2009-10-22 23:10:42 - Recently published research from Business Monitor International, "Canada Food & Drink Report Q4 2009", is now available at Fast Market Research

There has been minimal merger, acquisition, and expansion activity in Canada this quarter largely due to a slowdown in the economy. BMI has forecast a real GDP contraction of 1.4% for 2009 and, as a result, many companies are cautious of committing to heavy investments during this period of economic uncertainty. As the recession deepens consumers are also feeling the pinch and many have turned away from premium products, as discussed in BMI's newly published Canada Food and Drink Report Q2009.

Although some food and drink companies have posted positive results this quarter, in general earnings have suffered. Canada's largest dairy processing company Saputo announced this quarter that, in the nine months to December 31 2008, its earnings fell to CAD57.8mn

(US$47.1mn). Canadian soft drinks manufacturer, Cott Corp, and Canadian based brewer, Molson Coors, have also reported a drop in earnings, with the former announcing a loss of CAD152.8mn (US$124mn) for FY08 and the latter a drop in earnings of 22% to CAD416.4mn (US$338mn) for the same period. In addition to the general economic conditions, it is thought that Cott Corp's poor performance is likely to stem from a problem with its strategy and therefore the company needs to refocus its efforts on producing private label soft drinks. In light of the economic downturn, there is likely to be an increased demand for such products thus providing an opportunity for Cott Corp to reverse its fortunes.

Moving to the mass grocery retail sector, the situation is slightly different with many retailers posting positive financial results. Canada's leading supermarket chain Empire announced that during Q308 net earnings increased 26.5% to CAD61.5mn (US$47.6mn), whilst Canadian retailer Metro Inc reported an increase in net earnings of 9.9% year-on-year (y-o-y) to CAD81.1mn (US$65.9mn) for Q109. As the economic situation worsens, consumers are becoming more price conscious and therefore eating out less, as such retailers are picking up the slack and benefiting from the increase in sales this brings them. However, retailers appear to be mindful of the pressures consumers are facing and Wal-Mart, Loblaw, and Metro have all announced various forms of price promotions this quarter to continue to attract customers. With Canada's GDP expected to rebound in 2010 to 2.9% the long-term outlook offers some positivity even if the short-term appears quite bleak.

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