This document provides a summary of topics relevant to the food and beverage industry, including profitability in competitive landscapes, using quotas and trade agreements to advantage, considerations for entering the US market, cultivating industry talent, harvesting cash through effective transfer pricing, and additional costs of doing business with major grocery retailers. The overall document discusses strategies that companies can use to maximize profits and remain competitive in dynamic industry conditions.

1. Profitabilityincompetitivelandscapes
Q2 2016
www.bdo.ca/consumer-business
CONTENTS
Profitability in a Competitive
Landscape 1
Using Quotas and Trade
Agreements to Your Advantage 2
What You Need to Know Before
Entering the U.S. Market 3
Cultivating the Next Generation
of Industry Talent 4
Harvesting Your Company’s Cash 5
Additional Costs of Doing
Business with Major Grocery
Retailers and How Food and
Beverage Processors are
Protecting Their Bottom Lines 6
Market Update 8
Food & Beverage Quarterly
Today’s businesses aredealing withdynamic and uncertain
environments. By understanding howcontendingforces
influencethefood & beverage industry,companies
candevelop a strategyto maximize profits and remain
competitive inthis rapidlychanging landscape.
Read more u
SAVETHE DATE
The fall Food & Beverage roundtable is fast approaching. Join us for an
engaging discussion about the real challenges and trends facing the
industry and learn innovative ways to align your business for success.
Seating is limited—contact us to reserve your space today.

2. Quotas
Supply management systems, or quotas, are used to manage supply
to meet expected demand and to help ensure that the producers
are getting a fair price for their product. Quotas provide a definite
competitive advantage to food & beverage processors who have
them, by helping to ensure the processors have a consistent supply
of product. In Canada, dairy milk, chicken and eggs are subject
to quotas. For example, chicken farmers have quotas and sell to
the chicken processors who have processor quotas. When there is
insufficient supply to meet demand, tariff rate quotas (TRQ) exist
to allow the processors with quotas to import chicken from the U.S.,
subject to tariffs as low as 0% (and over 200% if the imports exceed
the TRQ). So what opportunities exist for those who would like to
get into or expand within one of those industries?
The processor must purchase processor quota from an existing
processor that has quota and obtain approval from the applicable
regulatory body in the province in which they operate, i.e. the
Chicken Farmers of Ontario in the case of an Ontario chicken
processor. There may also be opportunities for leasing quota. In the
absence of opportunities for chicken processors to lease or purchase
additional quota from another processor or through a business
acquisition of a processor which has quota, then the processor may
purchase chicken from another processor which has quota.
Consumers are only willing to pay market prices, so in order to
compete with the processors which do have quota, a processor
without quota needs to provide something different than the
competitor (a unique value added product, quicker turnaround time
for orders, smaller minimum order quantities) or accept a much
smaller profit margin. Successful processors doing business in a
quota industry without processing quota have their own competitive
advantage in either the product or service they offer, or their ability to
run lean operations in order to survive on meager gross margins.
Trade Agreements
Canada is well known for high quality, safe food and beverages.Trade
agreements create new markets for our products and allow them the
opportunity to be priced more competitively in foreign markets.
For food & beverage processors looking to grow
their businesses through export, understanding
trade agreements is the key to gaining the most
benefit over competitors.
The proposed Trans-Pacific Partnership (TPP) Agreement is expected
to provide preferential tariff rates to Canadian imports of certain
food products into the countries which signed onto the TPP. This
means that Canadian companies exporting to the U.S., Japan,
Australia, Mexico, Brunei, Peru, Chile, Malaysia, New Zealand,
Singapore and Vietnam will have either no tariffs or significantly
reduced tariffs to pay compared to companies from the countries
which are not part of the TPP.
As part of theTPP, a number of imports (see the full list below) in
Japan will be subject to import quotas, where reduced tariff rates will
apply until quota limits have been reached, after which the full tariff
rates will apply. Where quotas work on a first come, first served basis,
food & beverage processors providing products with a longer shelf
life have more of a competitive advantage as they can bring in large
quantities at the beginning of the quota period, taking advantage of
the reduced tariffs and then warehouse the product until needed.
Using quotas and trade agreements to your
advantage
Melissa Krakar, Assurance & Accounting
Food & Beverage Quarterly, Q2 | BDO Canada LLP2

3. Whereas products with short shelf lives may find their ability to
supply into such markets at a profitable price come to an abrupt end
when the quota limits are reached. Careful planning is needed.
