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					                                                         2004
                                                  Marketing Analysis
                                                                                 for


                                                             Mid Island Co-op
                                                                   Bowen Grocery Store

                                                                     2517 Bowen Road,
                                                                   Nanaimo, B.C. V9T 3L2
                                                                      (250) 729-8400




Prepared by - mclaren consulting

Completed: June 7th, 2004




    tel (250) 618-1226 – fax (250) 729 4961 – Email: profit@mclarenconsulting.ca - Web: www.mclarenconsulting.ca
Table of Contents
Table of Contents ............................................................................................................................ 2
1.0 Executive Summary .................................................................................................................. 3
   1.1 Objectives ............................................................................................................................. 7
   1.2 Background ........................................................................................................................... 8
2.0 Business Analysis ..................................................................................................................... 9
   2.1 Business Profile .................................................................................................................... 9
       2.1.1 Mission.......................................................................................................................... 9
       2.1.2 Niche/Position...............................................................................................................9
       2.1.3 Target Customer Segments ......................................................................................... 10
   2.2 Business Performance – History ......................................................................................... 13
       2.2.1 Sales ............................................................................................................................ 14
       2.2.2 Promotion....................................................................................................................17
       2.2.3 Marketing Mix - Overview ......................................................................................... 19
   2.3 Mid Island Co-op - Qualitative Analysis ............................................................................ 20
       2.3.1 Interviews....................................................................................................................20
       2.3.2 S.W.O.T. Analysis ......................................................................................................21
       2.3.3 Focus Group Report ....................................................................................................25
3.0 Market Analysis ...................................................................................................................... 28
   3.1 Industry ............................................................................................................................... 28
       3.1.2 Industry Trends ...........................................................................................................29
   3.2 Market Areas - Trade Areas................................................................................................ 33
       3.2.1 Market Share ...............................................................................................................33
       3.2.2 Nanaimo Households and Demographics ...................................................................34
       3.2.3 Market Trends .............................................................................................................35
   3.3 Competition Review ........................................................................................................... 36
4.0 Recommended Strategies to Increase Sales ............................................................................ 38
   4.1 Marketing and Communications ......................................................................................... 38
   4.2 The Shopping experience.................................................................................................... 40
   4.3 Member loyalty and data management ............................................................................... 40
   4.4 Target closest and most vulnerable competitor– Quality Foods, Bowen ........................... 40
5.0 Conclusion .............................................................................................................................. 41
6.0 Appendix – Reference Materials & Sources........................................................................... 42
                                2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store
1.0 Executive Summary
Mid Island Co-op commissioned mclaren consulting to conduct a marketing study to assess the
potential of increasing sales by 40% at the Mid Island Co-op grocery store.

Through the process of answering the above question, the study would also contain general
recommendations for overall sales growth.

     Analyze Mid Island Co-op‘s current processes and outcomes to determine strengths and
     weaknesses of current marketing procedures
     Analysis of market position including competitive analysis
     Including the Co-ops niche/values as a social democratic – community driven membership
     Analysis of target market, current membership and trade area demographics
     Analysis of Mid Island Co-ops key performance indicators as compared to industry and
     National Co-op standards
     Analyze marketing budget and processes
     Assess and recommend strongest opportunities for sales growth

Background: Mid Island Co-op – Bowen Road store has continued to run revenue shortfalls
with declining sales over the recent history. The Nanaimo area has seen rapid growth of grocery
retail competitors, while Co-op closed their Harewood location in 2001. At the same time the
competition has been upgrading and increasing.

Niche/Position: Co-op’s philosophy is held up as the niche/position within the Nanaimo market
place. Amongst the members and the general consumers, this niche is neither well defined nor
recognized.

Target Customer Segments

 Young/medium families that buy large quantity of groceries
      And/or current loyal members
 And/or higher educated (respond to social democratic values)
 And/or a union members
 New to the area, Prairie transplants
 Older non family (under serviced)
      And/or current loyal members

Geographically, the primary market for Mid Island Co-op is family households predominantly
within the V9S F.S.A. postal area and to a lesser extent – V9T. These are consumers that will
find the Co-op location convenient and live in areas surrounding the Bowen Road corridor and
into Departure Bay.

The Co-op membership to postal code ratio is very impressive and shows an excellent
opportunity to convert grocery consumers/members within the V9R area and a smaller portion of
the V9T area. These are households that will find the Co-op location convenient.


3
                                 2004 - Marketing Analysis
                            Mid Island Co-op – Bowen Grocery Store

Business Performance – History: Mid Island Co-op has gone from a leadership (40% share)
position in 1980 to a 5% share position in 2003/04. Co-op closed their Harewood location in
2001. At the same time, the Nanaimo area has seen rapid growth of grocery retail competitors
who have also been aggressively upgrading and increasing.

Sales: Since fiscal 1990/91, there has been a consistent downward trend in annual gross sales for
the Mid Island Co-op Bowen store. One major exception in this downward trend is when the
Harewood store closed in July 2001, resulting in a number of Harewood store members/shoppers
converting to the Bowen location. However, since 2001/02 the downward trend has continued.

Sales by Customer: Sales per customers is consistently trending downward, when considering
this result and the decrease in customer counts there is clear indications that consumers are not
responding favourably both to external communication and to the internal shopping experience.

Promotion: Results from the focus group sessions conducted for this report clearly recognize a
severe lack of positive positioning by the Mid Island Co-op grocery store. Currently, members
(and many staff) do not recognize a clear benefit in being a Co-op member. For non-members
there is either no recognition of any benefits, or a negative perception based on dated
information. For the basic grocery consumer there is the over-riding perception of an out-of-date
grocery store that is expensive. Positive positioning and niche development is absolutely critical
to the success of the Co-op Bowen store.

Promotional spending should be categorized, budgeted and tracked by medium type and fiscal
period. Promotional spending for the store in 2003/04 was at $205,160 or 2% of gross sales.
This is slightly above the norm for stand-alone grocery stores. When considering market share
and sales declines, the advertising spending is low.

Co-op flyers do not rank strongly with the consumer. The low cost of the flyers is exceptional
and too good to not continue. The low-cost flyers must be maintained, but enhanced with some
local positioning strategies with local benchmark pricing.

Marketing Mix - Overview

Product/Operation:

        The Produce section has clearly been recognized as a critical store weakness and must
         be addressed.
        The meat department has been recognised as a strength that is poorly promoted.
        The Bakery and Deli appears to be competitive in pricing and offers but this department
         should not be considered a strength. A poor layout with tired product displays, fixtures
         and bad lighting creates an under whelming visual appearance.
        The grocery area could be competitive but due to a confusing non-traditional layout and
         poor displays it should be considered an overall weakness.




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                                 2004 - Marketing Analysis
                            Mid Island Co-op – Bowen Grocery Store
Pricing: A definitive weakness, rooted both in reality and a very strong perception with members,
non-members and many staff members that overall the store is expensive. There have been strong
in-store specials but to the most part it is an in-house secret, only loyal members are aware of these
promotions.

Place/location: The location and its convenience did not receive an overall high rating by the
focus groups. The location has excellent parking and compares well in this category. The store
is also positioned well to reach households in the Diver Lake area and Bowen Road corridor and
has several distinct advantages over the Quality Foods, Bowen Road location.

Mid Island Co-op - Qualitative Analysis: The Focus groups indicated that many of the
conditions and attitudes towards shopping and perceptions of the store/market mix in Nanaimo
continue to reflect the findings of the 1999 research. The interviews conducted and the SWOT
analysis duplicated, to the most part the focus groups message that in almost all critical areas of
operations and marketing the Mid Island Co-op store is at the back of the competitive pack. At
the same time, both the stakeholder interviews and the focus groups indicate strong opportunities
for growth and niche development for the Co-op. Many of these suggestions strongly fit
industry and local market trends.

Industry and Local Market Trends: For Nanaimo this study suggests the ranked main factors
for choosing a store for the weekly grocery shop are:

    1. Pricing
           a. Every day low pricing
           b. In store specials
    2. Location/convenience
    3. Produce/Meat/Bakery quality
    4. Selection
    5. In store experience

Industry trends with opportunity for growth/development

          Prepared Foods/Meals
          Community and Charitable Support:
          Capital Improvements
          Buy Local, Marketing Programs




5
                                2004 - Marketing Analysis
                          Mid Island Co-op – Bowen Grocery Store
Market Share and the Competition: Mid Island Co-op has seen its share of the Nanaimo
grocery market decrease from: 40% in 1980, 6.5% in 2002, Less than 5% in 2003/04.

New and growing competition – Nanaimo is a highly competitive and over-serviced market area.
There is robust investment in capital improvements and the in-store shopping experience
amongst the grocery retailers.
        Co-op has fallen behind
        Fairway Market – three- to four- year old store – much more current than Co-op
               Most likely has, and is, stealing Co-op share
        New Save-on Foods - Woodgrove
        Renovated Save-On Foods at Country Club and Terminal Park
        Potential for a new grocery tenant at Rutherford Mall
        All other competitors have a stronger and/or more relevant in store layout

Thrifty Foods and Quality Foods have been recognised as main competitors, Fairway Markets
should be added in consideration of their location and market share growth. Quality Foods,
Bowen Road should be the main focus in a competitive/market penetration strategy. They are
Co-op‘s most direct competitor are also the most vulnerable of the competitors.

Recommended Strategies to Increase Sales:

The overlying factors in any sales improvement for Mid Island Co-op – Bowen Grocery store is:
            There must be radical change
            With consistent follow through
                    At every level of the operation and marketing pipeline
            A substantial increase in marketing budget
            A substantial financial investment into capital upgrades

Recommended Strategies – Concepts:

    1. Marketing and Communications

Increasing the marketing influence and weight within the Mid Island Co-op management
structure. Incorporate an integrated and consistent marketing / positioning approach for the
entire Mid Island Co-op operation. Positioning - Clearly establish the Co-op niche/position with
target segments, enhancing/developing in store depratment offers.

    2. The Shopping experience

Upgrade store to ―catch up‖ to the competitors and develop in store niche. Improve shopping
experience with focus on comfortable lighting, a welcoming entry way and a traditional grocery
floor plan/merchandising plan.




