Bharatbook.com : Impact of economic crisis on Food and Drink market in Canada
Canada Food and Drink Report Q3 2009
Canada continues to feel the impact of the global economic slowdown and many of the country’s food and drink producers are suffering as a result. GDP growth is expected to fall 2.9% in 2009. Coupled with the maturity of the Canadian market and disappointing per capita food consumption growth forecast (3.8% in local currency to 2013), this does little to entice investors at the current time and as such this quarter has seen little merger, acquisition or expansion activity. Where industry activity is taking place it seems to be primarily focused in the mass grocery retail sector.( http://www.bharatbook.com/Market-Research-Reports/Canada-Food-and-Drink-Report.html )
Among those company’s feeling the pinch is the organic foods producer SunOpta, which posted a loss of CAD1.9mn (US$1.7mn) for Q109. The company stated that first quarter results had been affected by consumer uncertainty amid the deterioration of global economic conditions. Maple Leaf foods is also feeling the effects of the downturn. The firm plans to sell its pork processing plant in Ontario in order to focus on value-added meat, meals and bakery. However, due to the economic crisis and falling credit markets the company cannot negotiate an appropriate value and has had to put its plans on hold. Elsewhere, drinks producers are experiencing mixed fortunes. Canada’s leading manufacturer and marketer of spirits, Corby Distilleries, reported that for the nine months ending March 31 2009 net profit had fallen 11.2% to CAD23mn. On a more positive note, Molson Coors experienced one of its most profitable quarters in the last five years, with net profit for Q109 increasing an impressive 123.5% to reach CAD83.6mn (US$76mn). After years of declining earnings Q109 has seen Canadian soft drinks manufacturer Cott Corp post a profit of CAD22.9mn (US$20.8mn) for the period. The firm is likely to be well placed to benefit from the current economic conditions as it has reverted its focus back to producing private label soft drinks.
Moving to the mass grocery retail sector, this quarter has seen Canada’s largest convenience retailer Alimentation Couche-Tard announce the acquisition of the world’s leading petroleum and petrochemicals company ExxonMobil’s US-based On the Run convenience store franchise system. Alimentation Couche-Tard is likely to be hoping to take advantage of the expected increase in convenience retail sales, which we estimate will reach CAD5.5bn (US$4.4bn) by 2013. Despite some negative results this quarter, a number of the country’s food and drink producers, along with many of its retailers, remain positive. This optimism would not appear misplaced and we predicting that Canada will post the best performance among major developed nations in 2010, with GDP expected to expand 1.4%.
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