Coffee Plus (English)
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
COFFEE PLUS LTD.<br />
CONFIDENTIAL INFORMATION MEMORANDUM<br />
DIVESTITURE » SUCCESSION » EXIT PLANNING » SELL<br />
1.888.859.5388 | www.pavilionservices.com
Table of Contents<br />
Business Summary 3<br />
Facilities and Business Premises<br />
5<br />
Administration and Operations<br />
6<br />
Current Sales and Marketing Efforts<br />
9<br />
Sales Statistics<br />
10<br />
Opportunities<br />
11<br />
Appendix A: Current Franchise Locations<br />
12<br />
Appendix B: Franchise Menu Items<br />
13<br />
Appendix C: <strong>Coffee</strong> and Tea Industry Overview<br />
14<br />
Appendix D: Works Cited<br />
24<br />
The information contained herein is based on sources that are believed to be reliable. Pavilion Business Services nor any of its<br />
directors, officers, employees or agents, make any representation or warranty as to the accuracy or completeness thereof, take any<br />
responsibility for any errors or omissions which may be contained herein or accept any liability whatsoever for any consequences<br />
arising from any use of or reliance on the contents hereof. Each prospective purchaser or investor acknowledges and agrees that<br />
he or she and his or her professional advisors are solely responsible for evaluating all information contained herein.<br />
Contact Pavilion Business Services<br />
To learn more about the various exit options you have as a business<br />
owner and how we can help you successfully sell your company –<br />
call us to arrange an exploratory meeting and discuss your options<br />
in a confidential manner.<br />
1.888.859.5388<br />
www.pavilionservices.com<br />
2
Business Summary<br />
General Business Information<br />
Name of Business<br />
Doing Business as<br />
Type of Business<br />
Year Founded<br />
<strong>Coffee</strong> <strong>Plus</strong> Ltd.<br />
<strong>Coffee</strong> <strong>Plus</strong><br />
<strong>Coffee</strong> franchisor and roasting plant<br />
1994<br />
Address<br />
5986 84th Street Calgary, Alberta, Canada<br />
Head Office Hours<br />
Mon- Fri 8am 4pm<br />
Shareholders<br />
Property<br />
Brendan Wicks (33.3%); Jess Wicks (33.3%);<br />
John Mills (33.3%)<br />
Available for sale<br />
Number of Employees:<br />
(not including shareholders)<br />
Reason for Selling<br />
18 - Full Time<br />
06 - Part Time<br />
Retirement<br />
Website<br />
www.<strong>Coffee</strong><strong>Plus</strong>.com<br />
Financial Statement Highlights<br />
Consolidated Figures: <strong>Coffee</strong> <strong>Plus</strong> Ltd.<br />
2012 2013 2014 2015 2016F 2017F<br />
Revenue $8,383,587 $7,743,165 $7,720,698 $7,563,549 $8,546,811 $8,974,152<br />
EBITDA (adjusted)<br />
$844,551 $2,706,150 $993,720 $2,212,485 $2,500,107 $2,625,114<br />
The company’s year-end is September 30th.<br />
3
Business Summary<br />
Opportunity<br />
<strong>Coffee</strong> <strong>Plus</strong> is headquartered in Calgary, Alberta. The<br />
company was founded in 1994. <strong>Coffee</strong> <strong>Plus</strong> has 23 franchise<br />
locations throughout Canada. The current shareholders are<br />
all in agreement with the sale of <strong>Coffee</strong> <strong>Plus</strong>. They will be<br />
leaving behind long-term employees that possess a great<br />
deal of experience. Brendan Wicks and John Mills are willing<br />
to remain in the business after the sale for up to one (1) year<br />
to ensure a smooth transition.<br />
Included in the sale:<br />
• <strong>Coffee</strong> <strong>Plus</strong> Ltd. (dba <strong>Coffee</strong> <strong>Plus</strong>), also referred to as CP<br />
• <strong>Coffee</strong> <strong>Plus</strong> Bakery No. 1, Inc., herein referred to as CPB#1<br />
• <strong>Coffee</strong> <strong>Plus</strong> Inc. (Franchise Advertising Management co.),<br />
herein referred to as CP<br />
• Other cafes included, if available at the time of sale (*Note:<br />
not included in the financials):<br />
• Three corporate wholly-owned franchise locations:<br />
1. Calgary , BC<br />
• 0876743 BC LTD Franchise Store (#17 – Calgary)<br />
• Corporate training centre, generates income, used as<br />
write-off, asset value only<br />
2. Vancouver, BC<br />
• CP19 COFFEEHOUSE INC Franchise Store<br />
• Asset value only<br />
3. Ontario, BC<br />
• 0815689 BC Ltd Franchise Store (#03 – Ontario)<br />
History<br />
1994<br />
<strong>Coffee</strong> <strong>Plus</strong> Ltd. founded by Brendan Wicks Jess Wicks John Mills<br />