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                                 2004 - Marketing Analysis
                            Mid Island Co-op – Bowen Grocery Store
    3. Member loyalty and data management

Manage, track and use membership data to enhance the relationship with the Co-op
customer/member. Increase cross-promotional marketing with gas bars.

    4. Target closest and most vulnerable competitor– Quality Foods, Bowen

Conclusion

For the Mid Island Co-op store to become competitive again radical change, consistent follow
through in both marketing and operations is necessary, plus a substantial investment in capital
upgrades.

Even with these changes our findings show that a 40% increase in sales is unlikely and most
probably impossible in this highly competitive market. The Co-op store is currently operating in
a ―negative vacuum‖, the downward momentum means an aggressive approach is needed just to
stop the share lost and declining sales.

With an aggressive, integrated and consistent marketing plan pursuing niches and effectively
positioning the Co-op store, the grocery operation has the potential to stop the decline in sales
within a year. With consistent follow through of a comprehensive marketing plan, the Co-op
store can potentially see 5% incremental growth in the years following.

Considering the investment needed to become competitive, stopping the decline and then in the
years following seeing manageable growth the return on investment would not be realized for at
least another four years.


1.1 Objectives

    1. How to increase market penetration?
         a. Can sales be increased by 40% in the existing market area?
                   - Stop trend of declining sales and market share
                   - General recommendations for sales increases
                   - Analysis of current marketing situation




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                               2004 - Marketing Analysis
                          Mid Island Co-op – Bowen Grocery Store
1.2 Background

Mid Island Co-op has continued to run revenue shortfalls with declining sales over the recent
history. At the same time the Nanaimo area has seen rapid growth of grocery retail models
including Costco and Superstore; the traditional competition of Thrifty, Quality Foods and a new
Save on Foods; plus assorted local merchants. At the same time the competition has been
upgrading and increasing, we note that the second Co-op store in Nanaimo was closed lessening
the overall footprint of Co-op in the marketplace.


Methodology

For this marketing study we used traditional research methods pursuing both primary and
secondary research. Our analysis includes both qualitative and qualitative data where we
assessed information from past Mid Island Co-op reports, conducted our own focus groups with
consumers and interviews with Co-op stakeholders.

 16 interviews conducted with store management; store staff and Mid Island Co-op board
   members. Participants were randomly selected.
 Focus Groups – subcontracted market research and focus group specialist – Roger Griffin
       Three focus groups were conducted: Older members, younger members, non members
 Competitive Analysis
 5 interviews with grocery/retail association executives and grocery sector consultants
 Secondary Research
           o Market area research – FP Markets – 2004 Demographics, Economic
              Development Office – City of Nanaimo
           o Industry profile – Multiple national and international retail/grocery studies
           o Previous Mid Island Co-op reports




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                                 2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store
2.0 Business Analysis
2.1 Business Profile
―Co-operatives are based on the values of self-help, self-responsibility, democracy, equality,
equity, and solidarity. In the tradition of their founders, co-operative members believe in the
ethical values of honesty, openness, social responsibility and caring for others.‖
Source: ―What is a Co-operative?‖

Key points from “About Mid Island Co-op”

   Our members are our owners
   We provide ourselves with services
   Membership is open and voluntary - and it pays to join!
   Our earnings stay in the community
   Mid Island Co-op is socially responsible
   We're part of a world-wide community of co-operatives
   Co-operatives are based on a set of principles

Mid Island Co-op was created by mid-Vancouver Island citizens in 1959 as a socially
responsible way to provide themselves with goods and services.

Today, Co-op's 20,000 members own seven gas bars with convenience stores along with the
familiar landmark on Bowen Road, Co-op Centre. All of the profits stay in the community
through allocations to their members or contributions to local organizations.

They offer a broad range of services, including a grocery store with home delivery. Anyone can
shop Co-op, though membership is available at a one-time cost of $10.

2.1.1 Mission

“Mid Island Consumer Services Co-operative provides an economic and social return through
quality, excellence and service as a member-owned Canadian business.”

2.1.2 Niche/Position

Current position in grocery store market place:

As recognized by store management and board members, the Co-op philosophy is held up as the
niche/position within the Nanaimo market place. Amongst the members and general consumers,
this niche is either not well defined or even recognized.

               Not well maintained with membership
               Not recognized by average consumer in trade area
               Not ranked as a primary influencer for choosing grocery stores



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                                2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store

In ―having weekly food specials‖ and ―low overall pricing‖, the focus groups ranked the Co-op
store as low even with their own members. Both members and non-members rate every other
store higher on pricing issues.

As this perception is the chosen influencer with grocery shoppers, this position must be adapted
in some way for the Co-op store to succeed in this competitive market.


2.1.3 Target Customer Segments
Considering the niche/positioning opportunity for Mid Island Co-op and its location, it is
suggested that the target customer segments be generally defined as:

 Young/medium families that buy large quantity of groceries
      And/or current loyal members
 And/or higher educated (respond to social democratic values)
 And/or union members
 New to the area, ‗Prairie transplants‘
 Older, non-family (under serviced)
      And/or current loyal members

Target Segments defined by demographics and psychographics
Further target segments are defined within the appendices.

Old Towns’ New Fringe – Younger and middle-aged high school and especially college
educated, grey collar, blue collar and government workers. Predominantly small families,
mortgaged, moderately priced, newer, own single-detached dwellings.

Boomers and Teens – Middle and late middle-aged, university and college-educated
maintainers of larger families with children over age six, especially teens. Managerial and white
collar occupations; commonly two wage earners.

Technocrats and Bureaucrats – Middle-aged maintainers of larger families living in large,
new, single-detached dwellings in suburbs of larger and medium-sized Canadian cities. Very
well-educated. Public sector and managerial occupations. Most households have two wage
earners.

Satellite Suburbs – Upper middle class, middle-aged maintainers of large families with children
of all ages. Typically college-educated with grey collar and managerial occupations. Commonly
two wage earners. Largely own heavily mortgaged, newer, single-detached and other dwellings,
16% ―ethnic‖.

Aging Erudites – Older, well-educated singles, couples and small families. Managerial and
upscale white-collar occupations. Single-detached and other predominantly `50s dwellings; 68%
owned; 10% apartments. Mortgages are small. These people ‗soak up culture‘.


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                                           2004 - Marketing Analysis
                                       Mid Island Co-op – Bowen Grocery Store

 Aged Pensioners – Largely very old singles, some couples, renting small apartments, flats and
 other dwellings in in-town areas of small and medium-sized Canadian cities. Very low
 education levels. High unemployment and government transfer rates. Low-status, grey collar
 occupations by very low labour price participant. High mobility.

 Source: FP Markets – Canadian Demographics 2004

 Geographically, the primary market for Mid Island Co-op is family households within the V9T
 and V9S - F.S.A. postal areas. These are consumers that will find the Co-op location convenient
 and would live in areas surrounding the Bowen Road corridor and into Departure Bay.

 Co-op Members – Where they live:


         Members Categorize by Postal Code                             Percentage of Members in Each Postal Code
                                                                                         Area
              4000
          3000                                                                       V9X          V9R
Number of                                                                            15%          24%
          2000                                                               V9V
Members
          1000                                                               15%

                0                                                                                  V9S
                     V9R   V9S   V9T     V9V    V9X                                V9T
                                                                                                   25%
                                                                                   21%
                                 FSA




 Comparison of households by F.S.A. to Co-op members:

 The Co-op membership to postal code ratio is very impressive and shows an excellent
 opportunity to convert grocery consumers/members within the V9R area and a smaller portion of
 the V9T area. These are households that will find the Co-op location convenient.


      10000
      9000
      8000
      7000
      6000
                                                                             Members
      5000
                                                                             Hhlds
      4000
      3000
      2000
      1000
         0
                     V9R         V9S           V9T     V9V       V9X




 11
                                     2004 - Marketing Analysis
                            Mid Island Co-op – Bowen Grocery Store
                                       Number of    Number of
                           FSA         Members      Households
                           V9R           3882         8621
                           V9S           2061         4360
                           V9T           3747         9200
                           V9V            861         2997
                           V9X            860         2966

The data and graph above indicates that V9R, V9S, and V9T are areas where most co-op
members live.


Current Customers/members – Demographics: Bowen Store
New Members – Age Group


                           Age breakdown of new members 2003-04 Full Year


          400


          350


          300


          250


          200


          150


          100


           50


            0

                Under 20     20-29        30-39    40-49    50-59    60 and o ver   No age




12
                                 2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store




2.2 Business Performance – History

Mid Island Co-op has gone from a leadership 40% share position in 1980 to a 5% share position
in 2003/04. Co-op closed their Harewood location in 2001. At the same time, the Nanaimo area
has seen rapid growth of grocery retail competitors who have also been aggressively upgrading
and increasing.

The Bowen store has moved from a ―warehouse style‖ grocery operation to a more competitive
super market type. Through the years, the store has struggled to stay current and competitive.
Over the last ten years the store has fallen further behind the competition and the store operation
is in need of a substantial capital upgrade.




13
                                                                          2004 - Marketing Analysis
                                                                Mid Island Co-op – Bowen Grocery Store
 Membership has increased due to the gas bar operation and revenues are consistently strong for
 the overall operation again due to the gas bars. The store continues to lose over a million dollars
 a year.

 2.2.1 Sales
 Since fiscal 1990/91, there has been a consistent downward trend in annual gross sales for the
 Mid Island Co-op Bowen store. One major exception in this downward trend is when the
 Harewood store closed in July 2001, resulting in a large number of Harewood store
 members/shoppers converting to the Bowen location. However, since 2001/02 the downward
 trend has continued.