For Canadian food & beverage companies, trade agreements
allowing imports into Canada can also help reduce product costs by
bringing in additional ingredient options at lower prices. For those
producing for the mass market, often the cheapest ingredient is the
only option in an effort to keep prices low so consumers continue to
buy the end product.
Quotas and trade agreements can add a layer of complexity to
doing business, but a solid understanding of how they work can help
navigate the available opportunities.
For those supplying Canadian ingredients to food & beverage
companies for use in their own products, the story doesn’t always
end with the cheaper imported ingredients being used. With the
local food movement growing and consumers having more of a
voice through the use of social media, positive change is happening
that provides advantages for Canadian ingredients suppliers. A key
example of this is the recent uproar in the news about Heinz pulling
out of Leamington and moving its ketchup production to the U.S. It
was brought to light that none of the ketchups available in the market
were 100% Canadian as they were either produced or bottled in the
U.S. or were made with U.S. tomatoes. French’s heard the Canadian
consumers asking for a Canadian ketchup and is now working on a
deal with Select Food Products Limited inToronto to have the product
produced and bottled there, using Canadian tomatoes. Sometimes the
competitive advantage is not in sourcing the cheapest ingredients, but
in having a Canadian made product or in the ability to quickly respond
to consumer demands for local product.
Categories of tariff rate quotas in Japan
• Dairy - fresh cheese for use as materials for shredded cheese,
butter, skim milk powder, milk powder and butter milk
powder, evaporated milk, condensed milk
• Food preparations - made primarily of wheat, barley, peas/
beans and leguminous vegetables, containing more than 50%
of sucrose, with sugar as the largest ingredient, containing
sugar and dairy
• Cocoa, chocolate, sugar, confectionary - food preparations
containing cocoa, food preparations using cocoa, chewing
gum and other sugar confectionery containing cocoa, cocoa
preparations containing added sugar weighing not more than
2 kg, candies/white chocolate and confectionary, chocolate,
cane sugar under 98.5 polarimetric, cocoa powder, cocoa
preparations containing added sugar weighing more than
2 kg, sugar
• Other - wheat products, wheat flour/pellets/rolled and
food preparations, uncooked udon/somen and soba, barley
flour/groats and pellets, barley, prepared edible fats and oils,
coffee/tea mixes/food preparations and doughs, starch
As a result of the competitive
landscape thatCanadian businesses
face and potential opportunities in
theU.S., there has been increased
expansion byCanadian entities into
theU.S. market.
The decision to enter the U.S. can have
federal and state income tax implications
and therefore should be carefully considered.
ACanadianentitythat has minimalconnection
withU.S.customers may becarryingon aU.S.
trade or business.The Canada-U.S. tax treaty
limits the U.S. federal income tax exposure of
Canadian entities by requiring the business
be carried on through a U.S. permanent
establishment.AU.S. permanentestablishment
includes a place of management, a branch,
an office or having a person acting on your
behalf in the U.S. Certain activities that may
not create a U.S. permanent establishment
include the use of facilities for storage/
delivery of goods and the maintenance goods
for processing by athird-party.The income
that is attributable to a U.S. permanent
establishment is subject to U.S. tax, however
you may be eligible to claim foreign tax
credits on your Canadian tax return.
Penalties for failure to file or non-disclosure
of treaty positions may be significant.
The threshold for activities that can cause
state income tax exposure is typically
lower than at the federal level. Many states
will consider activities such as shipping in
returnable containers, use or maintenance
of a warehouse for inventory, and use of
fulfillment services as sufficient to subject
an entity to state income tax. Filing
requirements, penalties and eligibility for
foreign tax credits will vary by state.
What you need to know before entering the U.S.
market
Kevin Macnab, U.S. Tax
Food & Beverage Quarterly, Q2 | BDO Canada LLP 3
Your BDO advisor can assist in
determining the U.S. permanent
establishment and state nexus
implications for your organization.
u

4. As competition in the food & beverage industry
continues to grow, obtaining the right talent has
become one of the most critical components of a
company’s success.
In the coming years, there will be an even greater demand for skilled
candidates who can comfortably navigate rapidly changing trends
and adapt to new technologies.