1997<br />
Vancouver BC franchise location opened, the first outside AB<br />
2015<br />
2015 Ontario location open. First in the East Coast<br />
4
Facilities & Business Premises<br />
Alberta<br />
Alberta is a province in Western Canada. Its landscape<br />
encompasses mountains, prairies, desert badlands and vast<br />
coniferous forests. It has more than 600 lakes, and rich mineral<br />
deposits. In the west, the Canadian Rocky Mountain Parks<br />
have glaciers in the Columbia Icefields. The Waterton Glacier<br />
International Peace Park is a biosphere reserve that straddles the<br />
southern border with the USA.<br />
City of Calgary<br />
Calgary, a cosmopolitan Alberta city with numerous skyscrapers,<br />
owes its rapid growth to its status as the centre of Canada’s<br />
oil industry. However, it’s still steeped in the western culture<br />
that earned it the nickname “Cowtown,” evident in the Calgary<br />
Stampede, its massive July rodeo and festival that grew out of<br />
the farming exhibitions once presented here.<br />
Property<br />
The company owns the corporate head office location property.<br />
The mortgage payment is currently $2,910 per month.<br />
• Roasting plant: 2,500 sq. ft.<br />
• Warehouse: 1,200 sq. ft.<br />
• Office: 1,200 sq. ft.<br />
• SB#1: 1,200 sq. ft.<br />
The head office property is included in the sale.<br />
5
Administration & Operations<br />
Company Structure<br />
Shareholders<br />
Table 1: Shareholders<br />
Name Position<br />
Age Shareholding %<br />
Brendan Wicks<br />
President/Chief Executive Officer (CEO)<br />
55<br />
33.3%<br />
Jess Wicks<br />
Chief Production Officer (CPO) 60 33.3%<br />
John Mills<br />
Chief Information Officer (CIO)<br />
52<br />
33.3%<br />
Brendan Wicks currently works on a part-time basis,<br />
approximately 25-30 hours per week. Brendan Wicks’s<br />
responsibilities include managing the general direction of the<br />
business and expanding the business through franchising.<br />
Brendan Wicks is willing to remain in the business after the sale<br />
for up to one (1) year to ensure a smooth transition.<br />
Jess Wicks’s retired September 1, 2015, position is not being refilled.<br />
John Mills works on a part-time basis, approximately 25-30<br />
hours per week. John is willing to remain in the business after<br />
the sale for up to one (1) year to ensure a smooth transition.<br />
7
Administration & Operations<br />
Staff<br />
<strong>Coffee</strong> <strong>Plus</strong> head office has eighteen (18) full-time and six (6) part-time employees. These individuals will ensure a smooth<br />
transition for new ownership. Table 2 below outlines <strong>Coffee</strong> <strong>Plus</strong>’s key staff:<br />
Table 2: Key Staff<br />
Name Position<br />
Age Length of Service<br />
Employee 1<br />
Purchaser / Bakery Supervisor<br />
32<br />
8 Years<br />
Employee 2<br />
Master Roaster<br />
50<br />
5 Years<br />
Employee 3<br />
Executive Assistant / Project Coordinator<br />
48<br />
8 Years<br />
Employee 4<br />
Payroll, Accounts Payable/Receivable<br />
47<br />
8 Years<br />
Employee 5<br />
Graphic Design / Marketing<br />
59<br />
3 Years<br />
Lisa Brown negotiates with suppliers and handles the bakery and food menu. Lisa currently works on a part-time basis,<br />
approximately 25-30 hours per week. Lisa’s position can be trained over a six (6) month period.<br />
The Master Roaster roasts coffee and supervises warehouse employees.<br />
Suppliers<br />
<strong>Coffee</strong> <strong>Plus</strong> is not vulnerable to any suppliers. Lisa Brown<br />
negotiates with suppliers to get the best price.<br />
Lead Times<br />
<strong>Coffee</strong> is roasted only when ordered by a franchisee and then<br />
delivered the next day.<br />
Legal<br />
The company is not currently involved in any legal proceedings.<br />
8
Administration & Operations<br />
Franchises<br />
There are 42 <strong>Coffee</strong> <strong>Plus</strong> Franchise locations, 28 franchise<br />
locations throughout Western Canada and 14 on the east coast.<br />
Three locations (Calgary, Vancouver, and Regina) are corporate<br />
wholly-owned locations. Many locations provide a catering<br />
service and feature comfortable seating, fireplaces, free parking,<br />
free Wi-Fi, great local art and outdoor seating/patios. Three<br />
franchise locations have a drive-through. The cafés have varying<br />
