The Canadian consumer demonstrated particular resilience throughout the downturn, as reflected in figures for private consumption growth, which remained in positive territory during 2009 and 2008. However, in the last six months, things have looked less rosy, with the economy slowing a bit more quickly than we anticipated and the consumer showing signs of taking a breather. The outlook is one of moderation from a strong H209-H110, not fundamental weakness. This view is a result of incoming headwinds, including interest rate hikes, inflation reducing disposable income and the potential for house price moderation or even a downturn. That said, the underlying fundamentals are still positive, with the labour market improving and real wages beginning to grow more robustly accordingly.
Headline Industry Data (local currency)
?? 2011 per capita food consumption value = 1.4%; forecast to 2015 = 7.1%
?? 2011 alcoholic drink value sales = -0.4%; forecast to 2015 = 18.2%
?? 2011 soft drink value sales = 0.3%; forecast to 2015 = 19.7%
?? 2011 mass grocery retail value sales = 3.7%; forecast to 2015 = 28.1%
Key Company Trends And Developments
Staple Outperformance Chimes With Increasing Consumer Pressure – In line with an uptrend in the wider market, consumer shares in Canada have generally been moving upwards over the last 18 months. Over this period, consumer discretionary stocks outperformed, but since the start of 2011 this pattern has reversed, with staples coming to the fore. The underperformance of consumer discretionary stocks is usually seen as a sign of risk aversion, and the expectations of consumer retrenchment. This fits in fairly well with our outlook for the Canadian market, with the Canadian consumer expected to moderate in 2011 and 2012 after a very strong previous 12 months.
Cott's Ongoing Turnaround Predicted By BMI – Canadian private label soft drink specialist Cott has posted rising sales for its latest financial year. In the 12 months to December Cott registered a 7% increase in recoded volumes, with the results boosted by the acquisition of juice maker Cliffstar in August 2010. On an organic basis (excluding the impact of Cliffstar) volumes were up by 1%. Revenues were up by 13% to US$1.8bn but declined on an organic basis by 1%. During the fourth quarter Cott's sales growth accelerated, with volumes up by 20% (4% excluding Cliffstar) and revenues up by 37% (3% excluding Cliffstar). The results continue to point to a recovery for the business, which had been hampered by mismanagement and the trend away from carbonated soft drinks.
Key Risks to Outlook
Secondary slowdown – Though the risks of a 2011 US slowdown are fading, we still remain 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.
Household indebtedness - High household indebtedness also threatens to crimp private consumption. The federal structure, with individual provinces sometimes pulling in different directions, could create new and unexpected calls on the federal budget, and risk further eroding the fiscal deficit. A more austere government fiscal plan than we are expecting could lead to a flat or even negative contribution from government consumption, perhaps as early as 2012.

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BMI Industry View . 7
SWOT Analysis 9
Canada Food Industry SWOT . 9
Canada Drink Industry SWOT . 10
Canada Mass Grocery Retail Industry SWOT . 11
Business Environment 12
BMI’s Core Global Industry Views .. 12
Table: BMI Food & Drink Core Views 17
Risk/Rewards Ratings . 18
Table: Global Food & Drink Business Environment Ratings 19
Macroeconomic Outlook 22
Industry Forecast Scenario 25
Consumer Outlook 25
Food. 27
Total Consumption . 27
Table: Canada Food Consumption Indicators - Historical Data & Forecasts . 28
Confectionery 28
Table: Confectionery Value/Volume Sales – Historical Data & Forecasts . 29
Canned Food 30
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts . 30
Drink 31
Alcoholic Drinks . 31
Table: Alcoholic Drink Value/Volume Sales – Historical Data & Forecasts . 32
Hot Drinks . 33
Table: Hot Drink Value Sales ? Historical Data & Forecasts .. 33
Soft Drinks . 34
Table: Soft Drink Value Sales - Historical Data & Forecasts .. 34
Mass Grocery Retail 35
Table: Canada Mass Grocery Retail – Value Sales By Format – Historical Data & Forecasts .. 36
Table: Canada – MGR Sales Breakdown By Retail Format Type 36
Trade .. 37
Table: Food & Drink Trade Balance – Historical Data & Forecasts 37
Food . 38
Key Industry Trends And Developments 38
Investment In Capacity 38
Interest In Healthy Alternatives .. 38
Food Industry Restructuring . 39
North American Dairy Consolidation .. 40
Ethical Focus 41
High Liner Bids for Growth .. 42
Market Overview .. 42
Food Consumption . 42
Food Processing . 42
Confectionery 43
Dairy . 43
Drink 45
Key Industry Trends And Developments 45
Cott's Ongoing Turnaround Predicted By BMI 45
Soft Drinks Companies Reveal Calorie Count . 46
Interest in Healthier Alternatives 46
Possible Entry Of Coca-Cola FEMSA . 47
Interest in Craft Beers Growing .. 48
Investment In Wine 48
Growth Of Coffee Capsules .. 49
Market Overview .. 50
Alcoholic Drinks . 50
Hot Drinks . 51
Soft Drinks . 52
Mass Grocery Retail .. 53
Key Industry Trends And Developments 53
Target Expands Into Canada 53
Growth Of The Hypermarket 53
Couche-Tard Driving Consolidation In North American Convenience . 54
MGR Market Overview .. 54
Main Players. 55
Table: Canada – Structure Of Canada's Mass Grocery Retail Sector, Sales By Format (US$bn) .. 56
Table: Canada - Annual Average Value Of Sales By Format, 2010 56
Competitive Landscape .. 57
Consumer Share Price Analysis . 57
Key Players .. 60
Table - Key Players In Canada's Food Sector . 60
Table - Key Players In Canada's Drink Sectors .. 61
Table: Key Players In Canada's Mass Grocery Retail Industry 62
Company Profiles . 63
Food. 63
Saputo .. 63
George Weston Ltd 65
Maple Leaf Foods .. 66
Drink 67
Corby Distilleries Ltd .. 67
Cott Corp 68
Mass Grocery Retail 70
Loblaw Companies Ltd 70
Metro Inc 72
Sobeys .. 73
Wal-Mart 74
BMI Methodology 75
Food & Drink Business Environment Ratings 75
Table: Rewards 76
Table: Risks .. 77
Weighting 77
Table: Weighting 78
BMI Food & Drink Industry Glossary 79
Food & Drink .. 79
Mass Grocery Retail . 79
BMI Food & Drink Forecasting & Sourcing . 81
How We Generate Our Industry Forecasts 81
Sourcing .. 82
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