                               Sales - Bowen Store                                                                                                    Sales Trend by Year
                                        21
                                      ,8
                                   11




12,000
                                                                                                                   $20,000,000
11,500
                                                                                                                   $15,000,000
11,000
                                                            7




                                                                                                                   $10,000,000
                                                         ,29




                                                                                55
                                                      10




10,500
                                                                              ,1
                                                                           10




10,000                                                                                                                  $5,000,000
 9,500
                                                                                                                                    $0
 9,000




                                                                                                                                       0


                                                                                                                                       2


                                                                                                                                       4


                                                                                                                                       6


                                                                                                                                       8


                                                                                                                                       0


                                                                                                                                       2


                                                                                                                                       4
                                                                                                                                     /9


                                                                                                                                     /9


                                                                                                                                     /9


                                                                                                                                     /9


                                                                                                                                     /9


                                                                                                                                     /0


                                                                                                                                     /0


                                                                                                                                     /0
                                              2001-02 Sales                                                                       89


                                                                                                                                  91


                                                                                                                                  93


                                                                                                                                  95


                                                                                                                                  97


                                                                                                                                  99


                                                                                                                                  01


                                                                                                                                  03
                                                                                                                               19


                                                                                                                               19


                                                                                                                               19


                                                                                                                               19


                                                                                                                               19


                                                                                                                               19


                                                                                                                               20


                                                                                                                               20
                                              2002-03 Sales

                                              2003-04 Actual Sales




                           Store - Weekly Sales


                     320


                     300


                     280


                     260
    Sales per Week




                     240


                     220


                     200


                     180


                     160


                     140


                     120
                           1

                               3

                                        5

                                             7

                                                  9

                                                       11

                                                                13

                                                                     15

                                                                          17

                                                                                     19

                                                                                          21

                                                                                               23

                                                                                                    25

                                                                                                         27

                                                                                                              29

                                                                                                                   31

                                                                                                                          33

                                                                                                                               35

                                                                                                                                     37

                                                                                                                                            39

                                                                                                                                                 41

                                                                                                                                                        43

                                                                                                                                                             45

                                                                                                                                                                  47

                                                                                                                                                                       49

                                                                                                                                                                            51




                                             2002 Sales                          2001 Sales
                                             2003-04 Actual Sales                                                                         Week Number




 14
                                                     2004 - Marketing Analysis
                                                 Mid Island Co-op – Bowen Grocery Store
Customer Counts:

Customer counts declined sharply from 2001/02 to 2002/03 and then flatted for 2003/04.

                                        Customer Count
      Number of Customer




                           460,000
                           440,000
                           420,000
                           400,000
                           380,000
                                     2001-2002     2002-2003     2003-2004
                                                     Year



Sales by Customer:

Sales per customers is consistently trending downward, when considering this result and the
decrease in customer counts there is clear indications that consumers are not responding favourably
both to external communication and to the internal shopping experience.


                                     Total Average Basket Size


                          26.50
                          26.00
                          25.50
                   Amount
                          25.00
                          24.50
                          24.00
                                        2001-2002 2002-2003 2003-2004
                                                     Year




                                                                 Members by Purchases

                                      10000

                                        8000                                                       Purchases
                                        6000                                                       Previous Year
 Number of Members
                                        4000
                                                                                                   Purchases Current
                                                                                                   Year
                                        2000

                                           0
                                                 $0-$50     $0-$500      $500-   $1500-   $3000+
                                                                         $1500   $3000




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                                 2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store

Members and how much they buy:

                    Purchases Previous Year Purchases Current Year
$0-$50                        42%                           37%
$50-$500                      21%                           24%
Graph incorrectly
shows $0 to $500
$500-$1500                    15%                           17%
$1500-$3000                   10%                           10%
$3000+                        11%                           12%

There are 22,594 Co-op members. There are a high percentage of members that only spend $0 to
$50 at Co-op.

Sales by Department:

Sales by department either show flat results or declines.



                           Department Sales Comparison

               7,000,000
               6,000,000
               5,000,000
      Amount




                                                                                    2003
               4,000,000
                                                                                    2002
               3,000,000
               2,000,000                                                            2001
               1,000,000
                     -
                                                     e




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                          ba




                                                 od
                          ro




                                               Ba




                                                              ar
                        lk




                                              Pr
                     G




                                                             H
                      Bu




                                               Departments




16
                                      2004 - Marketing Analysis
                               Mid Island Co-op – Bowen Grocery Store
2.2.2 Promotion
Results from the focus group sessions conducted for this report clearly recognize a severe lack of
positive positioning by the Mid Island Co-op grocery store. These results duplicate the focus
group sessions and the phone surveys conducted in 1999 by Hall & Hall Associates. Currently,
members (and many staff) do not recognize a clear benefit in being a Co-op member. For non-
members there is either no recognition of any benefits, or a negative perception based on dated
information. For the basic grocery consumer there is the over-riding perception of an out-of-date
grocery store that is expensive. Positive positioning and niche development is absolutely critical
to the success of the Co-op Bowen store.

In this very competitive market area, Co-op cannot compete without radical changes and
consistent follow through. An integrated marketing communication process is a must. A clear
and consistent message must be promoted to the consumer at all levels of the operation and must
be delivered on when the consumer makes their purchase.

Currently, promotional spending is not clearly isolated, budgeted and tracked for the Bowen
store. Rather, some costs are combined with the petroleum division. Cross marketing with the
petroleum division should be enhanced, though the budgeting and tracking should be distinct.
Promotional spending should be categorized, budgeted and tracked by medium type and fiscal
period.

Promotional spending for the store in 2003/04 was at 2% of gross sales. This is slightly above
the norm for individual grocery stores. When considering market share and sales declines, the
advertising spending is low. The Co-op has one store in the Nanaimo trade area and, when
compared to Save-On Foods, Thrifty‘s or Quality Foods, they have a smaller ―foot print‖ in the
market area which also indicates a larger advertising budget is needed. Costco, RCSS and Wal-
Mart have higher profiles and national awareness and advertising that further challenge Co-op‘s
position in the local market place.


        2003/04 Promotional Spending - Bowen Grocery Store
                                                      Cost per          Total
Media              Frequency       Distribution        run/ad        annual cost

Flyers             52/weekly Bulletin 17,725                $3,545     $184,340
Newsprint          12/monthly Bulletin 33,120               $1,475      $17,700
Radio              n/a - 2003/04                                             n/a
Television         n/a - 2003/04                                             n/a
Website            $300 mth x 20% for grocery store share                  $720
Public Relations   $1000 mth x 20%                                       $2,400

Total              Sales $10,155,234 x 2%                              $205,160




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                              Mid Island Co-op – Bowen Grocery Store

Flyers are the dominant and most effective form of advertising for grocery stores. Flyer
distribution was switched this year from CanWest (Daily/Star) to the Bulliten, partially because
at that time the Bulliten was the only local paper that could put the Co-op flyer on the Co-op web
page. With declining sales, it was also thought that a change in papers/distribution should be
tested.


Flyers - 2003/04
 production                              Per flyer             Total per Drops
(subsidized)   shipping     distribution subtotal Distribution flyer drop per year   Total

       $0.12        $0.06        $0.02      $0.20      17,725     $3,545        52 $184,340
Flyers - 2000/01
 Production                              Per flyer             Total per Drops
(subsidized)   Shipping     Distribution subtotal Distribution flyer drop per year   Total
      $0.12         $0.06        $0.02      $0.20      32,600     $6,520        52 $339,040

As noted below, Co-op flyers do not rank strongly with the consumer. The low cost of the flyers
is exceptional and too good to not continue. If contracted to an outside agency, a 16-page flyer
would cost at least $18-20,000 a week. If an internal department were created to produce a local
flyer, five to six staff members would be needed as well as the creation of an in-house graphic
library.

The low-cost flyers must be maintained, but enhanced with some local positioning strategies
with local benchmark pricing.


Print and Brand Advertising – qualitative analysis:

Flyer - The focus groups ranked the Co-op flyers as the weakest in the Nanaimo area. As
suggested above, the value of participating in the Federated flyer program is much too high to
not participate in. As is expanded on in Section Four, it is recommended that Mid Island Co-op
use the flyers, but augments them with local positioning tactics.

Newsprint ads - can be valuable though the reader tends to be a different audience than those
who read the flyer. If done, it must be part of integrated positioning strategy.

Scoop Newsletter – focus group results show that both members and non-members either were
not aware on the newsletter or were not impressed.

Web site – a good site, but the huge majority of grocery consumers do not use this as part of the
shopping process. One day, but not now.

Television – not used last year, started this fiscal year with other Island Co-ops. Considering
shared costs ($16,000 share for Mid Island of a $65,000 total), this should provide good


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                           Mid Island Co-op – Bowen Grocery Store
promotional R.O.I. A consistent benefit/message must be delivered, integrated with a
positioning strategy. Also for this to be considered a good investment, target audience and
frequency must be considered. Leverage the value of this TV promotion with integrated
marketing communication using Mid Island Co-op‘s other promotional mediums.

Radio – As with TV, advertising began this year with ads focusing on membership benefits.
Same issues as TV advertising: consistent benefit/messages and positioning strategy, reach to
target audience, and frequency. It is challenging in this market area to effectively reach the Co-
op target audience. ―Spill‖ from Vancouver and Victoria radio diminishes the effectiveness of
local radio advertising.

2.2.3 Marketing Mix - Overview

Product/Operation:

The Produce section has clearly been recognized as a critical store weakness and must be addressed.
Produce is one of the main determining factors in customer loyalty.
        Interviews with store staff, board memebers and management all recognised this as a
           weakness
        Focus groups rated the produce department as below most of the competition
        In a competition check mclaren consulting rated the produce section as lower than the
           competition

The meat department has been recognised as a strength that is poorly promoted. Many that do shop
in store do not recognize this strength due to the poor in store displays and signage.

The Bakery and Deli appears to be competitive in pricing and offers but this should not be
considered a strength. A poor layout with tired product displays, fixtures and bad lighting creates
an under whelming visual appearance. This department should play to all the senses.

The grocery area could be competitive but due to a confusing non-traditional layout and poor
displays it should be considered an overall weakness. Several memebers in the focus group did
recognize the convenience of wide aisles. The co-op brand products are not promoted and
displayed to maximum effectiveness.

Further details are contained within the focus group report and competitive review.