hours of operation.<br />
Several locations have bike racks and/or are located near bus<br />
stops. A few locations have a meeting spaces, book swap, board<br />
games or open mic nights. Current franchise locations and<br />
an overview of menu items can be found in Appendix A and<br />
Appendix B, respectively.<br />
Franchising highlights<br />
West Coast sites:<br />
• Initial franchise fee: $25,000<br />
• Franchise renewal fee:<br />
$2,500<br />
• Two-week training period<br />
• Royalty fee: 4%<br />
• Advertising fee: 2%<br />
Administration & Operations<br />
East Coast sites:<br />
• Initial franchise fee:<br />
$35,000<br />
• Franchise renewal fee:<br />
$3,500<br />
• Two-week training period<br />
• Royalty fee: 6%<br />
• Advertising fee: 4%<br />
9
Current Sales & Marketing Efforts<br />
Current Efforts<br />
Online Marketing<br />
Company Website<br />
(www.<strong>Coffee</strong><strong>Plus</strong>.com)<br />
Twitter<br />
(@<strong>Coffee</strong>plus)<br />
Facebook<br />
(/coffeeplus)<br />
YouTube<br />
(/coffeeplus)<br />
Picasa<br />
(/coffeeplus)<br />
FourSquare<br />
(/coffeeplus)<br />
Word-of-mouth/network of<br />
satisfied, past customers<br />
11
Sales Statistics<br />
Figure 2: <strong>Coffee</strong> plus Historical and Projected Revenues<br />
Consolidated Figures<br />
Consolidated Historical & Projected Revenues<br />
$10,000,000<br />
$9,000,000<br />
$8,500,000<br />
$8,383,587<br />
$7,720,698<br />
$8,546,811<br />
$8,974,152<br />
$7,000,000<br />
$6,000,000<br />
$5,000,000<br />
$4,000,000<br />
$3,000,000<br />
$2,000,000<br />
$7,743,165<br />
$7,563,549<br />
$0<br />
2012 2013 2014 2015 2016F 2017F<br />
*Consolidated figures: CP and CPB#1<br />
12
Opportunities<br />
Competitive Advantages<br />
There are a number of competitive advantages that make<br />
<strong>Coffee</strong> plus a unique acquisition opportunity, some of these<br />
advantages include:<br />
• Well-established reputation and brand awareness<br />
o Over 20 years in the industry<br />
o Considered a major franchise brand on Vancouver<br />
Island<br />
• Known for high quality, fresh coffee<br />
o Just-in-time roasting: only roast the coffee when a<br />
franchise/café has made an order and the coffee is<br />
delivered the next day<br />
• Strong relationships with suppliers<br />
• Excellent relationships with franchisees<br />
• Well-documented and operated franchise model<br />
o 42 franchises<br />
o Some franchisees operate more than one <strong>Coffee</strong> plus<br />
franchise<br />
Recent/Future Developments<br />
The following are recent or future developments planned or<br />
underway by <strong>Coffee</strong> plus:<br />
• Mobile app for online ordering<br />
Growth Potential<br />
There are numerous avenues of growth that can be explored<br />
by a new owner, some potential areas of growth include:<br />
• Sell more swag/retail items to consumers<br />
• Price increases to chain with long-term planning in place<br />
for retail price increases<br />
• Grocery store wholesale growth<br />
• Franchise the coffee roasting plant or bakery<br />
• Sell master franchise areas<br />
• International growth potential<br />
• Every single cafe opened will increase sales from a<br />
wholesale plant. The current owners believe this number<br />
will rise off-island, given the stronger population<br />
demographics versus Vancouver Island population<br />
demographics. Increasing the chain size should be<br />
relatively easy given the company’s history, trained staff<br />
in place and available procedures information.<br />
For example, say 60 cafes opened at $550K yearly sales per cafe<br />
= $33,000,000.00 net sales<br />
• Expect<br />
o $540,000.00 in Royalties / $360,000.00 in Advertising<br />
o and approximately $1,500,000.00 in manufacturing<br />
sales or more at a 26-28% net of gross sales<br />
• Take-out menu<br />
• Custom bags sizes are developed and in stock, sizes are<br />
250G, 400G, 2270G with a 800G coming soon<br />
13
Appendix A: Current Franchise Locations<br />
<strong>Coffee</strong> plus Current Franchise locations<br />
<strong>Coffee</strong> <strong>Plus</strong> has 24 franchise locations, of which 13 franchise locations throughout Western Canada and 11 on the east coast.<br />
West Coast<br />
1. Vancouver<br />
2. Surrey<br />
3. Burnaby<br />
4. Calgary<br />
5. Regina<br />
6. Saskatoon<br />
7. Edmonton<br />
8. Whistler<br />
9. Banff<br />
10. Kamloops<br />
