Transcript Opportunities in the Canadian Grocery Business

Opportunities in the Canadian
Grocery Business
John Teklenburg
President & 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 and
service industry
• Most of population and big cities all near US border: Toronto 5.4
million; 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% immigrant
households)
• $36,000 GDP / capita at parity (8th in world) with increasing
difference between high / low income families
Conclusion: Food export opportunities in prosperous markets with
diversified consumer profiles /costly distribution systems
Food in Canada
Households reported spending an average of $7,443 on
food in 2010. This included $5,377 on average spent on
food from stores and the remaining $2,066 on restaurant
meals.
The grocery business in Canada:
• $83,000,000,000 per year (about 5% of GDP) – Approx
60% through chain stores.
• Employs approx 550,000 people (3.7% of total national
employment), some part-time
• 22,402 stores
Additional opportunities: Food service and supply of
products for food industry
The big boys
The largest chains have nearly 50% of the
market:
Loblaws = 20% market share
Sobey’s = 13% market share
Metro Inc. = 9% market share
Walmart = 6% market share ($5 Bln / 167 SC’s)
They do not only operate supermarkets!
Competition between
the big boys is fierce
Loblaws
- More than 25 “banners”: Loblaws, Fortinos, No Frills, 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
Loblaws
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, Target
Grocery
- 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
Metro
(Example of JTI product line)
Walmart Canada
(Example of JTI product line)
Other markets: PL
(Examples of JTI product lines Mexico and Australia)
The other 50%: NOT only little boys
fighting – most very competitive!
The food sector is
very diverse,
competitive and with
many segments –
strong competition in
each segment
The other 50%
- Consumer club stores, e.g. Costco (approx 75 warehouses
with big volumes.
- Regional supermarket chains
- Smaller chains and over 900 independently owned small
supermarkets.
- Over 10,000 convenience stores – some connected with
gas stations
- Approx 650 independent delicatessen stores
- Frozen food products are a big trend in large chain stores
but there are also over 200 independent frozen product
stores (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 trends
1. Consumers demand “better” products: Health
consciousness, Non-processed items, Product
Safety (trend to local products – away from
processed products). They read labels!
2. Consumers increasingly demand sustainable
agriculture
3. Consumers seek convenience
4. Consumers demand VALUE (globalization,
recession): Price shopping versus value shopping
5. Still a large demand for “lowest price” when it
comes to staples and junk products.
How are stores responding?
Segmentation led to Polarization
1. Discount trending: Traditional supermarkets are still
important but their market share declined from 67 to
62% in past 3 years. The big chains are going towards
–
–
Hypermarkets (mostly low cost – not only groceries) now
about 11% market share (!), and
More discount stores: Large, medium and small
2. Premium trending: Format / Channel diversification
(specialization) not only smaller stores. Part of the
mass market is going upscale. Room for exclusives,
premium fresh items, specialty items (etnic, glutenfree, organic, diabetic, health food, etc.). In high-end
items of chain stores you will find lots of “ins and
outs”. USP’s critical.
Trends in grocery retail
• Price pressure to be competitive: Possible
through globalization.
• Diversification of sourcing: Openness to buy
from 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 are
biggest imports
- For commodities: It’s price!
- For specialties: It’s a USP
- Less supplier loyalty although one has
to be part of the club to be a supplier
Whatever your business is: Even a
small % of the $80 Billion is business
If you cannot compete in global markets, Canada is NOT the place for you.
To be successful:
- Know and understand your market and
your place in it
- Have a solid plan
- Carefully select penetration and
distribution
- Understand volatility: Be fast and
flexible
A SWOT ANALYSIS FOR
THE COLOMBIAN FOOD EXPORT SECTOR
Positive
Negative
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Strengths
Weakness
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- Home market focus/small size
companies (few huge)
- Internal Logistics
- Sometimes: Lack of marketing
& export experience
- Lack of certifications: BRC, etc.
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Opportunities
Threats
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- International Competition
- Late market entry
- New in market
Climate
Proximity (ocean freight)
Excellent professionals
New in market
Internal market with
interesting products
Free Trade Agreement
“Tropical” items
Organic Markets
Good reputation (coffee)
Market more open-minded
Additional focus on
Opportunities and Threats
Opportunities:
- Fresh Produce vegetables and fruits. We cannot even grow lettuce
because of our (lack of) climate. Canada has two seasons only:
“Construction” and “Winter”
- Consider cultivating items we need because of climate and high
Canadian labor cost
- Prosperous market / some of your specialties may have potential
Threats:
- 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 need
several distributors to serve several geographic areas and
distribution channels).
Private initiative: The Danper
Farms – A unique venture
It commenced in 2004: Danper started with
converting 445 ha of desert lands in Northern Peru
with an ideal eternal spring climate. It rapidly went
from this..
To this: A leading agro-industrial complex
In the North: 2,000 ha highly productive asparagus fields. Plus: In 17 valleys
spread across Peru, 2,200 ha of “black land” to cultivate artichokes and
much 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, target
markets 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 (distributors
know and can package your bulk items in Canada).
- Logistics: The need of Just-on-time deliveries. Constraints within
Colombia, 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 and
how does it compare with the competition from other countries?
- Your sustainability?
ANALYSIS RESEARCH IS KEY
Three 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 term
entry before doing your homework.
An example of teamwork – vertical integration to
build a private label product line
STRATEGIC PARTNERS ARE KEY
Apart from finding some short term
opportunities, in this global environment you
have only a few choices:
- Don’t play
- Be a minor player
- Efficiently organize your optimum vertically
integrated supply system by creating strong
partnerships: In Colombia (agricultural crop,
packaging, logistics) and in Canada
(distributors).
WHAT CAN WE DO FOR YOU
IN CANADA?
1. Assess the possibilities for your
product(s) in Canada.
2. Be your (master-) distributor if your
product fits in our product portfolio.
3. If your product(s) do not fit in our
portfolio: Identify one or more
distributors for your product(s).
Build Alliances
….to solve the SUCCESS puzzle
Vertical integration of the supply chain is key. Efficient,
professional, fine-tuned team work is essential.
JTI Inc. (Canada)
JTI Foods Inc. (USA)
JTI Foods Pty Ltd. (Australia)
Agrosol International Inc. (Europe)
John Teklenburg
[email protected]
Call me directly
HQ near Toronto +1 (905) 681-2555, ext 211