100

Outlook: 92/100

Risk: 100/100

Dividend: 84/100

P/E: 25.3

5 Yr Revenue Growth: 5.0%

5 Yr Earnings Growth: 26.8%

5 Yr Dividend Growth: 8.6%

Yield: 1.1%

  • Market leader with a nationwide footprint and strong brand recognition.
  • Diversification through pharmacy operations (Shoppers Drug Mart) enhances revenue streams.
  • Growing e-commerce and home delivery services to meet consumer demand.
  • Private-label products boost margins and differentiate from competitors.
  • Inflation-resistant business model as groceries remain essential spending.
  • Consistent dividend growth and share buybacks provide shareholder value.
  • Online Grocery Growth – Loblaws is expanding its e-commerce operations, investing in pickup and delivery services to meet changing consumer habits.
  • Pharmacy Expansion – Shoppers Drug Mart continues to grow, benefiting from an aging population and increased demand for health products.
  • Private-Label Strength – The President’s Choice and No Name brands are thriving, offering higher margins than national brands.
  • Cost Management – Rising wages and transportation costs could squeeze margins, making efficiency improvements crucial.
  • Regulatory Pressures – Government scrutiny on grocery pricing and potential regulations could impact profitability.
  • Competition – Rivals like Walmart and Costco continue to put pressure on pricing and customer retention.
  • Supply Chain Challenges – Global supply disruptions can affect product availability and costs.
  • Consumer Behavior Shifts – A continued shift to discount retailers could erode margins at Loblaws’ premium locations.

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Quebec’s grocery powerhouse

Metro Inc. (TSE:MRU)

Metro operates a network of grocery stores and pharmacies, with a strong presence in Quebec and Ontario. It owns popular banners like Metro, Super C, and Food Basics, as well as Jean Coutu pharmacies. The company is known for its steady execution, operational efficiency, and strategic acquisitions.

Valuation: 62/100

Profitability: 37/100

Outlook: 85/100

Risk: 92/100

Dividend: 95/100

P/E: 21.2

5 Yr Revenue Growth: 4.8%

5 Yr Earnings Growth: 8.1%

5 Yr Dividend Growth: 10.9%

Yield: 1.5%

  • Strong market share in Quebec and Ontario, regions with stable consumer demand.
  • Pharmacy segment (Jean Coutu) provides additional growth opportunities.
  • Focus on operational efficiency and cost controls drives steady margins.
  • Strong balance sheet and disciplined capital allocation strategy.
  • E-commerce expansion with home delivery and pickup services gaining traction.
  • Dividend growth history, making it a reliable income stock.
  • Quebec Market Strength – Metro dominates in Quebec, where loyalty to local brands remains high.
  • Pharmacy Growth – Jean Coutu’s integration continues to drive profitability and expansion.
  • Technology Investments – The company is rolling out automation and AI-driven logistics to improve efficiency.
  • Discount Grocery Expansion – Super C and Food Basics are benefiting from increased demand for lower-cost grocery options.
  • Regional Exposure – Heavy reliance on Quebec and Ontario makes Metro vulnerable to economic shifts in these regions.
  • Labor Costs – Rising wages and union negotiations could impact profitability.
  • Retail Competition – Discount grocers and big-box retailers remain a persistent threat.
  • Inflation Effects – Higher food costs may push consumers toward even lower-cost alternatives.

Canada’s best discount store operator

Dollarama (TSE:DOL)

Dollarama operates discount retail stores. The company provides a broad range of everyday consumer products, general merchandise, and seasonal items both in-store and online. General merchandise and consumer products account for the majority of the company’s product offerings. The company’s stores are throughout Canada, generally located in metropolitan areas, midsize cities, and small towns. All the stores are owned and operated by the company.

Valuation: 28/100

Profitability: 85/100

Outlook: 92/100

Risk: 87/100

Dividend: 92/100

P/E: 37.5

5 Yr Revenue Growth: 10.6%

5 Yr Earnings Growth: 16.5%

5 Yr Dividend Growth: 12.1%

Yield: 0.2%

  • Cost of living crisis is causing many Canadians to change their shopping habits permanently
  • The company operates a lean inventory model, carrying less products, which ultimately results in higher inventory turnover and larger margins
  • The company generates significantly more free cash flow than its competition on a fraction of the revenue
  • The company has proven it can operate profitable businesses even in Canada’s smallest towns, leaving much more room for expansion
  • Although valuations are high, they certainly aren’t unreasonable
  • International expansion gives it a lot more runway outside of Canada
  • Inflation and the health of the Canadian consumer. If discretionary spending increases, it may lose customers to higher value stores
  • Manufacturing costs in China. The company sells items that are primarily manufactured in China
  • E-commerce trends. Although Dollarama offers cheaper products, convenience is a human element as well.
  • Advancements in supply chains. With most of its products being outsourced from international countries, improving supply chains can boost earnings
  • China exposure. The company outsources a lot of its products from China. Sanctions, global conflicts, and rising costs of production in the country could materially impact the company’s operations
  • Rising labor costs. More and more Canadians are refusing to do work at minimum wages. This could put pressure on the company’s ability to staff its stores unless it pays more
  • Competition for discount items is fierce. Although Dollarama hasn’t been disrupted by a major player yet, there is no guarantee it won’t be in the future
  • Currency. A weaker Canadian dollar can increase the cost of imported goods, impacting profitability

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