This anticipated demand has prompted a number of government-
funded job training initiatives which aim to provide Canadian youth
with the skills and experience needed to successfully lead the
industry of tomorrow.
Career focus
Core business issue: competitiveness & succession
Application intake period: Applications will be accepted between
October 1 and November 15 each year for internships beginning on
or after April 1 of the following year.
Career Focus is a funding opportunity for organizations across the
country to employ Canadian youth, in an effort to guide them
professionally.This fund will assist young individuals to make
informed decisions about their career path and help them develop
the necessary skills and experience they need to succeed.The
organization can benefit by receiving funding to hire additional
resources for project initiatives, helping them to stay competitive
and assist with succession planning by hiring and developing people
with the potential to fill key positions within the company.
Program objectives:
• To increase the amount of highly qualified individuals in the
workforce.
• To help our youth gain both the skills and experience needed for
their career goals.
• To facilitate the transition of highly skilled young people to a
rapidly changing labour market.
• To help promote the benefits of higher education.
• To invest in the skills and education required for the future needs
of our ever-changing job market.
Who is eligible?
Eligible hiring candidates must be between the ages of 15 and 30,
Canadian citizens, permanent residents, or persons who are legally
entitled to work in Canada.
A minimum of eight youths must be involved per project. If your
business is located in a rural area some exceptions might be made
to hiring minimums.Workforce experience is to be reinforced by
coaching and/or mentoring provided by the company.
Eligible costs
Grant to fund up to a maximum of 80% of related expenses for
approved activities. Funding may also be provided for employability
workshops (e.g. working on management, communication, or
leadership skills applicable to career experience).
Food & Beverage Quarterly, Q2 | BDO Canada LLP4
Cultivatingthenextgenerationofindustrytalent
Jacquelyn Schaefer, Advisory Services
How can BDO help?
BDO’s Advisory Services Group wants to connect you
with the most suitable associations and government grants
and incentives to ensure you receive the maximum amount
of funding possible. We can provide a strategic approach in
determining how government grants and incentives fit into
your company’s future growth plans.
u

5. Transfer pricing: how food & beverage companies use
it to retain more cash
Canadian food & beverage companies are often either owned by a
foreign parent company or own foreign subsidiary companies, which
can present them with unique trade and tax complications relating
to transfer pricing. A carefully planned and proactive transfer policy
structure is essential to minimize tax rates and bottom lines.
While there are many differing types of structures within the
food & beverage industry, Canadian parent companies tended, in
the past, to create both the marketing-related intangibles, such
as trade name, trademarks and brand names, and product-related
intangibles, such as recipes, formulas and manufacturing know-
how. That Canadian parent company would then perform the
manufacturing function, while using distribution entities in other
countries to market, sell and distribute their products in those
other countries. The same holds true for U.S. parent companies,
although many of them also established manufacturing in other
countries, including Canada. Given this international trade of goods,
the Canadian, U.S. and other governments developed domestic
laws and international tax treaties. These laws included rules
related to transfer pricing; transfer pricing being the price at which
goods or services are exchanged by related parties across borders.
The Organisation for Economic Co-operation and Development
(OECD) developedTransfer Pricing Guidelines that are based on
the ‘arm’s length principle’; being that related parties that transact
across borders should determine and use prices as if the parties were
not related, but were at arm’s length.Transfer prices would then be
considered arm’s length prices, i.e., prices to which two arm’s length
parties would agree to pay/receive.
The challenge for food & beverage companies came in the form
of significant tax rate differentials between the various countries
that they operated within. Without proper planning, a corporate
group could pay too much tax globally, leaving less after-tax cash
for re-investment and/or shareholder compensation.
Effective transfer pricing planning
Setting arm’s length transfer prices requires a detailed analysis
of the corporate group’s value and supply chain, particularly with
respect to:
Functions – which functions create most of the profit in the
corporate group. Profit may be broken down into routine profit,
being the profit that every food & beverage company may expect
to earn, and residual profit, being the profit attributable to high
value-add functions and/or unique, valuable intangibles that
distinguish the corporate group from its competitors.
Risks - risks within a corporate group tend to be associated with the
high value-add functions and/or the company’s intangibles. There
may be low or nominal risks associated with the more routine parts
of the business. As with functions, residual profits are generally
associated with bearing significant risks.