Pricing:

A definitive weakness, rooted both in reality and a very strong perception with members, non-
members and many staff members. There have been strong in-store specials but to the most part it
is an in-house secret, only loyal members are aware of these promotions. Due to poor displays and
signage many customers may miss the “deals”.


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                           Mid Island Co-op – Bowen Grocery Store


People:

The interviews suggest many believe the consistency of service is a strength; many staff know the
members by name. There is some suggestion that the maturity of staff is recognized as a strength,
mature staff are more trusted by consumers and can relate more to the consumers needs.

Staffing is considered a weakness by some store, more so than by the focus groups. Though both
groups recognized that younger staff brings a vibrancy and new energy to an store.

Place/location:

The location and its convenience did not receive an overall high rating by the focus groups. The
location is somewhat off the main track for the majority of Nanaimo shoppers. However the
location has excellent parking and compares well in this category. The store is also positioned
well to reach households in the Diver Lake area and Bowen Road corridor. From a
location/convenience standpoint the Co-op store has an advantage over the Quality Foods,
Bowen Road location.


2.3 Mid Island Co-op - Qualitative Analysis

2.3.1 Interviews
As part of the process of analysing the marketing effectiveness of Mid Island Co-op, mclaren
consulting conducted a series of interviews with randomly selected staff members, board
members and store management.

In total 16 interviews were conducted:
      Store Staff            7
      Board Members          5
      Management             4

These interviews and the noted SWOT issues do not include industry research interviews or
focus group information.

The objective of the interviews was simple, discover what the internal stakeholders believe are
the critical issues facing the Co-op store and seek suggestions for improvement. The interviews
were conducted using a SWOT process of listing the Mid Island Co-op store‘s strengths –
weaknesses – opportunities –threats. To protect the integrity of this project and confidentiality
of the individual, names are not included.

We have compiled the interview issues and suggestions into the SWOT table below. When
topics were discussed in more than one interview, a number in brackets precedes the comment.



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                       Mid Island Co-op – Bowen Grocery Store

2.3.2 S.W.O.T. Analysis

Strengths:        (3) Membership list - 22,000 plus
                  o 16,000 valid addresses
                  (2) Co-op Philosophy
                  Community support – Co-op the true leader
                  A true locally owned store
                  (2) Social Democratic philosophy
                  Good support by members
                  Schools – Co-ops support of…
                  Local car dealers in area
                  (3) Beautiful store
                  (6) Great service
                  Loyalty of members, they keep coming back
                  Staff have great people skills
                  Knowledgeable staff – staff know their customers (many by name)
                  (4) Good variety of product
                  Co-op has been buying longer from local producers
                  o Good & trusted relationships
                  o Local producers want to deal with Co-op
                  Good member programs
                  (4) Good meat dept.
                  Consistency of service
                  Staffing quality
                  Pricing is competitive
                  Hours of operation (competitive)
                  Meat debt offers smoked meats
                  (2) Great promotional offers
                  Deli is price competitive
                  Good lunch crowd for Deli (from surrounding car lots)
                  (5) Good garden shop
                  Garden workshops, attendance is consistently increasing
                  Fresh product in Garden centre
                  Knowledgeable staff in Garden Centre
                  Attractive Web site
                  Extended hours
                  Green/environmental values of Co-op
                  22,000+ members
                  Member owned
                  Financial stability of Mid Island Co-op (not just the store)
                  Convenience to local neighbourhood and businesses

Weaknesses:      (7) Membership list is not utilized for (marketing/member) store benefit
                      o Costco took membership concept and are now better at it
                 Pacific distributor is good supplier
                 Federated
                      o (4) They control pricing (too pricey by comparison)
                      o Federation wants too much margin
                      o Is federation ‗old-school‘?
                 Federation dictates produce specials
                 Not a lot of support for each other (staff)



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                    (3) Not strong follow-through on good in-store ideas or promotions
Weaknesses               o Ideas are sometimes initiated but tend to fall away when they are not managed
(con‘t)             Poor equipment (meat dept.)
                    (2) Don‘t promote Co-op brand
                    Not implementing programs
                    Perception of negative board influence – weak communication to staff
                         o Perception of opinions based on personal lifestyle
                         o Not ‗grocery people‘
                    (4) Produce
                         o (4) Customer complaints
                         o (3) Poor freshness – i.e. wrinkled apples
                         o Variety is good
                         o Design/layout is old-fashioned
                         o Displays are not used to full potential (colour, etc.)
                    (2) Dated eating/sitting area,
                         o Uncomfortable, uninviting, poor lighting
                    (4) Not a welcoming entrance
                    (2) Floor displays are either not done, or done poorly
                    (2) Limited space
                    Bad location
                         o Bowen Rd
                    Union shop – difficulty matching the right people to the right jobs
                    Sometimes not enough staff (at garden centre)
                    (4) Staff are ‗too old‘
                         o No enthusiasm
                         o Many struggle with technology, limiting potential use of POS
                    (3) Misconception that you have to be a member to shop at Co-op
                    Health of staff
                         o Costs
                         o No transition
                    (7) Not enough promotion of store
                    Poor management history
                         o Management/store is boxed in - restricting itself on new/fresh opportunities
                    Left lane access
                         o Coming from North
                              Can‘t beat out local big box (ie: Wal-Mart peanut butter $3.99, Co-op, $5.99)

Opportunities:      Enhance/promote community and charitable support
                    Competition does not recognize co-op as major threat
                    QF Bowen store is closest and most vulnerable competitor
                    Old style (value) Market place
                          o Take advantage of the Baby Boomer affinity for retro
                    Butcher shop– promote as is and/or enhance and reconfigure
                    Local produce – enhance and reconfigure
                    Promote health – focus on health supplements, dietary specialties (diabetic, low fat, low
                     carb, low calorie), dietetic products.
                    Food service - Pre-prepared meals - Deli & Bakery
                    Philosophy – effectively promote & establish position
                          o Community support – the true leader
                          o A truly locally owned store
                          o Social Democratic
                    Is there an opportunity to open a 2nd store?
                          o Buy the Food Country store



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                             (2) Anti-globalization movement very strong
Opportunities:          o Not part of multi-national
                        o   Promote as shop Canadian, BC, ‗home-grown/town‘)
(con‘t)
                            (6) Improve member sales (use list)
                        o Remember PIPA
                        o Offer/promote something specific – benefit for coming in
                        o Provide clear value/benefits
                            (3) Have members-only sales; incentives for members
                            Promote value of membership
                            Compare membership to other operations (Costco)
                            (3) Create events (ie: 2 for 1 specials)/ create in-store excitement
                            $5 off cake on birthday?
                            (5) Beancarts
                        o Well kept secret
                        o Kids driving
                            Pay staff to phone and invite memebers to events or promotions
                            Pricing specials - shoppers pursue specials
                            (4) Must be price competitive
                            Flyers, improve distribution
                            (3) Buy local produce (ie: Gabriola)
                            (6) More promotion (ie: sausage and meat, rotisserie chicken)
                            (10) Upgrade in things that matter (and a consistent process to see it
                     through)
                            Improve produce
                            Improve over-all store layout
                            Re configure Deli (by the door – seating in centre, bakery on other side)
                            Improve appearance of bakery and deli
                        o Signage
                        o Lighting
                    Promote take home meals, party trays, etc
                    Promote specialty meals, lunch speicals
                            Improve facing with more product
                            Pasta kiosk?
                            *Old-style marketplace (ie: Granville Island style)?
                            Mini stir-fry
                            What are new colour trends? Use them and update store and ―warm it up‖
                            Juicer in produce dept.?
                            In-store bank?
                            (3) Use garden centre at entrance to encourage shoppers
                            Older customer (needs not met?) opportunity ignored by competitors?
                            Transparent board sessions
                            More communication/discussion with staff
                            (6) New blood
                        o Young people attract young people
                        o Change perception of being store for ‗older generation‘
                        o Target new babies – through hospitals
                        o Improve in-store advancement opportunities
                            (2) Keep the ball rolling on in-store specials
                            Promote to city – too far (expensive) to go elsewhere
                            (2) Reader board
                            Promote to Ex-prairie people/tourists
                        o Offer sani-dump, specials to bring them into the store
                        o Motor home parking in back?



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                             Family-sized purchases (case lot) is competitive
Opportunities:               Promote to unions?
(con‘t)                      Radio advertising?
                             When garden shop is closed for 3 months, replace with something else in that
                     area
                              (3) Offer (more) prepared foods (ie: hamburgers, fish and chips, etc.)
                         o (2) Fax daily specials to promote
                         o Serve food on ‗real‘ plates
                    Fax grocery specials to local businesses
                              Co-op hardware in south end or Downtown
                              Bring in booths for café (*expensive)
                              (2) In-store ―face lift‖
                              (2) Work on Kids‘ Club (half-done now).
                         o Use to increase members‘ visits, attract more families
                              Fresh fish
                              Advertise Bowen Rd. Access
                              ‗You‘re Forgiven‘ - tongue & cheek promotion telling members there are no
                     owed fees/penalties
                              Need a new POS system (being looked into)
                              Co-op dollars? Gift certificates or rebates?
                         o Give 1 % on food purchases, 4% on gas purchases
                              (3) Improve public relations
                              Can there be in-store fishing equipment (Home Depot doesn‘t supply)
                         o Had once as part of hardware, complaints that it‘s now gone
                         o Expensive to inventory in slow season
                              (2) Offer health care services: clinic- doctors, clinic where people wait
                              On Wednesdays, 10% off to membership – further discount?
                              Recycling bins – replace with our own
                              Expand 3R opportunities
                              Give workshops on organic/environmental products and uses
                              (2) Increase stature in community (PR)
                              Take advantage of $1.49 day (promotional appeal, tie in to old Woodward‘s/retro
                     promo)
                              Promote social responsibility
                              Fair trade
                              Environment
                              (2) Welcome wagon
                         o New babies, new families
                         o Target prairie transplant
                              (2)―Did you know‖ history of & benefits - advertising campaign on Co-op– in-
                     store/out
                         o Tag line ―I shop Co-op because....‖
                              Use meeting space for non-profits and (target segment) community) groups
                              Promote convenience of location to locals

Threats:            Competition (re)directs competitive responses at co-op
                    Loyalty of members is decreasing
                    Aging of loyal members (will they be replaced by new/younger)
                    Strong need to reduce losses ($300/day, $100,000/month).
                         o 23 % of income available for general expenses
                         o 19 % goes to salaries/labour (12 % average on Prairies).
                    Co-op store may no longer be relevant
                     Management/staff buying at competition? (Perception)



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                            Mid Island Co-op – Bowen Grocery Store
                      (3) Lack of target marketing
                      When a department sales are down/declining
Threats: (con‘t)           o Pressure on staff
                           o Declining momentum
                           o Less production from staff, poor sales result
                      (4) Lots of/ new competition
                           o Perceived as younger/fresher, more vibrant
                      (2) Competitors have more buying power
                      Staff – older
                      Any store changes will anger old-timers
                      Not changing may be worse
                      Perception that members may owe money - embarrassment to have to pay (owe money)
                      Perception of members having to pay ($2.50/week)
                      Lots of garden shops
                      Cheaper garden plants



2.3.3 Focus Group Report
Please refer to the mclaren consulting’s Focus Group Report for full details on the sessions.

Participants in the three focus groups (2 member and 1 non-member), evidenced a great deal of
similarities in their attitudes, behaviours and motivations towards the weekly shopping
experience. Most shopped two or more of the major stores regularly and for the most part Mid
Island Co-op was not their primary store … even for members.