11. Medicine Hat<br />
East Coast<br />
1. Thunderbay<br />
2. Winnipeg<br />
3. Ottawa<br />
4. Montreal<br />
5. Quebec City<br />
6. Saguenay<br />
7. St John<br />
8. Kingston<br />
9. Torronto<br />
10. Hamilton<br />
11. London<br />
12. Weyburn<br />
13. Kindersley<br />
* Corporate wholly-owned location<br />
15
Appendix B: Franchise Menu Items<br />
Franchise Menu Items<br />
<strong>Coffee</strong> <strong>Plus</strong> franchises carry the following menu<br />
items:<br />
Hot<br />
Cold<br />
• Drip<br />
• Iced Americano<br />
• Decaf<br />
• Frappe<br />
• Americano<br />
• Iced Latte<br />
• Cappucino<br />
• Frappe Mocha<br />
• Espresso<br />
• Iced Mocha<br />
• Latte<br />
• Frappe Maccha<br />
• Mocha<br />
Latte<br />
Teas<br />
Edibles<br />
• Hot Chocolate<br />
• Chai Latte<br />
• Maccha Latte<br />
• Tea Misto<br />
• Steamer<br />
• Iced Maccha<br />
Latte<br />
• Iced Tea<br />
• Italian Soda<br />
• Smoothies<br />
• Black<br />
• Chai<br />
• White<br />
• Green<br />
• Maccha<br />
• Breakfast Options<br />
• Bagels<br />
• Quesadillas<br />
• Brioche<br />
• Granola<br />
• Gluten & Sugar<br />
Free<br />
• Chilli & Stew<br />
• Soups & Bisques<br />
• Cookies & Bars<br />
• Hot Apple Cider<br />
• Yerba Mater<br />
• Wraps<br />
Beans<br />
• Mild<br />
• Organic<br />
• Medium<br />
• French Roast<br />
• Smoky<br />
• Bold<br />
• Aribica Intense<br />
• House Blend<br />
• True North Blend<br />
• Veranda Blend<br />
• Rooibos/Herbal<br />
Merchandise<br />
• Reloadable Card<br />
• <strong>Coffee</strong> Related<br />
Items:<br />
• Travel Mugs and<br />
Tumerblers<br />
• Muffin & Scones<br />
• Lunch & Light<br />
Dinners<br />
• Rolls<br />
• Sandwiches<br />
• Paninis<br />
• Ethiopian<br />
16
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Introduction to Canada’s <strong>Coffee</strong> Industry<br />
Although Canada does not have the appropriate climate for growing coffee, Canadian-based firms do import raw materials for<br />
processing and resale into domestic and export markets. <strong>Coffee</strong> manufactured for retail and foodservice markets has been an<br />
important component of food and beverage processing in the country for many years.<br />
<strong>Coffee</strong> is believed to have arrived in North America in 1607 and has been enjoyed by North Americans for centuries. However the<br />
first reference to coffee being drunk in North America was in 1668.<br />
<strong>Coffee</strong> is the most popular hot beverage in Canada with a total of 14 billion cups consumed annually. An estimated 64% of<br />
Canadians drink coffee each day. <strong>Coffee</strong> is also the top beverage in the Canadian foodservice category.<br />
Over 30 developing countries export coffee to Canada and those coffee shipments are still an important source of foreign<br />
exchange and job creation in 10-12 Latin American and African countries in terms of their total trade and connection to Canada.<br />
• Internationally – <strong>Coffee</strong> businesses are involved in a multitude of sustainability initiatives around the world involving<br />
important initiatives in environmental, economic and social arenas and the coffee sector serves as a role model for the breadth<br />
of these initiatives aimed at connecting the many elements of a valuable and complex supply chain.<br />
• Domestically – <strong>Coffee</strong> businesses drive important sustainability initiatives in store design, recycling and operating practices as<br />
well as supporting many charitable activities.<br />
An Important Social Connector & Quintessential Canadian Activity<br />
• Common social connector at home, at work and in café and restaurant settings<br />
• Most popular beverage other than tap water amongst adult Canadians (16+)<br />
• Two-thirds of adult Canadians enjoy at least one cup of coffee a day<br />
• Of the traditional importing markets for coffee – North America, Europe and Japan, Canada is showing, by a considerable<br />
degree, the fastest sustained growth in the last decade<br />
1<br />
3<br />
2<br />
1<br />
2<br />
3<br />
The Canadian <strong>Coffee</strong> Industry, Sub-Sector Profile, Agriculture and Agri-Food Canada, Government of Canada, October 2010<br />
<strong>Coffee</strong> and tea industry trends from the Canadian <strong>Coffee</strong> and Tea Show, Agriculture and Agri-Food Canada,<br />
Government of Canada,October 2011<br />