Assets - tangible assets are generally responsible for a corporate
group earning its routine profit, although cutting edge assets may
also contribute to the group’s residual profit. Intangible assets,
whether marketing-related or product-related, contribute to the
group earning residual profit.
As a result, planning opportunities that will enable your company
to retain more cash by minimizing the corporate group’s overall
income tax expense will involve one or more of the following:
1. Shifting higher value-add functions to low tax jurisdictions,
while shifting or retaining lower value-add functions in high tax
jurisdictions. In the food & beverage industry, the most common
lower value-add functions involve having entities in the group
perform manufacturing, packaging, research and development
(R&D) or marketing services under contract to another entity in
the group. These entities would then earn a profit commensurate
with what third parties earn for performing similar services in
a similar manner. In the food & beverage space, the residual,
non-routine profits would be earned by the entities owning and
Harvestingyourcompany’scash
Food & Beverage Quarterly, Q2 | BDO Canada LLP 5
Dan McGeown, Transfer Pricing

6. maintaining significant, unique, non-routine intangibles such
as product formulations, recipes, unique marketing programs,
name brands or trademarks. The entities owning these valuable
intangibles would enter into contracts with the companies
providing the routine services. Most prevalent in the food &
beverage industry are arrangements for contract manufacturing,
contract packaging, contract R&D services, and contract
marketing services.
2. Shifting significant risks to lower tax jurisdictions, while having
limited or nominal risks in higher tax jurisdictions. A common
occurrence in the food & beverage industry is the use of limited
risk distributors to distribute products in higher tax jurisdictions,
with the transfer prices for products established to leave the
distributor with a routine level of profit each year. The residual
profit is then earned elsewhere in the corporate group, by an
entity taking on risks such as product liability, credit, or foreign
currency exchange.
3. Transferring the ownership of unique, valuable intangibles to
lower tax jurisdictions, while leaving routine tangible assets in
higher tax jurisdictions. For food & beverage companies this is
often used for product formulations or trademarks.
Substance is the key ingredient
Now, more than ever before, economic substance is the key
ingredient. The OECD recently released its final recommendations
regarding Base Erosion and Profit Shifting (BEPS). These
recommendations, developed in response to recent concerns that
large multinational entities were exploiting existing legislation
to shift profits and avoid paying tax, contains proposals for the
development of new laws and rules related to cross-border
transactions. The OECD BEPS recommendations really aim to curtail
tax planning strategies lacking in true economic substance.
Transfer pricing planning is still alive and well, as long as companies
are willing to ensure that substance is at the core of every
restructuring involving shifting functions, risks and assets. Successful
food & beverage companies are taking steps to use substance to
their advantage, thereby lowering the effective tax rate and overall
income tax expense.
BDO’s Transfer Pricing Services Team is available to
assist with a substance review to determine whether
steps need to be taken to improve and strengthen existing
structures, or to assist in the creation of new, tax effective
transfer pricing structures.
Food & Beverage Quarterly, Q2 | BDO Canada LLP6
Additionalcostsofdoing businesswith major
grocery retailers and howfood and beverage
processors are protectingtheir bottom lines
In an effort to sell product to the masses, many food and beverage
processors are eager to get their new products onto the shelves of
the major grocery retailers. Some believe that their success should
be measured by whether or not they have SKUs on the shelves of
the big grocery chain stores. But, what is the true cost of doing so?
The financial costs are significant and range from
deductions taken by the retailers, various extra fees
charged and withholding payments for months.
One of the most significant costs are the non-refundable listing fees
retailers charge just to get the product on the shelf. Expect these
to increase exponentially for prime eye-level location where the
product is more likely to be seen by everyone. This is a fee paid for
each SKU and comes with no guarantee as to how long the product
will remain on the shelf. If the product is not selling, it is delisted.
Chargebacks and deductions are common practice in the retail
industry. When retailers advertise a product at a particular price,
consumers expect that it will be in store for them to purchase
during the advertised time period. As a result, food and beverage
processors are assessed penalties for late shipment, shipping too
much or too little of a product, or for providing the wrong size.