Many of the conditions and attitudes towards shopping and perceptions of the store/market mix
in Nanaimo continue to reflect the findings of the 1999 research. Notable exceptions are that for
the most part the 3% surcharge and shopper paying/bagging has fallen from the mix of barriers.
Note: the fact they have disappeared is not creating a positive response to shopping at Mid Island
Co-op; it is simply been removed as a barrier.

Other than for these items, shoppers tell us little has changed in their overall perceptions of the
Co-op store and in spite of the significant investment in the new entrance we continue to see
references to the dark entrance along with requests to lighten/brighten it up … particularly the
café and deli/bakery areas.

Convenience

Shoppers continue to identify price and convenience highest on their list of weekly shopping
decision-making factors. And while Mid Island Co-op‘s convenience is satisfactorily ranked by
members, so are the other major competitors, indicating no particular advantage.




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                            Mid Island Co-op – Bowen Grocery Store

Price

Clearly the single most significant barrier to Mid Island‘s ability to seek major sales increases is
the almost universal perceptions of overall high prices and poorly rated weekly specials.
Customers generally make their weekly shopping decisions from a mix of 2-3 stores on their
‗regularly shopped‘ list and the appeal or need triggered by the weekly special offerings of those
grocery retailers.

Mid Island Co-op’s Brand Image

While we did not do an extensive Brand Image exploration in these groups it is evident that Mid
Island Co-op is seen as a store for ‗older folks‘. This is evident in their personification of the
store, the average age of the staff and Members and the fact that nearly all of the members we
contacted talked about the historical roots of their membership. While there is nothing wrong
with enjoying this strength; alone, it is not enough on which to build a successful financially
viable future for Mid Island Co-op.

Membership

Co-op membership as it stands is a ‗nice thing‘ but not a key motivator to shopping …
particularly among the non-member and to some extent younger Co-op members. Its value is
poorly understood by both members (who see it deteriorating in the form of reduced/non-existent
dividends and an absence of meaningful member communications or other specific benefits) and
non-members who think it is expensive to join and don‘t perceive any particular benefit.

Staffing & Customer Service

Good customer service is an expectation … not a competitive advantage. Customers valued it,
particularly when it is ‗personal‘ (as in truly recognizing and naming a customer or going beyond
expectations in look after a customer), it was not a key determinant in weekly shopping
destination decision making. While co-op members rate the co-op store well on the availability
and quality of staff, the same can be said for the ratings of Save-On-Foods and Thrifty‘s. If there
is a weak or venerable store on this front it is the Bowen Quality Foods which was definitely
seen as weaker than the other QF locations and tended to bring down the QF ratings overall (on a
number of fronts).

Fair Trade and Organics

While not familiar with them to any great extent, Fair Trade products were generally lumped in
with organics in customers minds as ―important options but not important enough to justify the
poorer quality (produce in particular) and much higher prices‖.




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                           Mid Island Co-op – Bowen Grocery Store

Local Products

As in the overall membership benefit of supporting the local and island community, there was a
strong affinity for local products. In addition to being seen as supportive, they are seen as
fresher, healthier and possibly more pesticide/chemical free. The current expectation amongst
the participants is that local produce should not be more expensive in fact some thought it should
be less.

Wherever possible promoting ‗local‘ will be well received and seen as part of the Mid Island Co-
op advantage.

Produce

Expanded, fresher (quality) and cheaper produce was a consistent focus of customers in this
study and a key factor in many customers decision-making. Save-On-Foods was clearly the
competitive winner in the ratings here including with Co-op members. Part of this is with the in-
store presentation, which does not highlight it as effectively as key competitors.

Meat

The ongoing interest in opening a Butcher Shop would only build on the strength and trust
members have in the Co-op meat department.

With non-members, however, it is very important that the brown-wrapped meats be
reconsidered. There is no current level of trust among non-members and many flatly stated they
―wouldn‘t buy meat they can‘t see‖.

In a Butcher Shop environment, the brown wrap (after purchase) would send positive signals
about the meat quality as well as contributing to the overall desire for enhanced ‗shopping
experience‘.

Marketing & Advertising

Current marketing and communication efforts are almost entirely focused on the centrally
produced flyer and its weekly distribution. Faced with the positive example of the Save-On-
Food flyer (which is in some ways perceived as the ‗gold standard‘ of local flyers), the Co-op
flyer was awkward, recognized as not produced or controlled locally and missed communicating
many of the member benefits, local strengths and other Mid Island Co-op Competitive
advantages in the Nanaimo community.




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                             Mid Island Co-op – Bowen Grocery Store



3.0 Market Analysis
3.1 Industry

Factors influencing how the consumer chooses where to shop

The main factors that influence loyalty with the grocery shopper is fairly consistent in the
western world. There are minor shifts in rankings dependant on the country or region, however
the primary factors are essentially the same. For this report, we have conducted secondary
research on the top loyalty factors within the grocery sector for Canada, Britain and the U.S. We
then compared these results to our primary qualitative research with the focus groups and Co-op
interviews.

According to a 2001 U.S. study, price or price specials are the most important factors for
choosing a grocery store with the average family. This ―Middle American‖ cluster best
represents the average grocery family. Convenience also rates highly amongst consumers?
consumer also rates convenience highly. Quality of produce, in-store convenience and location
convenience (time saving) ranked higher with the ―sophisticates‖, a middle-aged family group
with higher incomes and higher education. For the Nanaimo area, this would be comparable to
Thrifty Foods target customer, predominantly in the Hammond Bay area.

“Middle American”, Grocery Store Loyalty Rankings

     1.   Having low prices
     2.   Sale or money saving specials
     3.   Convenient location
     4.   Fast check-out
     5.   Clean and neat store
     6.   High quality meat
     7.   Accurate shelf tags & descriptive signage
     8.   High quality fruits and vegetables

Source: ―A Segmentation Analysis of U.S. Grocery Shoppers‖
Department of Applied Economics, University of Minnesota

In Britain, a trend setting country for the grocery sector (followed by the U.S.) shoppers also rate
price and specials as critical. Local products are now moving up the scale as important to the
British consumer, moving to number three (behind pricing and specials) in some recent studies.

“Shoppers place a high value on low prices (58%), good quality products (42%), free parking
(40%), customer service (39%) and convenient/easy location (37%). Promotions are deemed to
be essential by 29% of shoppers whilst only 8% consider a loyalty card as being essential.”

Source: “Ensuring and Retaining Shopper Loyalty – An Industry Challenge”


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IGD Consumer Watch, Date published 21/10/03


The focus groups conducted for this report ranked the key grocery shopping factors as:
   1. Price/value/specials
   2. Location/convenience
   3. Selection
   4. Staff/customer service

For Nanaimo this study suggests the main factors for choosing a store for the weekly
grocery shop are:

     1. Pricing
            a. Every day low pricing
            b. In store specials
     2. Location/convenience
     3. Produce/Meat/Bakery quality
     4. Selection
     5. In store experience

Considering the above, we suggest a strategy based on in-store specials, with targeted offers in
specific departments. This will positively affect the pricing perception without positioning the
Co-op in a price war with competitors and eroding much-needed margins.

It has been recognised that the Nanaimo targeted grocery shopper is either a ―cherry picker‖ or
an ―every day low price‖ convenience shopper – a shopper that goes to one store with the
perception that the overall value is consistently competitive.

There is an opportunity for the Co-op store to pursue the cherry picker utilizing the store‘s
current strengths and enhancing department offers for new opportunities. Manager specials,
meat department promotions and local produce all present opportunities to change the perception
of the Co-op as a high priced grocery store.


3.1.2 Industry Trends
Prepared Foods/Meals

 A recent study called ―Foodservice 2010: America's Appetite Matures‖ by McKinsey & Co., a
multinational research company based in New York City, points out how dramatic social
changes have altered the nation's eating habits.

    • As the number of households earning over $50,000 increases to 30 percent of total
households, the amount of money spent on food prepared outside the home will also rise. The
study predicts that high-income households devote half or more of their food dollar on meals
prepared outside the house.


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                              Mid Island Co-op – Bowen Grocery Store

―Because working women are pressed for time, they tend to rely on food prepared away from
home,‖ the report found.

     • While baby boomers like to eat out, the 36 million people in Generation Y - aged 15 to 25
years old — like it even more. Gen Y already spends 50 percent to 55 percent of its total food
dollars on meals away from home, and that is expected to increase in the years to come.

     One of the most significant developments in the American food industry in the past decade
has been the growth of convenience food and food that is eaten away from home, said Bob
Goldin, executive vice president of Technomic Inc., a Chicago-based food consulting and
research group.

     ―Our moms may have been home cooking when we were kids; but now with dual-income
households, there just is not enough time,‖ Mr. Goldin said. ―People get home at 6 or 6:30, run a
few errands and, well, who has time to cook?