The Role of the <strong>Coffee</strong> Sector in Canada, <strong>Coffee</strong> Association of Canada<br />
17
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Global<br />
<strong>Coffee</strong> competes with a variety of other non-alcoholic beverages including tea, soft drinks, energy drinks, milk and dairy<br />
beverages, fruit juices, bottled water, sports drinks, vegetable juices, soya beverages, hot chocolate, and low alcohol wine coolers<br />
and ciders.<br />
Figure 2: Global Beverage Market, Total Liquid Volume, 2014<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Bottled Water<br />
Tea<br />
Carbonates<br />
<strong>Coffee</strong><br />
Juice<br />
Concentrates<br />
Other Hot Drinks<br />
Sports Drinks<br />
Energy Drinks<br />
<strong>Coffee</strong> is among the most consumed beverages by volume globally. In 2014, Canada ranked 9th in retail value with $2.1 billion.<br />
Table 3: Top Markets Globally in Retail Value in 2014<br />
Rank<br />
Country<br />
Value ($ billion dollars)<br />
Rank<br />
Country<br />
Value ($ billion dollars)<br />
1<br />
United States<br />
$12.8<br />
6<br />
Russia<br />
$3.7<br />
2<br />
Brazil<br />
$6.4<br />
7<br />
United Kingdom<br />
$2.5<br />
3<br />
Germany<br />
$6.4<br />
8<br />
Italy<br />
$2.4<br />
4<br />
Japan<br />
$4.6<br />
9<br />
Canada<br />
$2.1<br />
5<br />
France<br />
$4.2<br />
10<br />
Mexico<br />
$1.8<br />
Canada has a highly developed away-from-home coffee market and is second only to Italy in highest percentage<br />
of total cups of coffee consumed outside the home.<br />
18
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Industry Structure<br />
<strong>Coffee</strong> and tea represent 1.1% of total food and beverage sales of manufactured goods in Canada.<br />
In 2008, 112 establishments (plants) in the tea and coffee industry shipped $917 million worth of product and employed 2,240<br />
people. Canadian tea and coffee exports totalled $251.2 million in 2008. The Canadian market absorbed the remaining $666<br />
million in domestic shipments and a volume of imports worth $785.2 million. This industry continues to be a net importer.<br />
Figure 3: Tea and <strong>Coffee</strong> Imports, Exports and Sales of Goods Manufactured, 2008 and 2012<br />
4<br />
Canadian Market Sales of Goods Manufactured<br />
2008: $1,451M<br />
2008: $917M<br />
2012: $1,893M<br />
2012: $1,290M<br />
$1,143M<br />
$785M<br />
$666M<br />
$750M<br />
$540M<br />
$251M<br />
Imports Domestic Shipments<br />
Exports<br />
2008 2012<br />
The Canadian market for tea and coffee was valued at $1,451 million and sales of goods manufactured were valued at $917 million<br />
in 2008. In 2012, the market for tea and coffee was valued at $1,893 million and sales of goods manufactured were valued at<br />
$1,290 million.<br />
4<br />
The Canadian <strong>Coffee</strong> Industry, Sub-Sector Profile, Agriculture and Agri-Food Canada, Government of Canada, October 2010<br />
19
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
The majority of tea and coffee processing takes place in Ontario (42 establishments in 2010), Quebec (36 establishments in 2010)<br />
and British Columbia (26 establishments in 2010) as seen in the table below.<br />
Table 4: Number of Establishments (plants) in the Tea and <strong>Coffee</strong> Industry, 2004-2010<br />
Location 2004 2005 2006 2007 2008 2009 2010<br />
Nova Scotia<br />
New Brunswick<br />
Quebec<br />
Ontario<br />
Manitoba<br />
Saskatchewan<br />
Alberta<br />
British Columbia<br />
Canada<br />
2 2 3 3 2 2 4<br />
3 3 2 2 2 2 2<br />
27 47 36 34 37 36 36<br />
38 41 37 41 35 34 42<br />
1 1 1 2 3 3 3<br />
1 •• •• •• •• •• ••<br />
9 9 7 9 10 9 9<br />
22 23 25 26 23 24 26<br />
103 126 111 117 112 111 122<br />
•• Data not available<br />
2010 is the most recent data available from Statistics Canada<br />
<strong>Coffee</strong> is an age-driven rather than a gender-driven industry. It is the second most consumed beverage, after water, by people<br />
25 and older, and the top beverage of choice for adults, especially those in the 25 to 49 age group. The greatest consumption of<br />
coffee is found in the 50+ age group.<br />
The quick service coffee market in Canada is currently estimated at $3 billion and continues to grow. In 2010, Canadians consumed<br />
1.5 billion cups of coffee from quick service establishments. Quick service restaurants and fast food chains have recognized<br />