Processors are also responsible for products that the retailer ordered
but didn’t sell prior to the best before date. While most of the major
retailers pay quickly, some smaller processors have had payment for
invoices held up for months. It’s beneficial for processors to
Melissa Krakar, Assurance & Accounting
u

7. promptly follow-up on missing payments, as they could be the result
of issues in the electronic data interchange (EDI) systems used for
invoicing, or turnover in staff at the retailer, both of which can result
in a lengthy process to move forward on getting payment.
Rebates are another major cost, both in time spent by processors
administering rebate programs and actual deductions taken by
the retailers related to these programs. These include rebates for
monthly and annual purchase volume, special promotions, and
advertising. While some accounting systems may automate the
accruals of the rebates, tracking and validating those which have
been claimed by the retailers is a huge undertaking on the part of
the processor. Some retailers simply take the rebates as a deduction
from their payment on invoices throughout the year. Also, many
have agreements that give the retailer the right to audit the
processor to ensure the retailer is maximizing their entitlements.
Price, product specifications and private label
products are additional areas of pressure for the
processors when dealing with retailers.
Driven by consumer demand for low prices, combined with the
retailers’ own need to make a profit, the retailers put pressure on
the processors for price reduction. Retailers can choose to delist a
product if the price point doesn’t allow them to sell it at a rate that
will satisfy consumers while still providing sufficient margins.
Increasingly, retailers are asking processors for products unique to
their store so that no other competitor will be selling exactly the
same product, thereby reducing the cost associated with consumer
price matching. In a branded product, this could be in the form of
a different size of package or in a product variation. Packaging or
recipes specific to one retailer are added costs for the processor in
terms of additional inventory carried and time spent developing the
product variation.
Private label brands pose several issues to processors. First, because
the retailers want to have innovative products in their own private
label to keep consumers loyal to their stores, often the retailers will
price those products lower than the comparable branded products.
This creates more competition for the branded products. Second,
for the processors that produce both private label products and
branded products for retailers, there is a push from the retailers
to ensure that product innovation is in the private label products.
For a processor working hard to build and maintain a brand, this
undermines the process. Other processors may be willing to make
that same product innovation in a private label product for the
retailer, so turning down a private label opportunity in order to focus
on your own brand growth may inevitably result in competing with a
private label comparable to your new branded product innovation.
How are the successful food processors making it work?
Strategies range from choosing not to do business with the large
retailers, to working with the retailers and the processors’ own
suppliers to get the right product at the right price.
Some processors focus on other distribution channels such as
independent retailers, distributors, online sales, food service or
industrial customers. Alternatively, they may choose to co-pack
products for other processors so they don’t have the costs of dealing
with the major retailers. Others recognize that doing business with
the larger retailers means additional costs and they build those costs
into their prices. Transparency with retailers about product costs is
another strategy used where processors share with the retailers their
costs of production and the margins they are achieving in the hopes
that price increases will be accepted.
Building and maintaining good relationships with store managers or
department managers can help ensure that the products get shelf
space and are being promoted. This includes regular store visitation
programs by the processors’ sales staff where checks are done on the
product displays. During the same visit, the processor’s sales staff
restock shelves with any products that might be in the back of the
store, rotate the products to ensure that the ones which expire first
are at the front, and give special coupons to customers for products
nearing the best before date in an effort to get those products sold.
Understanding the consumers’ price expectations helps processors
make decisions about their product. This could be the decision to
work with their own suppliers or new suppliers to find a way to
reduce costs or shrink the size of the product to maintain both price
point and quality.
Another strategy is to work with the retailers to find solutions that
are mutually beneficial. An example of this is providing a packaging
solution that benefits both the retailer and the processor. This is
advantageous in situations where there is traditionally limited
packaging or no packaging on the products and the premium and
regular products both look the same. Adding packaging to an
otherwise unpackaged product allows the processor to sell more
because it forces the consumer to buy in multiples. It reduces costs
of waste on the retailers’ part where the consumer would otherwise
have the opportunity to pick through for the best product. Barcodes
and additional room on the packaging to illustrate it is a premium
product allows the product to be scanned or keyed in correctly as the
premium priced product rather than the regular lower cost product.
While there may be additional costs to working with the major
retailers, there is significantly more opportunity to grow your business
and showcase your products to the masses. Having a great product
and working together with the retailers can result in a win for all
parties—lower costs, less waste, better margins and happy customers.