Source: ―Foodservice 2010: America's Appetite Matures‖ by McKinsey & Co. - 2001

Community and Charitable Support:

According to a survey conducted by the Food and Consumer Products Manufacturers of
Canada, the Canadian food and consumer products industry contributes consistently to the
community and to charities.

         95% of companies surveyed participate in special drives (United Way, food banks,
          etc.), giving 4.5 million bags of groceries and $33 million in cash annually
         and half donate excess assets for community purposes.

Many companies also:
       provide meeting space and loan equipment for community groups;
       assign staff to specific tasks for community groups;
       provide shipping or storage services; and
       handle mailings for local groups.
Sourced from: http://www.fcpmc.com, May 2004 – Date of survey is n/a

As so many grocery/food companies contribute to charity and community organizations and do a
good job of communicating their goodwill gestures (e.g. – Thrifty‘s or Q.F. Public Relations) it
will be difficult to be recognized as stronger or better with the grocery consumer. To effectively
differentiate from the competition and be recognised by the consumer as the leader in
community support, a grocery operation must invest in an integrated marketing communications
program that fully develops a positioning strategy on community support and ethical buying.
Even with this approach, there will be some promotional ―catch-up‖ to the current market area
leaders (Thrifty‘s, Q.F. & Save-On Foods). If this strategy is pursued the competition is sure to
react.



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Capital Improvements:

Concise information (secondary research) on how much is invested into capital improvements by
grocery stores and what sales increases are realized is information that is well guarded. No
industry associations can or will supply this information for obvious reasons. For our purposes
we researched Loblaws, a public company that must report to its shareholders. Even this
information is general and on a chain-level basis.

This noted, the following excerpt does give a benchmark on the level of investments made for
capital improvements and potential increases in sales:

“Over the past two years, the Company has invested more than $1 billion in capital annually,
resulting in an increase in net retail square footage of approximately 4.5 million square feet or
12%. The capital investment program resulted in new, larger stores replacing older, smaller
stores, which dampened short-term earnings growth as sales developed…

“The weighted average increase in net retail square footage was 5.6% in 2003 and 6.2% in
2002. Growth in same-store sales was 4.6% in 2002 and 4.6% in 2003 on an equivalent 53-
week basis. 6.2% in 2002. Sales may be influenced by a number of factors including changes in
net retail square footage, same-store sales, inflation, expansion into new services and/or
departments and the activities of competitors.”

Source: Loblaw Companies Limited, 2003 Annual Report

Loblaws budgeting process for capital improvements should be considered against it‘s $25
billion in gross sales. Loblaws ratio for capital expenditures would be comparable to Mid Island
Co-op investing $400,000 to capital improvements on an annual basis. It should also be
considered that Loblaws is consistent with its capital improvement program and Mid Island Co-
op would need to invest significantly more just to ―catch up‖.

Local Market – Capital Improvements:

mclaren consulting contacted the City of Nanaimo – Economic Development Office and
researched several comparable capital improvement projects for grocery stores in the Nanaimo
area.

Fairways Market, Nanaimo - 2000:                                                    $974,000
Interior leasehold improvements only. Fixtures, inventory, etc are separate

Save on Foods – Terminal Park - 2003:                                             $1,700,000
Interior and exterior, leasehold improvements only. Fixtures, inventory, etc would separate

Quality Foods, Bowen – 2002:                                                    $55,000
New children’s entertainment area, leasehold improvements only. Fixtures, etc are separate




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Buy Local, Marketing Programs

Strategies that involve purchasing from local producers (dairy, produce, etc) and the promotion
of this to the grocery consumer is a trend that is at the infancy level in British Columbia. While
some grocery retailers are beginning to promote this niche, no one retailer has taken the lead.
Consumers are influenced by this product feature and do recognize some benefits, however they
are willing to pay more for a local product. In fact, comments from our focus group suggest they
believe they should pay less for local produce.


Dan Dagg of the ―Buy BC‖ program was interviewed for this analysis. ―Consumer surveys
suggest consumers are willing to pay 3-9% more for local produce, however sales results show
that this is not the case. Consumers are not willing to pay more.‖

Though local consumers are not yet willing to pay more, the influence of local products on the
grocery consumer is a growing international trend. In Europe, local programs are beginning to
be quite successful. As Canada generally follows European and U.S. trends, a ‗buy local‘
program has strong potential as a long term and highly valuable opportunity. This is not a short
term, quick cash infusion initiative. Either product must be obtained at a competitive price from
local suppliers, or a lower margin accepted by the grocer. A good selection or quality local
produce at a competitive price can offer a grocer a local market niche. Ultimately the consumer
may accept a higher price, but not today.

The below excerpt is from an article produced by a British marketing research association
specializing in the grocery industry.

Why buy local foods?

From the producer perspective, one of the main drivers of the local food sector is the ability to
support local community. This is not always the case when it comes to what motivates
consumers to choose local over other foods.
Figure 2: Why buy local foods?




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For the majority of consumers, ‗localness‘ and patriotic emotions are not sufficient to encourage
them to buy local foods. The quality of the food is key. For local food to compete in today‘s
marketplace, it must respond to the current demands of consumers and also the parameters
within which food choices are made, such as money and time available.

                                                              Source: IGD Consumer Watch, April 2003

3.2 Market Areas - Trade Areas
3.2.1 Market Share
Mid Island Co-op has seen its share of the Nanaimo grocery market decrease from:
            40% in 1980
            6.5% in 2002
            Less than 5% in 2003/04
2003/04 Mid Island Co-op Bowen Store:        $10,155,234
Nanaimo Supermarket & Groceries:             $210,544,766
Considering the sales decrease and consistent market share loss, Mid Island Co-op is operating in
a negative vacuum. Momentum is working against the Co-op store.
1980 - Mid Island Co-ops Grocery Market Share




                                                Co-op
                                                 40%

                    All Others
                       60%




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2003/04 - Mid Island Co-ops Grocery Market Share


                                     Co-op
                                      5%




                             All Others
                                95%




Source: 1980 & 2002 share percentage – Mid Island Co-op, Malaspina Marketing Project – 2003
2003/04 – FP Markets – Canadian Demographics 2004; Mid Island Co-op Store Sales

There were two Co-op stores until 2001- the Harewood store closing in 2001. This has led to a
smaller ―foot print‖ in the Nanaimo market area. The key competitors either have multiple
stores or national brand recognition with advertising to match.


3.2.2 Nanaimo Households and Demographics



                                    Old Towns'       Conservative
                Town Boomers
                                    New Fringe       Homebodies
               Blue Collar
                                                        Old Leafy
                Winners
                                                         Towns
                 Satellite                                       Nesters &
                 Suburbs                                          Young
                                                              Homesteaders
               Aging Erudites
                                                            Aged
                  Small City Elite                        Pensioners

                                            All others
                 Boomers &
                   Teens              Mortgaged in
                         Technocrats & Suburbia
                          Bureaucrats




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                                  No. of
  Psyte Categories - 2004 Nanaimo Hhlds      % Total
  Mortgaged in Suburbia                  488    1.28%
  Technocrats & Bureaucrats              859    2.26%
  Boomers & Teens                        388    1.02%
  Small City Elite                     8454    22.22%
  Aging Erudites                         299    0.79%
  Satellite Suburbs                    1138     2.99%
  Blue Collar Winners                    391    1.03%
  Town Boomers                           330    0.87%
  Old Towns' New Fringe                6025    15.84%
  Conservative Homebodies              1750     4.60%
  Old Leafy Towns                      2300     6.05%
  Nesters & Young Homesteaders         5721    15.04%
  Aged Pensioners                      1536     4.04%
  All others                           8368    21.99%


Source: FP Markets – Canadian Demographics 2004


3.2.3 Market Trends

        New and growing competition – highly competitive and over-serviced market area
        Heavy investment in capital improvements and the in-store shopping experience
         amongst the grocery retailers
            o Co-op has fallen behind
            o Fairway Market – three- to four- year old store – much more current than Co-op
                     Most likely has, and is, stealing Co-op share
            o New Save-on Foods - Woodgrove
            o Renovated Save-On Foods at Country Club and Terminal Park
            o Potential for a new grocery tenant at Rutherford Mall
        Fairway Market should be considered a main competitor for the Bowen corridor and
         Departure Bay consumer
        Promotional focus amongst key competitors on their local/Island identity and community
         support
        Ethnic/international grocery and produce selection is growing with Fairways and RCSS
        Thrifty‘s and others are enhancing their organic produce selection and promoting this
         niche
        Thrifty‘s is further establishing itself as the urban/sophisticate grocery retailer
        All competitors are pursuing the prepared meals and deli niche opportunity
        Wal-Mart‘s move to the north changed Nanaimo traffic flows – negatively affecting Co-
         op



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        The new Save-on Foods, RCSS and overall development in the Woodgrove area
         continues to draw traffic flow to the Woodgrove area
        Country Club‘s new upgrade with new anchors is now positively affecting traffic flow in
         the Bowen Rd, Island Hwy area.

Vancouver Island‘s real estate market is booming, growing the overall grocery market for the
Nanaimo area. Many of the newcomers are from the prairies and/or are seniors or future
seniors. These are segments that are either aware of the Co-op brand and want to maintain their
membership or, for future seniors, may be responsive to the Co-op philosophy/message.

Another relevant trend is the return to the political polarization of B.C. politics. The social
democratic and/or union movement is gaining in popularity. Mid Island Co-op must be careful
and not be seen as a political organization but at the same time there is an opportunity to promote
its values to a target audience that may be more responsive than in recent years.


3.3 Competition Review

Competitors
 Quality Foods – Three locations
 Thrifty Foods – Two locations
 Fairways Market
 Save On Foods – Three locations
 Real Canadian Super Store
 RCSS Warehouse
 Costco

Thrifty Foods and Quality Foods have been recognised by store management as main
competitors in consideration of pricing and product offerings. We suggest that Fairway Markets
be added in consideration of their location; they should not be underestimated. Fairway‘s has
undoubtedly taken share from Co-op.

