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GAIN Report #CA9142

Page 3 of 19

C) Summary of the Retail Food Sector Strengths - the Opportunities and Challenges that are faced by US Exports in Western Canada.

Advantages

Challenges

Large Market of 10 Million Consumers in Western Canada (90% within 100 miles of the border)

A high level of retail concentration in Western Canada

Sophisticated distribution infrastructure

The higher value of the US dollar adds costs to US exports in Canada

Imports are well accepted fact of life for Canadians as Canada has a short growing season and a high dependence on international trade - especially with it’s number 1 trading partner - the USA.

Retailer power and the difficulty and high cost associated with gaining entry/ listings, and sustaining retailers support.

A common culture, with common eating habits and food trends ( with a few notable differences mentioned in this report )

Higher level of Private Label development and the lower number of branded product Stock Keeping Units in the average Canadian store

NAFTA, free trade, and the elimination of tariffs on most food products

Packaging requirements around Bilingual labels and Metric measurements

( French and English )

US high value food products are well accepted by retailers and consumers especially those filling unique needs and leading current food trends.

D) Retail Food Sector Structure The western Canada retail food sector has two dominant and unique features. The first is the segmentation of the industry into it’s two key components traditional grocery stores and non grocery stores. This segmentation will be discussed in detail in the following section of this report.

The two key segments are as follows :

  • -

    Traditional grocery (chains and independents) dominates in western Canada with 81.1% of retail food sales in

1998.

  • -

    Non grocery at 18.9% is comprised of membership clubs (Costco) 9.4%, mass merchandisers 3.0%, specialty

    • 2.3

      % and all other non grocery (including gas bars) 2.2%. (Source - NPD Trade Track).

The second unique feature of the western Canadian retail food sector is it’s high level of concentration of ownership. The 1998 statistics (CCGD/FMI Industry Report) show that in each Western province 4 or 5 retailers control over 90% of total food distribution.

Retail Concentration by Province:

BC - 90% Alberta - 96%

( Safeway, Ovewaitea, Loblaws, HY Louie, and Thrifty’s). ( Safeway, Overwaitea, Loblaws, Sobeys West, Co-op )

Manitoba/Saskatchewan - 92% ( Safeway, Loblaws, Sobeys West, & Co-op)

With this high level of concentration, retailers have disproportionate power that has manifested itself in several ways. Including higher levels of private label sales (now 23% of combined grocery category sales), focus on category management, fewer stock keeping unit listings, higher listing fees, and tighter control over in store merchandising. Given this situation, the role of a well planned entry strategy presented by a strong sales force or broker/agent is increasingly important.

UNCLASSIFIED

Foreign Agricultural Service/USDA

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