Food & Beverage Quarterly, Q2 | BDO Canada LLP 7

8. MArket Update
Ryan Farkas, Transaction Advisory Services
Macro-economic indicators: Canada
The Canadian economy steadily gained traction in the second quarter, as the global price of oil continued to move towards an equilibrium.
Spillover from Britain’s vote to leave the European Union is not expected to materially affect Canadian exporters, as only 3% of Canadian
exports go to the United Kingdom. In addition, the Comprehensive EconomicTrade Agreement (CETA) is expected to provide Canadian Food
and Beverage exporters, among others, with access to the remaining European Union members. Expectations for real GDP growth in 2016 have
been lowered slightly to 1.2%, reflecting the oil industry’s half-capacity quarter following the Alberta wildfires.
It is expected that a Q3 rebound is in order, given the monetary policy stance expressed by the Bank of Canada, and the expected ratification
of theTrans-Pacific Partnership (TPP). Although volatile through the quarter as a result of economic and political uncertainty in the U.S. and
United Kingdom, the Canadian dollar ended the quarter close to where it was three months ago at $0.77 USD.
Current Food & Beverage M&A Trends
For starters, financial due diligence is not an audit. An audit provides
an opinion on whether the historical financial statements present
fairly the financial position, results of operations, and cash flows of
a company. Financial due diligence, on the other hand, goes deeper
to understand the reasons for historical and forecasted trends, and
reports on the relevancy of these trends to the purchaser.
The scope of financial due diligence differs from business to business
depending on the size and industry of the target company.Typically,
the scope would include an analysis of the historical quality of
earnings (i.e. the sustainability of historical earnings before interest,
taxes, depreciation and amortization, or EBITDA), quality of net assets,
working capital requirements, capital expenditure requirements,
financial debt and liabilities, and forecasted financial results. In
the food & beverage industry, it also important to understand
the financial implications of compliance with the Canadian Food
Inspection Agency’s requirements (including product recalls and
equipment maintenance).
Based on their risk profile and the outcome of the due diligence, a
purchaser should be able to assess whether there are any potential
deal breakers, whether the structure and price of the acquisition is
appropriate or whether appropriate warranties and representations
are included in the purchase agreement.
Who should complete the financial due diligence?
Financial due diligence can be conducted either internally, by the
acquirers’ own accounting and finance function, or by external
independent due diligence professionals.The benefits of using external
professionals include: 1) The diligence is based on an independent
viewpoint from a party that has no direct interest in the outcome of the
proposed transaction; 2) The diligence is completed by professionals
who understand the dynamics of a transaction environment; and
3) Internal resources, which are likely already constrained, can be
dedicated to integration and post transaction planning.
Source: Bank of Canada
MONTHLY AVERAGE EXCHANGE RATE (1 CAD TO USD)
Food & Beverage Quarterly, Q2 | BDO Canada LLP8
Jun-13
Sept-13
Dec-13
M
ar-14
Jun-14
Sept-14
Dec-14
M
ar-15
Jun-15
Sept-15
Dec-15
M
ar-16
Jun-16
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%

9. MArket Update
Ryan Farkas, Transaction Advisory Services
What will I get out of a financial due diligence review?
Depending upon the scope of the procedures conducted, financial
due diligence should provide answers to the following questions: Is
the information provided by the vendor reliable? Are the historical
earnings of the company sustainable? What are the potential future
earnings of the company? What level of working capital should
be included at transaction closing? Has the company sufficiently
invested in capital expenditures? Are there any on- or off-balance
sheet liabilities that should be considered? Does the company have
any future commitments or contingencies? In the food & beverage
industry, it is also important to understand both the customer and
vendor contracts including the types and value of rebates being
provided and given, as well as the target’s history of product recalls.
When done properly, financial due diligence provides valuable
information to support a fair purchase price and ensures the
appropriate warranties and representations are included in the
purchase agreement. It also identifies the issues the purchaser
and vendor should address to complete a successful transaction.
Finally, in today’s markets, a third-party due diligence report is
increasingly becoming a requirement for lenders to provide financing
to a transaction. In summary, the cost of performing professional
financial due diligence far outweighs the cost of a bad acquisition.