We also suggest that Quality Foods, Bowen Road be the main focus in a competitive/market
penetration strategy. Due to their location, QF Bowen is Co-op‘s most direct competitor. Due to
their size and location, parking/convenience issues, they are also the most vulnerable of the
competitors.



Competitor Assessment

Below should be considered a ―snapshot‖ assessment, a moment in time reflecting a single visit
to each location. Assessments were conducted on April 19, 2004. The focus group results were
consistent with the assessment ratings.




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                       Mid Island        QF - Bowen    Fairways      QF - Turner Thrifty - Turner
                       Co-op
Store Location
Exterior signage       3                 3             3             3             3
Location               3                 2             4             3             4
Convenience
Hours                  8-9               8–10          ?             8–10          8–10
Parking                4                 2             3             2             3
Service
# of staff available   3                 3             3             4             4
Staff quality          3                 3             3             4             4
Service policies       Up front          Much less     Less          Less          Up Front
                                         convenient    convenient    convenient
Visual
Shelf talkers,         3                 4             4             4             4
specials tags
Signage                2                 4             3             4             4
Lighting               2                 3             3             5             2
Layout                 Confusing         Traditional   Traditional   Traditional   Traditional
Atmosphere             2                 3             5             4             4
Neatness               3                 3             4             4             3
Cleanliness            4                 4             4             4             4
Smell                  Neutral           Neutral       Neutral       Neutral       Neutral
Excitement             1                 3             3             4             4
Merchandise
Assortment -           Garden centre     Good deli,    Good          Good deli,    Good deli,
breadth (visual)                         bulk          produce,      prepared      bakery, meat &
                                                       ethnic                      produce
Well Faced             3                 3             3             4             3
Brand names            2                 3             3             3             3
House Brands           Not obvious       Few           No            Few           Few
Stock levels           4                 4             4             4             3 Lots of Holes
Pricing
Price Levels           Mid               Mid-Upper     Low-Mid       Mid-Upper     Mid-Upper
Sale Promotions                          Good          Good          Good          Good Specials
                                         Specials      Specials      Specials

Other
                       Uninviting        Children‘s                  Pleasant
                       entry &           play area                   coffee shop
                       uncomfortable
                       coffee shop
Delivery service       Yes               Yes           ?             Yes           Yes




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4.0 Recommended Strategies to Increase Sales
These strategies are general recommendations. A comprehensive marketing plan is needed to
offer details in budgets, specific & measurable goals, timelines and tactical components. These
recommendations do have numerous overlaps due to the complexity of processes.

The overlying factors in any sales improvement for Mid Island Co-op – Bowen Grocery store is:
            There must be radical change
            With consistent follow through
                    At every level of the operation and marketing pipeline
            A substantial increase in marketing budget
            A substantial financial investment into capital upgrades


Overall Objectives:

        1. Market penetration
              a. Increase sales in existing market areas



4.1 Marketing and Communications

Increasing the marketing influence and weight within the Mid Island Co-op management
structure. Incorporates an integrated and consistent marketing / positioning approach for the
entire Mid Island Co-op operation.

The objective is to create and/or improve the Co-op position and brand within the mid-Island
trade area.

     1. Senior (contract) position that reports directly to the GM and board
            a. Marketing position to carry out communication and promotional tasks
     2. Increase the marketing budget
            a. 2003/04 at 2% of gross sales at $202,040
            b. Increase to 3% (or more) of gross – at $304,657 (% to 2003/04 actual gross sales)
            c. Manage the budget and track results for store only
     3. Target marketing
            a. Prioritize market areas that have the most potential for sales increases
            b. Geographic – V9S, Bowen Road corridor (convenient location)
            c. Families as defined in target market section
            d. Philosophy sharing members and non members
            e. Current members – older
            f. Pursue prairie transplants


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     4. Positioning
           a. Clearly establish Niche/position with target segments
           b. Clearly establish position/brand
           c. Operational/department niche development
                    1. Meat department, local produce, deli/bakery (old style market)
                    2. Dietetic, Co-op brand products

           d. Do not try to compete on every day low price
           e. Promotional / Manager specials
                     1. Department niches – can be aggressive in price in specific categories
                     2. Specials through out store, benchmark products
           f. Mid Island Co-op to obtain membership with Canadian Council of Grocery
               Distributors. Gain access to marketing research and use for marketing plans
     5. Communication
           a. Key communication messages that consistently support and promote the position
               and brand
           b. Establish and communicate clear benefits for Co-op membership
                     1. Clear and consistent definitions that are replicated
                     2. In store promotional materials - Point of Purchase – P.O.P.
                     3. P.O.P. staff verbal support
                     4. Member newsletters
                     5. PR materials
                     6. Paid advertising
           c. Augment and enhance Flyer materials with local positioning
                     1. Monthly insert - ―pony page‖ or four page wrap or front page/back page
                     2. Produced by federated at flyer production centre
                     3. Federated do a ―press stop‖
                     4. Rough estimate of $2000 added cost per flyer drop
                     5. Or produced locally (higher costs, not as consistent)
                     6. Focussing on local Mid Island communication and promotions
                     7. Local benchmark pricing
                     8. In store ―Manager‖ specials
                     9. Promote niche/advantage departments - Co-op market place
           d. Establish and brand Co-op as the community leader in…Ethical Buying,
               Community Support, Buy local – support of local producers
     6. Event marketing
                     1. Objective is to draw attention and traffic to the Co-op store location
                     2. Secondary; demonstrate community support and Co-op niche
                     3. In store – workshops (e.g. current garden centre workshops)
                     4. In store - member promotions
                     5. Parking lot – community support (Sporting groups, etc)
                     6. Planned schedule




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4.2 The Shopping experience
Capital upgrade and improvements to in store experience.

     1. Welcoming entry way
     2. Improve lighting – inviting and comfortable colour temperature
     3. Enlarge and improve kids club area – child minding and entertainment
     4. Old fashioned market place – enhance produce/deli/bakery/meat
     5. Improve and upgrade Deli and coffee shop (lighting)
     6. Convenience centre, close to entry for quick pick-up of prepared meals, staples, etc.
     7. Store displays – enhance and change weekly
     8. In-store signage, enhance and improve for clarity, conveninec and excitement
     9. Store layout changes using traditial shopping planagrams
     10. Potential for leasing of space to complimentary retailers
            a. Strict criteria based on fit to Co-op target market and/or traffic draw
     11. External store
            a. Improve signage – clarity of message and positioning
            b. Improve sightlines to store front from Bowen road (e.g. lower hedges)
            c. Make the store front more welcoming and demonstrate positioning/sales
                promotions
            d. Weekly events - as above

4.3 Member loyalty and data management

     1.   Gas bar cross promotional offers to attract customers to grocery store
     2.   Enhance use of sales/marketing results and customer data management
     3.   Customer Relationship Management – maximize customer relationship
     4.   Increase efficiency/effectiveness of the sales/service ―pipeline‖ process
     5.   Weekly marketing/competition meeting on sales results and plan of actions

4.4 Target closest and most vulnerable competitor– Quality Foods, Bowen

     1.   Eliminate QF Bowen‘s advantage - Children‘s area
     2.   Promote advantage of convenience facors – parking and entry
     3.   Aggressively target surrounding area
     4.   Promote convenience factors
     5.   Promote new niche developments (as they apply)
     6.   Promote parking lot and in store events




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5.0 Conclusion
For the Mid Island Co-op store to become competitive again radical change, consistent follow
through in both marketing and operations is necessary, plus a substantial investment in capital
upgrades. The substantial investment needed we would roughly estimate to be a minimum
$500,000 in capital upgrades/in store improvements plus a minimum increase of $100,000 to
marketing expenditures. This aggressive strategy of investing into both operations and
marketing would need to be maintained for at least two years.

Even with these changes our findings show that a 40% increase in sales is unlikely and most
probably impossible in this highly competitive market. The Co-op store is currently operating in
a ―negative vacuum‖, consistently losing market share for at least the past ten years. This
downward momentum means an aggressive approach is needed just to stop the share lost and
declining sales. This alone presents a lofty challenge and should be considered high
expectations.

The Mid Island Co-op store does have many distinct and exciting opportunities to carve out
specific market niches. Considering the large amount of upgrades needed and new development
opportunities, much work is needed in prioritizing issues and strategies to select those that offer
maximum return on investment.

With an aggressive, integrated and consistent marketing plan pursuing niches and effectively
positioning the Co-op store, the grocery operation has the potential to stop the decline in sales
within a year. With consistent follow through of a comprehensive marketing plan, the Co-op
store can potentially see 5% incremental growth in the years following.

Considering the investment needed to become competitive, stopping the decline and then in the
years following seeing manageable growth the return on investment would not be realized for at
least another four years.




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6.0 Appendix – Reference Materials & Sources
Interviews/Sources

Industry/Market
 Peter Wolford – Retail Council of Canada, Vice President of Policy and Research
 Bryan Walton – Canadian Council of Grocery Distributors, Vice President Western Canada
 Joann Sandhu – B.C. Ministry of Agriculture, Market research
 Dan Wong – Marketing Consultant, specializing in the grocery industry – contractor CCGD
 Dan Dagg – Consultant for Buy B.C.
 Economic Development Office – City of Nanaimo

Industry Articles

Local Foods: Niche market or explosion waiting to happen?


Date published 07/08/03


In the top-ten wish-list for supermarket shopping in 2003, number 3 was selling local foods,
topped only by lower prices and more price promotions. When this is what consumers want can
you afford not to sit up and listen?

The profile of the UK local food sector has been rapidly growing over the last few years. Not
only is local food high on the political agenda but IGD‘s continual programme of consumer
research has tracked this area as it has gained prominence in the consumer mindset.

Those supporting the expansion of the local food sector see wins for both industry and
consumers. Most recently, the Policy Commission on Food and Farming reported to
Government that the public‘s enthusiasm for local food was one of the greatest opportunities
for farmers to add value to locally produced food. Within the private sector, many small food
businesses have recognized the economic benefits of selling their products directly to
consumers. Recognizing these benefits many of the major multiples now operate local and
regional buying teams to support this sector further.

