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Opportunities in the Canadian Grocery Business John Teklenburg President & CEO JTI Group of Companies (Canada, USA, Australia, Europe) Lead, follow or.

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Presentation on theme: "Opportunities in the Canadian Grocery Business John Teklenburg President & CEO JTI Group of Companies (Canada, USA, Australia, Europe) Lead, follow or."— Presentation transcript:

1 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

2 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 (8 th in world) with increasing difference between high / low income families Conclusion: Food export opportunities in prosperous markets with diversified consumer profiles /costly distribution systems

3 Food in Canada Households reported spending an average of $7,443 on food in 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

4 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!

5 Competition between the big boys is fierce

6 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 (40 th 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

7 Loblaws

8 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

9 Metro - Started in Quebec -Bought A&P in ,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

10 Metro (Example of JTI product line)

11 Walmart Canada (Example of JTI product line)

12 Other markets: PL (Examples of JTI product lines Mexico and Australia)

13 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

14 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

15 Brands for the other 50% (We have our house labels and supply to major brands)

16 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.

17 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, gluten- free, organic, diabetic, health food, etc.). In high-end items of chain stores you will find lots of “ins and outs”. USP’s critical.

18 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

19 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

20 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

21 Strengths -Climate -Proximity (ocean freight) -Excellent professionals -New in market -Internal market with interesting products Weakness -Home market focus/small size companies (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-minded Threats -International Competition -Late market entry - New in market Positive Negative A SWOT ANALYSIS FOR THE COLOMBIAN FOOD EXPORT SECTOR

22 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).

23 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..

24 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..

25 (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?

26 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.

27 An example of teamwork – vertical integration to build a private label product line

28 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).

29 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).

30 Build Alliances ….to solve the SUCCESS puzzle Vertical integration of the supply chain is key. Efficient, professional, fine-tuned team work is essential.

31

32 JTI Inc. (Canada) JTI Foods Inc. (USA) JTI Foods Pty Ltd. (Australia) Agrosol International Inc. (Europe) John Teklenburg Call me directly HQ near Toronto +1 (905) , ext 211


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