LESS HMR APPETITE FOUND IN CANADA

ELLIOT ZWIEBACH

TORONTO -- Home meal replacement -- already a driving force among consumers in the United States -- is likely to spread more slowly in Canada, according to a new study to be unveiled here next week.

"As is traditionally the case, the Canadian industry and consumer preferences are running behind trends in America by a few years," John Scott, president and chief executive officer of the Canadian Federation of Independent Grocers here, told SN.

CFIG is scheduled to hold its annual convention here next week. A highlight of the event will be the findings from the study, a survey of Canadian consumers conducted by Kraft Canada.

According to Scott, the survey results will contain "some important messages for independents who rely primarily on differentiation to retain their market share."

Though he said he could not reveal any of the study's conclusions before its Oct. 28 presentation, he did indicate that the study will show a lower demand for HMR in Canada than in the United States.

"Consumer expectations here appear to be different, with less demand for HMR," Scott said.

The Kraft study sought to assess consumer attitudes among a variety of Canadian retail formats, although the portion that is scheduled for presentation next week will concentrate on the independent sector, Scott explained. '

''No one in Canada has ever undertaken this kind of study, assessing attitudes and evaluating their implications for a sector of the distribution channel," he said, "and after seeing the data, we are quite excited by what will be released at the convention."

Scott told SN that HMR is still in its "embryonic stages" in Canada, "although a number of retailers are already very good at it." Among them, he said, are the following:

Loblaw Cos. here, which has started installing outlets of Movenpick -- a popular Toronto restaurant chain -- in its retail stores.

Longo Bros. Fruit Markets, Mississauga, Ontario, and Thrif-ty Foods, Baanichton, British Columbia (located on Vancouver island), which offer extensive varieties of value-added meals for in-store eating or for takeout.

Overwaitea Foods, Langley, British Columbia, which is experimenting with express outlets of Tim Horton's, a local doughnut chain.

CFIG represents about 3,800 independent and franchised retailers across Canada -- roughly 70% of all full-service independent supermarkets in English-speaking Canada and about 15% of the independents in French-speaking Quebec, according to Scott.

The federation's mission, he explained, is "to further the interests of independent and franchised grocers both as an advocate and a business support group -- kind of a cross between the Food Marketing Institute and the National Grocers Association in the United States." CFIG's membership also includes Canada's primary wholesalers as associate members.

Efficient Consumer Res-ponse is one area where independents, corporate-owned stores and franchised operators have worked together, Scott said.

"And there are some who believe we are ahead of the ECR efforts in the United States because we have a smaller critical mass of companies to deal with in Canada," he noted.

"The ECR steering committee has taken the bull by the horns and committed the industry to facilitate ECR by obtaining critical mass, and because we have a smaller group of companies to work with, it's easier to get agreement on general principles."

The Canadian supermarket industry, Scott said, is experiencing some of the same trends as its U.S. counterpart, including ongoing retail consolidation and the loss of some sales to alternative formats.

In contrast to the U.S. industry, however, Canada's supermarket trade is dominated by several distributors, which control about 80% of the nation's supermarket sales through corporate stores and licensed or franchised independents, he said. The balance of stores in Canada consists of unaffiliated independent grocers who buy directly from manufacturers or small wholesalers.

Yet the number of such independents is shrinking, Scott said, "as more independents without a franchise or license look to one of the major distributors to provide capital support and group advertising."

Part of the reason for the strength of franchising and licensing among Canadian independents, according to Scott, is the large number of smaller communities spread over a wide expanse of Canada. And the nation still has room for retail expansion, he said.

"With population growth flat in Quebec, several operators there are looking to grow their businesses by moving into Ontario," he explained. "Provigo, for example, is looking to expand its Maxi stores into Toronto, and Loeb stores is also looking for locations in the province. And everyone expects Loblaw, which has already expanded into Atlantic Canada, to move into the lucrative Quebec market, particularly into some of the more urban centers."

An influx of new retail operators into Canada is unlikely, according to Scott. "It would be very difficult for anyone to try to 'greenfield' Canada without a firm commitment and very deep pockets, who could afford to lose money for a few years," he said.

"Wal-Mart didn't do it," Scott added. "What [Wal-Mart] did was buy the Woolco chain and convert it to a Wal-Mart format, but those stores were already there. The only way a new operator could make it would be to do what Ahold has done in the United States -- come in and expand through acquisition of existing companies."