But operating in the local food arena faces many complexities. To begin, what are local foods;
how close does local need to be? Perhaps more importantly, why do consumers want to see
more local foods on shelves; is it the premium quality they believe local foods to offer or is it
the economic support give to the local community? Consumer Watch provides answers to
some of these questions.



What are local foods?

        63% of consumers see local foods as those produced fairly close-by, either 30 miles from where
         they live or buy the food from, or from the country the live.

        One in five consumers think bigger; for 13% local is their home nation, either England Scotland or
         Wales, and a further 8% see local as food produced in Britain.



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Figure 1: What are local foods?




                                                                 Source: IGD Consumer Watch, April 2003
So what?
        Local is a relatively defined concept with communicable parameters. Vague terms are likely to
         detract consumers‘ confidence. Use of specific terms in marketing seems more appropriate,
         rather than a just the term local.

        Qualitative research indicated that understanding and trusting the provenance is often more
         relevant to many consumer than the exact location of production.

Why buy local foods?
From the producer perspective, one of the main drivers of the local food sector is the ability to support
local community. This is not always the case when it comes to what motivates consumers to choose local
over other foods.

Figure 2: Why buy local foods?




                                                                 Source: IGD Consumer Watch, April 2003

For the majority of consumers, ‗localness‘ and patriotic emotions are not sufficient to encourage them to
buy local foods. The quality of the food is key. For local food to compete in today‘s marketplace, it must
respond to the current demands of consumers and also the parameters within which food choices are
made, such as money and time available.




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Source: State of the Industry Report 2002, Canadian Council of Grocery Distributors




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Source: State of the Industry Report 2002

      A recent study called ―Foodservice 2010: America's Appetite Matures‖ by McKinsey & Co., a
multinational research company based in New York City, points out how dramatic social changes have
altered the nation's eating habits.

    Even more sweeping changes are on the way, according to the study produced for International
Foodservice Distributors Association, Food Distributors International and International Foodservice
Manufacturers Association:

     • Maturing and wealthier consumers will fuel robust growth for the food-service industry, with
revenues projected to surpass those of food retail revenues in 2010 for the first time. Food service
encompasses all providers of prepared meals, while retail includes supermarket and other retail outlets.

     • The U.S. population is projected to increase by 24 million, to 300 million people. As generations
age, they are more likely to spend significantly more dollars away from home on food.

     • As the number of households earning over $50,000 increases to 30 percent of total households,
the amount of money spent on food prepared outside the home will also rise. The study predicts that
high-income households devote half or more of their food dollar on meals prepared outside the house.

        ―Because working women are pressed for time, they tend to rely on food prepared away from
         home,‖ the report found.

     • While baby boomers like to eat out, the 36 million people in Generation Y - aged 15 to 25 years old
— like it even more.

     Gen Y already spends 50 percent to 55 percent of its total food dollars on meals away from home,
and that is expected to increase in the years to come.




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     One of the most significant developments in the American food industry in the past decade has been
the growth of convenience food and food that is eaten away from home, said Bob Goldin, executive vice
president of Technomic Inc., a Chicago-based food consulting and research group.

     ―Our moms may have been home cooking when we were kids; but now with dual-income
households, there just is not enough time,‖ Mr. Goldin said. ―People get home at 6 or 6:30, run a few
errands and, well, who has time to cook?

Source: ―Foodservice 2010: America's Appetite Matures‖ by McKinsey & Co. - 2001



For multi industry organizations – including: Canadian Council of Grocery
Distributors

THE GROCERY STORE OF THE FUTURE
Shopper Missions, Category Solutions, Beacon Brands and Retail-tainment - Grocery
shopping is now less planned and more impulsive. Weekly or fortnightly trips are less
common and shorter top-up visits more frequent. What are the implications of this for
retailers and suppliers? What will the future store look like?

Grocery shopping is now less planned and more impulsive. Weekly or fortnightly trips
are less common and shorter top-up visits more frequent. But research shows that
overall, shoppers are actually spending more time shopping. What are the implications
of this for retailers and suppliers? How are retailers and suppliers sharing their
expertise?

Much shopper research has been done to identify specific shopper groups and
missions. Much of this new, detailed work has been done by manufacturers re-defining
category decision trees and cross category purchasing dynamics. Simple definitions of
staple versus impulse, expandable versus non-expandable are too simplistic. Our report
shows how leading suppliers now divide categories.

“ If you lay out the shelving in a way that matches the logic of the way the category is
shopped, they then move on and notice more things…. we’ ve done the research and
the prize is at least a 20% sales increase” (Customer Marketing Director, Supplier)

Retailers are redesigning stores to match shopper missions to layout. Because
shoppers are using less lists, store environment and signage needs to prompt the




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shopper and offer solutions. Use of “ beacon brands” , and “ vertical blocking”
exploiting consumer cues with “ colour and shape” will develop further.

Increasingly, point of sale, is recognised as a key advertising medium. Retailers and
suppliers are communicating with shoppers, using off shelf displays, sampling, in-store
TV and POP plasma screens. Digital media has made it possible for advertising or other
messages to take place on one screen, leaving the aisle and shelf-edge uncluttered.
Tesco may roll-out in-store TV to 300 stores. How will this fit into overall changes in
store layout?

“ I don’ t think that price in isolation is becoming less important, but I think price
compared to time is becoming less important” (Business Development Director, Major
Multiple)

Research shows that shoppers are less price conscious on small shopping missions
and are less motivated by promotions, with convenience and time-saving now being
paramount. How are promotional strategies likely to be adapted to fit in with these
changes? Which promotions build not just individual SKU volumes but also overall
basket size? And can stores be made more “ exciting” environments in different
ways?

Sainsbury’ s concepts at Hazel Grove and King’ s Road may become more
mainstream. But Hazel Grove is not the only ground breaking concept store in Europe.
Metro AG have the world's most extensive trial of RFID technology at their future store
in Rheinberg. In the short term RFID may only impact on the shopping experience
through better product availability. In the longer term RFID could be revolutionary. What
are the other possibilities?

This report is based on interviews with Metro AG, each of the leading UK grocery
retailers at Director and senior management level,category leading manufacturers and
third-party marketing specialists. As with all Strategic Insight reports, it features
proprietary business-to-business interviewing and data analysis techniques. High level




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                                2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store

qualitative depth interviews are transcribed and subjected to a systematic process of
analysis.
Source: Insight Strategic Understanding – (England based Marketing Research
Company specializing in the Grocery Industry) Published May 2003


Definitions for FP Markets - Psyte Profiles

Boomers and Teens – Middle and late middle-aged, university and college-educated
maintainers of larger families with children over age 6, especially teens. Managerial and white
collar occupations; commonly two wage earners. Newer, larger, owned single-detached
dwellings, 10% Italian mother tongue. Skewed to larger Ontario and B.C. cities.

Mortgaged in Suburbia – Upscale, predominantly younger (age under 45) large families living
in new suburban subdivisions in large, heavily mortgaged houses. Occupations are
managerial/professional and high-status white collar. Most families have two income earners.
Education attainment is high. Children are typically under age 10.

Technocrats and Bureaucrats – Middle-aged maintainers of larger families living in large,
new, single-detached dwellings in suburbs of larger and medium-sized Canadian cities. Very
well-educated. Public sector and managerial occupations. Most households have two wage
earners.

Blue Collar Winners – The most upscale town cluster. Middle-aged and older, high school and
college-educated blue (age grey) collar maintainers. Upscale towns and ex-urban environs of
large cities. Still 10% farming. Some management commuters. Older owned dwellings with
some new subdivisions. Very good income for lower cost of living.

Satellite Suburbs – Upper middle class, middle-aged maintainers of large families with children
of all ages. Typically college-educated with grey collar and managerial occupations. Commonly
two wage earners. Largely owned, heavily mortgaged, newer single-detached and other
dwellings, 16% ―ethnic‖.

Small City Elites – Small traditional families and older couples headed by middle-aged, well-
educated managerial/executive maintainers. Children are typically over 6. Larger, single-
detached post-1971 dwellings. Comfortable neighbourhoods in smaller cities and towns.

Aging Erudites – Older, well-educated singles, couples and small families. Managerial and
upscale white collar occupations. Single-detached and other predominantly `50s dwellings; 68%
owned; 10% apartments. Mortgages are small. These people soak up culture.

Town Boomers – Comfortable, relatively well-off, younger and middle-aged smaller families in
towns and small urban areas. Education levels are modest but high for towns. Occupations are
grey collar and white collar. Dwellings are typically newer, owned and single-detached. Most
households have children.


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                                2004 - Marketing Analysis
                           Mid Island Co-op – Bowen Grocery Store

Old Towns’ New Fringe – Younger and middle-aged high school and especially college
educated, grey collar, blue collar and government workers. Predominantly small families.
Towns and fringes of small cities outside of Quebec. Mortgaged, moderately priced, newer,
owned single-detached dwellings.
Conservative Homebodies – A large cluster of predominantly older singles, couples and small
families. Middle income derived from middle statues blue/grey collar occupations. Mainly
lower education attainment. Dwellings are other, single-detached and dominated by `50s and
`60s vintage, 12% Eastern European immigrants. Skewed to medium sized cities.

Old Leafy Towns – Established stable neighbourhoods of older, single-detached, owned
dwellings in the nicer residential areas of towns and townships. Maintainers age has a strong
skew to 55+. Education and occupational status are quite mixed. Younger families with
children are starting to move in.

Nesters and Young Homesteaders – Old singles and couples, some younger couples and small
families. Older neighbourhoods in towns and smaller cities outside of Quebec. Dwellings are
mixed row housing and low-rise, singled-detached. Mostly rented. High school and college
education. Grey collar and service occupations. Relatively low labour force participation.

Aged Pensioners – Largely very old singles, some couples, renting small apartments, flats and
other dwellings in in-town areas of small and medium-sized Canadian cities. Very low
education levels. High unemployment and government transfer rates. Low-status, grey collar
occupations by very low labour price participant. High mobility.

Source: FP Markets – Canadian Demographics 2004




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