Selected Q2 2016—Canadian Food and Beverage
Mid-Market Transactions
There were a total of 9 food & beverage deals announced in
Q2 2016. Five select deals have been highlighted below:
Elite International Foods Inc.was acquired byWallace &Carey
Inc.onApril 1, 2016 for an undisclosed amount. Elite International
Foods Inc. distributes food products to grocery and specialty food
retailers in Canada. The company was founded in 1997 and is based
in Calgary, Canada.
Highline Produce Limitedwas acquired by Fyffes plc (ISE:FQ3)
onApril 1, 2016 for approximately $145 millionCAD. Highline
Produce Limited, a mushroom farm, grows and distributes a line
of fresh, organic, dried, stuffed, and exotic mushrooms for retail
and food service clients in Eastern Canada and the Midwestern
United States. The company was founded in 1961 and is based in
Leamington, Canada.
DominionCitrus Limitedwas acquired by 2510891Ontario
Inc.on May 20, 2016 for approximately $32.5 millionCAD.
Dominion Citrus Limited provides an integrated suite of services
for fresh produce to various customers in retail, food service, and
food distribution businesses in Canada. It provides procurement,
processing, repacking, sorting, grading, warehousing, and
distribution services. The company also imports and distributes
fresh fruits and vegetables under the Country Fresh brand, as well as
under private labels.
Black RiverCheeseCompany Ltd.was acquired byGay Lea Foods
Co-operative Ltd.on May 25, 2016 for an undisclosed amount.
Black River Cheese Company Ltd. produces and markets cheese
in Canada. The company offers cow, goat, sheep and specialty
cheddars, mozzarella cheese, curd, vanilla and chocolate soft ice
creams and hard ice creams. It offers products through its retail
store, wholesale markets and online.
DMB Distribution alimentaire Inc. was acquired by an undisclosed
buyeron June 15, 2016 for an undisclosed amount. DMB
Distribution alimentaire Inc., also known as Distributions Marc
Boivin, operates as a food distribution company. It stocks and
distributes a wide range of food products to supermarkets, large
grocery stores, and regional food stores in Quebec.
Canadian FOOD AND BEVERAGE: m&A deal activity
70
60
50
40
30
20
10
0
2012 2014 TTM Jun-162013 2015
43 49 57 63 50
*TTM Jun-16: “Twelve months ended June 30, 2016”
Source: S&P Capital IQ
Number of Transactions Number of Transactions - Q2 2016
Food & Beverage Quarterly, Q2 | BDO Canada LLP 9
9

10. BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of
independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
About BDO’s Food and Beverage Practice:
BDO recognizes that it is critical to both build and protect your
brand, as well as to take advantage of recent developments
in innovation and technology. Our professionals understand
the varying priorities and concerns for food and beverage
organizations in Canada. As a leader in serving the food and
consumer products subsector, we help clients grow their
revenue in new markets, build their brands, and control costs
to maximize profitability. To ensure we stay current on the
issues facing food companies in Canada, we have conducted
the Food Processors Survey to learn how organizations are
evolving to build sustainable value in their businesses.
About BDO:
BDO is one of the nation’s leading providers of assurance,
accounting, tax, and advisory services. With strengths firmly
rooted in the communities we serve, our professionals deliver
highly individualized services informed by deep industry
knowledge and nearly 100 years of experience working in local
markets throughout the country. And with resources across
Canada and around the world, BDO provides seamless and
consistentcross-border servicestoclients with international needs.
BDO is an international network of public accounting, tax, and
advisory firms that performs professional services under the
name of BDO. With nearly 65,000 people working out of more
than 1,400 offices in over 150 countries, the network generates
worldwide revenue of $7.30 billion.
BDO Writers
For more information on these and other issues facing your business, please contact your local BDO office or the
GTA Food and Beverage Team:
Bob McMahon
Partner
National Industry Leader, Retail and Consumer Business
905 272 7818
bmcmahon@bdo.ca
Melissa Krakar
Senior Manager
905 272 7836
mkrakar@bdo.ca
Dan McGeown
National Practice Leader, Transfer Pricing
416 369 3127
dmcgeown@bdo.ca
Ryan Farkas
Senior Manager
416 865 0210
rfarkas@bdo.ca
Kevin Macnab
Manager
905 272 6253
kmacnab@bdo.ca
Jacquelyn Schaefer
Consultant
705 441 6346
jschaefer@bdo.ca
Jamie Windle
Senior Manager
416 865 0210 Ext. 3201
jwindle@bdo.ca