Opportunities in the CanadianGrocery BusinessJohn TeklenburgPresident & CEO JTI Group of Companies(Canada, USA, Australia, Europe)Lead, follow or get out of the way:This is a very competitive market!Cowards will fail – Team players can win
A glance of Canada• Second largest country in the world• $1.8 Trillion GDP• Economy based on natural resources (oil & mining), technology andservice industry• Most of population and big cities all near US border: Toronto 5.4million; Montreal 3.8 million; Vancouver 2.2 million; OTTAWA(capital) 1.2million; Calgary 1.2 million (2009)• 35 Million people –- ethnically very diverse• 80% urban population (!) – etnically diverse (20% immigranthouseholds)• $36,000 GDP / capita at parity (8th in world) with increasingdifference between high / low income familiesConclusion: Food export opportunities in prosperous markets withdiversified consumer profiles /costly distribution systems
Food in CanadaHouseholds reported spending an average of $7,443 onfood in 2010. This included $5,377 on average spent onfood from stores and the remaining $2,066 on restaurantmeals.The grocery business in Canada:• $83,000,000,000 per year (about 5% of GDP) – Approx60% through chain stores.• Employs approx 550,000 people (3.7% of total nationalemployment), some part-time• 22,402 storesAdditional opportunities: Food service and supply ofproducts for food industry
The big boysThe largest chains have nearly 50% of themarket:Loblaws = 20% market shareSobey’s = 13% market shareMetro Inc. = 9% market shareWalmart = 6% market share ($5 Bln / 167 SC’s)They do not only operate supermarkets!
Loblaws- More than 25 “banners”: Loblaws, Fortinos, NoFrills, Zehrs, RCSS, Provigo. Some regional, some specialized, well“targeted”- Started in Ontario – now nationwide- 14 Million weekly shoppers- 136,000 employees- $30,000,000,000 sales (40th retailer worldwide) – not only groceries- 1,000 corporate / franchise stores- 400 associate stores- Sells to 4,700 independent stores- Low price strategy is important- 1/3 of store space = non grocery- Recognized as Private Label leader: PC, No Name- Big on product R&D / innovators
Sobey’s- Started in Atlantic Canada- Bought IGA in 1998 – which made it national- Owned by “Empire Corporation”(bought in 2007)- 90,000 employees- $ 15,000,000,000 sales- 12 banners incl Sobey’s, Price Chopper, Thrifty, TargetGrocery- 1,334 stores- Private Label: Sensations, Compliments- Concentrated on groceries
Metro- Started in Quebec- Bought A&P in 2005- 65,000 employees- $ 11,000,000,000 sales- 6 banners incl Metro, Food Basics, Super C,Richelieu- “only” 564 stores- Private Label: Irrisistables- Concentrated on groceries
Other markets: PL(Examples of JTI product lines Mexico and Australia)
The other 50%: NOT only little boysfighting – most very competitive!The food sector isvery diverse,competitive and withmany segments –strong competition ineach segment
The other 50%- Consumer club stores, e.g. Costco (approx 75 warehouseswith big volumes.- Regional supermarket chains- Smaller chains and over 900 independently owned smallsupermarkets.- Over 10,000 convenience stores – some connected withgas stations- Approx 650 independent delicatessen stores- Frozen food products are a big trend in large chain storesbut there are also over 200 independent frozen productstores (excluding those specialized in meat products)- Food items in drug stores (!): Shoppers Drugmart
Brands for the other 50%(We have our house labels and supply to major brands)
Consumer trends1. Consumers demand “better” products: Healthconsciousness, Non-processed items, ProductSafety (trend to local products – away fromprocessed products). They read labels!2. Consumers increasingly demand sustainableagriculture3. Consumers seek convenience4. Consumers demand VALUE(globalization, recession): Price shopping versusvalue shopping5. Still a large demand for “lowest price” when itcomes to staples and junk products.
How are stores responding?Segmentation led to Polarization1. Discount trending: Traditional supermarkets are stillimportant but their market share declined from 67 to62% in past 3 years. The big chains are going towards– Hypermarkets (mostly low cost – not only groceries) nowabout 11% market share (!), and– More discount stores: Large, medium and small2. Premium trending: Format / Channel diversification(specialization) not only smaller stores. Part of themass market is going upscale. Room forexclusives, premium fresh items, specialty items(etnic, gluten- free, organic, diabetic, healthfood, etc.). In high-end items of chain stores you willfind lots of “ins and outs”. USP’s critical.
