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Canada Food and Drink Report Q4 2011
Business Monitor International, Oct 2011, Pages: 95
Business Monitor International's Canada Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada's food and drink industry.
The latest results from Canadian retailers suggest that the consumer market continues to be something of an outperformer in terms of developed states. This is reflected in the strong share price performances of two of the country’s largest retailers, which have outperformed our grocery retail index since the start of 2011.
While the Canadian economy has certainly been affected by weak global growth and the poor state of the US economy, the consumer remains in a relatively strong position to continue purchasing, which should bode well for steady (if not spectacular) results for the country’s leading grocery retailers and producers.
Headline Industry Data (local currency):
2011 per capita food consumption value = 1.7%; forecast to 2015 = 9.0%
2011 alcoholic drink value sales = 0.2%; forecast to 2015 = 19.3%
2011 soft drink value sales = 4.4%; forecast to 2015 = 25.7%
2011 mass grocery retail value sales = 5.4%; forecast to 2015 = 24.7%
Key Company Trends And Developments
Molson Coors Takes Control Of Cobra India: Canada-based beer producer Molson Coors has purchased a controlling stake in Cobra India after the Indian beer company ran into capital difficulties. Molson Coors revealed that the purchase of the stake plus upfront investment would cost US$35mn and that the business is to be renamed Molson Coors Cobra India. The move will give the firm greater exposure to the high-growth Indian market and comes two years after it purchased a 50.1% stake in Cobra’s UK business.
Couche-Tard Still Performing Strongly, But Not Immune To Economic Environment: Canada-based convenience store operator Alimentation Couche-Tard has reported solid results for its fiscal first quarter, underlining its position as a regional outperformer. For the three months ending July 17 the firm registered a 24% increase in revenues, aided by higher fuel prices and expansion, while net profits advanced by 9.9%. On a like-for-like basis the results looked less robust, with general merchandise sales up by 1.5% in the US and down 0.2% in Canada. However, given the weak economic backdrop, this result is still relatively positive.
Key Risks To Outlook
China Slowdown: BMI still remains concerned about the growth cycle in China, which could ease significantly as the government there tightens policy to stave off soaring inflationary pressures. This would have knock-on effects on Canada via several channels, not least commodity prices.
Drop In Property Prices/Increased Interest Rates: BMI has some concern that house price appreciation may top out (but not end in a crash), which would cap the wealth effect. A second risk is that interest rates move higher more quickly than BMI is currently forecasting, which will increase the cost of credit and reduce the propensity to borrow.
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