the potential of the upscale premium coffee market and are diversifying their coffee offerings to include more sophisticated<br />
beverages, in addition to drip coffee.<br />
Overall coffee consumption at restaurants in 2014 was 2.1 billion servings of coffee.<br />
5<br />
5<br />
The Canadian <strong>Coffee</strong> Industry, Sub-Sector Profile, Agriculture and Agri-Food Canada, Government of Canada, October 2010<br />
21
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Figure 4: Per Capita <strong>Coffee</strong> Retail Value<br />
Sales (US$, 2014)<br />
Figure 5: Per Capita Specialist <strong>Coffee</strong><br />
Shop Transactions (2014)<br />
70<br />
16<br />
60<br />
14<br />
50<br />
12<br />
10<br />
40<br />
8<br />
30<br />
6<br />
20<br />
4<br />
10<br />
2<br />
0<br />
US<br />
Canada<br />
0<br />
US<br />
Canada<br />
Strong Growth despite being a mature and competitive market<br />
Figure 6: Retail Value Sales (Tons)<br />
Figure 7: Retail Value Sales (US$ Bn)<br />
90<br />
2.5<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
2<br />
1.5<br />
1<br />
0.5<br />
0<br />
2000<br />
2002<br />
2004<br />
2006<br />
2008<br />
2010<br />
2012<br />
2014<br />
2000<br />
2002<br />
2004<br />
2006<br />
2008<br />
2010<br />
2012<br />
2014<br />
22
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Trends<br />
<strong>Coffee</strong> in Canada grew by 19% in off-trade current value<br />
terms in 2014 to reach C$2.3 billion. Meanwhile, off-trade<br />
volume sales rose by a more modest 4%. The much slower<br />
volume performance was due to already high per capita<br />
coffee consumption in Canada. In addition, Canadian<br />
foodservice is very competitive in terms of coffee and<br />
continues to expand. This inevitably affects the retail<br />
performance, as the consumption of coffee has a limit.<br />
As seen in the infographic on the right, a survey released by<br />
the Canadian <strong>Coffee</strong> Association in 2014 indicated that:<br />
• two-thirds of adult Canadians (65%) consumed coffee in<br />
the past-day<br />
• Approximately 78% of 18-79 year-olds stated that they<br />
had consumed coffee in the past week, while 84% of<br />
Canadian consumers drank coffee in the past year<br />
• On average, coffee drinkers drink 3.2 cups of coffee per<br />
day<br />
• Overall, around three-quarters (78%) of consumers who<br />
drank coffee in the past-day consumed it at-home, while<br />
37% consumed coffee out-of-home.<br />
The demand for fresh coffee beans was supported by a<br />
large number of specialist coffee shops like Starbucks and<br />
expanding grocery retailers, which are likely to remain and<br />
maintain a strong presence. For example, Second Cup has<br />
increased its retail selection of fresh coffee beans across<br />
Canada. In 2014, Second Cup added three whole bean<br />
products and three roast and ground coffees. These coffee<br />
products are popular in foodservice outlets.<br />
6<br />
6<br />
Passport: <strong>Coffee</strong> in Canada, Euromonitor International, March 2015<br />
23
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Differentiation is key across all coffee categories.<br />
Buzzwords in<br />
Consumables<br />
Natural<br />
Organic<br />
Fair<br />
Trade<br />
Non-<br />
GMO<br />
Gluten<br />
Free<br />
Figure 8: Retail Value Sales of Organic <strong>Coffee</strong> (US $ millions) in Canada<br />
7<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
2009 2010 2011 2012 2013 2014<br />
7<br />
Euromonitor International<br />
24
25<br />
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Table 5: Forecast Retail Sales of <strong>Coffee</strong> by Category, 2014-2019<br />
8<br />
Volume (tonnes) 2014 2015 2016 2017 2018 2019<br />
% Growth<br />
2014/19<br />
Fresh <strong>Coffee</strong><br />
Free <strong>Coffee</strong> Beans<br />
Fresh Ground <strong>Coffee</strong><br />
Fresh Ground <strong>Coffee</strong> Pods<br />
Standard Fresh Ground <strong>Coffee</strong><br />
Instant <strong>Coffee</strong><br />
Instant Standard <strong>Coffee</strong><br />
Instant Decaffeinated <strong>Coffee</strong><br />
<strong>Coffee</strong><br />
74,595.90 78,208.50 80,226.70 81,627.10 82,144.40 82,467.40 10.6%<br />
9,716.00 9,991.00 10,245.10 10,481.00 10,687.80 10,888.70 12.1%<br />
64,879.90 68,217.50 69,981.50 71,146.10 71,456.50 71,578.70 10.3%<br />
13,271.70 16,969.20 19,010.10 20,319.80 20,904.40 21,477.10 61.8%<br />
51,608.20 51,248.30 50,971.40 50,826.20 50,552.20 50,101.60 -2.9%<br />