Trends in grocery retail• Price pressure to be competitive: Possiblethrough globalization.• Diversification of sourcing: Openness to buyfrom a variety of sources (NOT only China!)• Sharper focus on category management• Market segmentation
Canada imports lots of food products- 24% of food products are imported (15%from the USA alone)- Fresh foods and vegetables / fish arebiggest imports- For commodities: It’s price!- For specialties: It’s a USP- Less supplier loyalty although one hasto be part of the club to be a supplier
Whatever your business is: Even asmall % of the $80 Billion is businessIf you cannot compete in global markets, Canada is NOT the place for you.To be successful:- Know and understand your market andyour place in it- Have a solid plan- Carefully select penetration anddistribution- Understand volatility: Be fast andflexible
Strengths- Climate- Proximity (ocean freight)- Excellent professionals- New in market- Internal market withinteresting productsWeakness- Home market focus/small sizecompanies (few huge)- Internal Logistics- Sometimes: Lack of marketing& export experience- Lack of certifications: BRC, etc.Opportunities- Free Trade Agreement- “Tropical” items- Organic Markets- Good reputation (coffee)- Market more open-mindedThreats- International Competition- Late market entry- New in marketPositive NegativeInternalExternalA SWOT ANALYSIS FORTHE COLOMBIAN FOOD EXPORT SECTOR
Additional focus onOpportunities and ThreatsOpportunities:- Fresh Produce vegetables and fruits. We cannot even grow lettucebecause of our (lack of) climate. Canada has two seasons only:“Construction” and “Winter”- Consider cultivating items we need because of climate and highCanadian labor cost- Prosperous market / some of your specialties may have potentialThreats:- High Canadian distribution cost- Lots of competition- Requirements of factory / productoon certification: HACCP, ISO, BRC- Finding a good distribution network is not simple (You may needseveral distributors to serve several geographic areas anddistribution channels).
Private initiative: The DanperFarms – A unique ventureIt commenced in 2004: Danper started withconverting 445 ha of desert lands in Northern Peruwith an ideal eternal spring climate. It rapidly wentfrom this..
To this: A leading agro-industrial complexIn the North: 2,000 ha highly productive asparagus fields. Plus: In 17 valleysspread across Peru, 2,200 ha of “black land” to cultivate artichokes andmuch more…. The industry created jobs - 100’s of thousands found work..
(Preserved) Food Products- Do you know your potential place in the market: Market size, targetmarkets and do you know your competition?- Pushing your own brand is nearly impossible: Listing fees- CFIA requirements and certifications required by Grocery chains:Food safety, QA, Social Responsibility, BRC- Understand packaging and shipping requirements (distributorsknow and can package your bulk items in Canada).- Logistics: The need of Just-on-time deliveries. Constraints withinColombia, transport issues, CHEP pallets, best freight routes- How does Canada fit in your general portfolio?- Can you produce year round? What is your production window andhow does it compare with the competition from other countries?- Your sustainability?
ANALYSIS RESEARCH IS KEYThree dimensional:- What can you offer to each market?- What does each market seek?- How will you sell / distribute?Don’t even try to make a long termentry before doing your homework.
An example of teamwork – verticalintegration to build a private labelproduct line
STRATEGIC PARTNERS ARE KEYApart from finding some short termopportunities, in this global environment youhave only a few choices:- Don’t play- Be a minor player- Efficiently organize your optimum verticallyintegrated supply system by creating strongpartnerships: In Colombia (agricultural crop,packaging, logistics) and in Canada(distributors).
WHAT CAN WE DO FOR YOUIN CANADA?1. Assess the possibilities for yourproduct(s) in Canada.2. Be your (master-) distributor if yourproduct fits in our product portfolio.3. If your product(s) do not fit in ourportfolio: Identify one or moredistributors for your product(s).
Build Alliances….to solve the SUCCESS puzzleVertical integration of the supply chain is key.Efficient, professional, fine-tuned team work isessential.
JTI Inc. (Canada)JTI Foods Inc. (USA)JTI Foods Pty Ltd. (Australia)Agrosol International Inc. (Europe)John TeklenburgJohnT@JTIFoods.comCall me directlyHQ near Toronto +1 (905) 681-2555, ext 211