GAIN Report #CA9142
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This channel‘s potential growth opportunity for high value food products is very significant, particularly with the Wal-Mart organization, given it’s expansion of its Super Center concept in the U.S. market.
Although the short-term expansion emphasis for Wal-Mart appears to be in eastern Canada, the area of greatest opportunity, it is believed that their focus of attention will soon move to western Canada.
Over the next number of years Wal-Mart will be the number one competitive threat to traditional grocery as Wal-Mart develops their super center concept.
Food Trends and Demographic Factors The following are the some of key recent demographic factors of note in western Canada and their impact on food consumption trends. A) Immigration Immigration has had a big impact on the ethnic diversity, and the food sales trends of W\western Canada. Canada has had immigration of approximately 225,000 per year contributing approximately 50% of the annual population growth in Canada. Western Canada has been the destination for many of the new immigrants, now primarily of Asian descent. This trend has resulted in an opportunity for the food industry. Retailers and food manufacturers are catering to the new ethnic mixes with both traditional brands, new value added products, and with specialty sections in the food stores. These markets also potentially provide a testing ground for US food manufacturers looking at expanding from the U.S. home market to Canada and then eventually to Asian markets. B) Consumer Income Personal disposable income has declined through the 1990's in Canada and it is not until the last 2 years that a more robust economy has had a more positive impact on family incomes. Consumers throughout the 1990's have understandably pursued value in food purchases, and retailers responded with retailing strategies ranging from a focus on aggressive price comparison promotion, adoption of category management and a focus on fewer SKU’s in each category (top brands and new innovative products) and a focus on private label (now over 23% of combined grocery categories according to A.C. Nielsen).
C) Time Poverty and Convenience Foods The decline in personal disposable income has been offset to some extent by the higher level of two income families now up 60% of Canadian families. Female participation rate has also increased to over 70%. The net effect on families has been rising incomes and less time to spend it - time poverty. Consumers are starved for spare time to shop, and to plan and prepare meals. The result is the increasing demand for convenience and easy to prepare foods and home meal replacements.
Retailers have responded and have enjoyed fast rising sales in take out/ready to eat meals (deli sections), frozen foods (A.C. Nielsen shows frozen dinners and entrees increased to 23% of the freezer sales in 1998 with an annual growth rate of 13%), and lastly an increasing number of in store fast food kiosk’s (Pizza Hut’s/ KFC’s). It is interesting to note that the Canadian family prepares and consumes considerably more meals at home than the U.S. counter part (Canadian’s only consume 16% of food spending away from home versus 24% in the U.S.). No doubt the future trend in Canada will closely track U.S. trends in this area.
Section 2. Road Map For Market Entry
Supermarkets – Chain/Independents
Foreign Agricultural Service/USDA