6,116.20 5,904.80 5,682.10 5,453.40 5,236.40 5,036.50 -17.7%<br />
5,769.10 5,572.60 5,365.30 5,152.20 4,950.30 4,765.10 -17.4%<br />
347.10 332.30 316.80 301.20 286.10 271.40 -21.8%<br />
80,712.10 84,113.30 85,908.80 87,080.40 87,380.80 87,504.00 8.4%<br />
Value ($CAD million)<br />
Fresh <strong>Coffee</strong><br />
Free <strong>Coffee</strong> Beans<br />
Fresh Ground <strong>Coffee</strong><br />
Fresh Ground <strong>Coffee</strong> Pods<br />
Standard Fresh Ground <strong>Coffee</strong><br />
Instant <strong>Coffee</strong><br />
Instant Standard <strong>Coffee</strong><br />
Instant Decaffeinated <strong>Coffee</strong><br />
<strong>Coffee</strong><br />
$2,139.40 $2,485.90 $2,690.80 $2,838.00 $2,924.30 $3,007.80 40.6%<br />
$285.40 $296.40 $307.30 $317.60 $327.50 $337.90 18.4%<br />
$1,854.00 $2,189.40 $2,383.50 $2,520.50 $2,596.80 $2,669.90 44.0%<br />
$1,074.10 $1,400.90 $1,585.10 $1,709.70 $1,774.40 $1,837.60 71.1%<br />
$779.90 $788.50 $798.40 $810.70 $822.40 $832.30 6.7%<br />
$172.50 $166.20 $159.90 $153.70 $147.90 $142.60 -17.3%<br />
$159.40 $153.70 $148.00 $142.40 $137.20 $132.40 -17.0%<br />
$13.10 $12.50 $11.90 $11.30 $10.70 $10.20 -22.1%<br />
$2,311.90 $2,652.00 $2,850.70 $2,991.70 $3,072.20 $3,150.40 36.3%<br />
8<br />
Passport: <strong>Coffee</strong> in Canada, Euromonitor International, March 2015<br />
Source: Passport: <strong>Coffee</strong> in Canada, Euromonitor International, March 2015
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Competitive Landscape<br />
Canada is a more competitive market.<br />
Specialist <strong>Coffee</strong> Shop Value Sales Brand Share Breakdown<br />
US Canada<br />
Others Others<br />
Starbucks<br />
Peet’s<br />
<strong>Coffee</strong> &<br />
Tea<br />
<strong>Coffee</strong><br />
Bean &<br />
Tea leaf<br />
Starbucks<br />
Cafe<br />
Depot<br />
Timothy’s<br />
Blenz<br />
Van Houtte<br />
Second<br />
Cup<br />
Important Economic Sector - Sector Size – <strong>Coffee</strong> Driven Revenue Only<br />
• Grocery / Retail (Future Consumption) estimated $900,000,000<br />
• Foodservice estimated $3.5-4,000,000,000<br />
• Office <strong>Coffee</strong> Sector estimated $325-400,000,000<br />
• Total Sector Value – estimated total $4.7-5,000,000,000+<br />
There are between four and five thousand independent cafés and coffee shop owners and nearly several thousand franchise<br />
owner-operators. Some six to eight thousand small business owners are directly involved in the coffee focused sector, generating<br />
jobs, considerable economic and community activity and paying taxes to all levels of government. <strong>Coffee</strong>-focused operations<br />
can be found in all major cities, towns, important crossroads and increasingly in smaller and smaller centres across the country,<br />
making it part of the Canadian lifestyle.<br />
Kraft Canada remains the leading player in coffee in Canada, with a 31% share of retail value sales in 2014. Market saturation is<br />
pushing major companies like Kraft Canada to be more flexible in terms of their offer to reach more consumers.<br />
McDonald’s, one of the strongest players in Canadian foodservice, is still trying to make moves in retail coffee. McDonald’s is<br />
improving its in-restaurant design to highlight the McCafé brand more efficiently and grow visibility. Different shelf designs have<br />
been created to support the different McCafé offerings.<br />
The Second Cup <strong>Coffee</strong> Co. has aggressively restructured its brand in both the retail and foodservice channels. The recently hired<br />
CEO, Alix Box, has emphasized restructuring and improving below-average performing cafés. Some of its outlets have found it<br />
difficult to remain financially healthy and attract customers.<br />
9<br />
The Role of the <strong>Coffee</strong> Sector in Canada, <strong>Coffee</strong> Association of Canada<br />
9<br />
26
Appendix C: <strong>Coffee</strong> & Tea Industry Overview<br />
Prospects<br />
The concentration of major retail chains has continued to be a challenge to the coffee industry and has resulted in a higher degree<br />
of competition for shelf space. For coffee manufacturers, the domestic market will likely continue to be the most important<br />
market for the foreseeable future. The Canadian market is small, but sophisticated, and extremely well served which means that<br />
competition will continue to be strong.<br />
Restaurants and fast-food chains are major purchasing points for coffee, with some chains focussing on improving the quality<br />
of coffee served. Vending is an important component of distribution for coffee, making it available to consumers at strategic<br />
locations. The continued growth of coffee-themed restaurants will offer ongoing private label and branding opportunities to<br />
Canadian coffee manufacturers. Exposure to premium coffee products at coffee-themed restaurants has enlightened consumers<br />
about coffee quality such that consumers are now seeking these premium products at retail. Products such as iced coffees have<br />
captured the interest of the youth market and have introduced these young consumers to coffee, increasing the chance that they<br />
will continue to be consumers throughout their lives.<br />
Changing consumer demographics has resulted in changing consumer tastes and increased demand for healthy products.<br />
Numerous studies on the health and performance benefits of drinking coffee are emerging.<br />
Over the forecast period, coffee is projected to post a 6% value CAGR at constant 2014 prices to reach C$3.2 billion in 2019. Retail<br />
volume sales are expected to see a more modest 2% CAGR. Canada already has a high per capita coffee consumption rate, which<br />
presents difficulties in driving coffee volumes further. New product development and the consistent launch of new technology<br />
play a key role in encouraging consumers to trying different products. The strength of the category remains the presence of highly<br />
innovative companies, which compete strongly for sales.<br />
Tim Hortons, one of the biggest foodservice players in Canada, has already begun buying beans at higher prices due to market<br />
conditions. The trading price for coffee beans is higher and will probably continue to fluctuate as regions are affected by climate<br />
change. If prices continue to increase and Canadian importers of beans are unable to protect themselves against raw material<br />
price rises, retail/foodservice prices may be higher for consumers. If price fluctuation is temporary, shopping behaviour and<br />
patterns are unlikely to be affected significantly.<br />
Conclusion<br />
Canada is<br />
NOT the<br />
51st State<br />
Growth<br />
Persists<br />
Opportunities<br />
Exist<br />
North America is a highly<br />
important coffee market<br />
Each country has a unique<br />
coffee culture in a different<br />
stage of development<br />
Canada has distinct<br />
opportunities that can be<br />
leveraged<br />
27
Appendix D: Work Cited<br />
2014 Canadian Tea Fact Sheet & Trends. (2014). Retrieved November 2015, from Tea Association of Canada:<br />
http://www.tea.ca/about-us/media-kit/2014-canadian-tea-fact-sheet-trends/<br />
<strong>Coffee</strong> in Canada: The Role of the <strong>Coffee</strong> Sector in Canada. (n.d.). Retrieved November 2015, from <strong>Coffee</strong> Association of Canada:<br />
http://www.coffeeassoc.com/coffee-in-canada/<br />
DIG Insights. (2013). Canadian <strong>Coffee</strong> Drinking Study 2013 Highlights - INFOGRAPHIC. Retrieved November 2015, from <strong>Coffee</strong><br />
Association of Canada: http://www.coffeeassoc.com/coffee-in-canada/canadian-coffee-drinking-study-2013-highlightsinfographic/<br />
Euromonitor International. (March 2015). Passport: <strong>Coffee</strong> in Canada.<br />
Government of Canada. (2004-2012). CANSIM Table 301-0006, Principal statistics for manufacturing industries, by North American<br />
Industry Classification System (NAICS) <strong>Coffee</strong> and tea manufacturing 31192. Retrieved November 2015, from Statistics Canada:<br />
http://www5.statcan.gc.ca/cansim/a47<br />
Government of Canada. (2010, October). The Canadian <strong>Coffee</strong> Industry: Sub-Sector Profile. Retrieved November 2015, from<br />
Agriculture and Agri-Food Canada: http://www.agr.gc.ca/eng/industry-markets-and-trade/statistics-and-market-information/byproduct-sector/processed-food-and-beverages/the-canadian-coffee-industry/?id=1172237152079#footnote-4<br />
Government of Canada. (2011, October). <strong>Coffee</strong> and tea industry trends from the Canadian <strong>Coffee</strong> and Tea show. Retrieved<br />
November 2015, from Agriculture and Agri-Food Canada.<br />
29
Notes<br />
30
CONTACT<br />
1.888.859.5388 | info@pavilionservices.com<br />
DIVESTITURE » SUCCESSION » EXIT PLANNING » SELL<br />
1.888.859.5388 | www.pavilionservices.com