Market Research Vancouver, British Columbia

Market Research

Vancouver, British Columbia Bakery and Party Shop Market Analysis

The intent of this plan is to define the market opportunities for a bakery and party shop in British Columbia, using all available secondary research and completing primary research on what brands are selling, at what price, and what consumers' attitudes are regarding a retail shop that could deliver on each of these characteristics. The unique value proposition of including both bakery and party supplies in the same retail business is what is specifically being researched in this report.

Market research firm DataMonitor has defined the total available bakery market in Canada as $500M in 2004, growing at a 11% growth rate through 2010. The United States Department of Commerce tracks globally, and has projected the figure of $420M in shipments for Canada in 2004. The unit shipment figures vary significantly due to the differences in methodologies used. Both however show significant market potential for bakeries throughout Canada, as a result of the factors defined throughout this report.

In completing the analysis for this report the following NAICS pronounced "nakes") codes were used:

311811 Retail Bakeries - establishments primarily engaged in manufacturing bakery products, for retail sale, but not for immediate consumption. Establishments in this industry make bakery products from flour, not from prepared dough.

Bread and Bakery Product Manufacturing: establishments primarily engaged in manufacturing baked goods. Establishments primarily engaged in manufacturing bakery products, for retail sale, but not for immediate consumption, are included.

The following table shows the Consumer Price Index for British Columbia from 1990 to 2003. The implications for the proposed retail bakery and party is the fact that the more prices rise in this CPI index, the greater the pressure to outsource the production of noodles and seek out alliances, partnerships and joint ventures to take advantage of cost reductions over the long-term.

The following table shows the progression of pricing since 1990:

Table 1: Consumer Price Index for Food British Columbia (1992=100)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 All Items 92.4-97.4 100.0 103.5 105.5 107.9 108.7 109.7 110.0 111.2 113.3 115.2 117.9 120.4 ALL FOOD 91.1-97.7 100.0 103.0 104.2 107.3 108.1 110.8 112.5 113.6 113.0 117.4 120.6 122.8 Food Purchased from Stores 92.7-97.8 100.0 103.2 103.7 107.2 107.5 110.4 111.9 112.8 111.0 115.7 118.4 120.7 Meat 93.4-98.2 100.0 106.7 107.6 107.9 109.8 112.9 108.9 112.2 115.6 123.9 125.2 126.5 Fish & Seafood 91.4-96.2 100.0 104.2 108.0 115.9 114.3 117-117.3 122.2 122.0 128.8 129.3 128.4 Dairy Products and Eggs 92.7-97.7 100.0 100.2-98.7 103.5 106.8 112.6 115.0 115.2 114.9 118.4 122.3 125.9 Bakery & Cereal Products 92.5-96.4 100.0 102.1 105.6 111.1 113.7 116.9 117.5 117.6 111.9 114.0 116.7 122.3 Fruit, Fruit Prep. & Nuts 89.2 104.7 100.0-99.9-99.1 101.0 100.3-98.6 101.1 102.1-97.4 103.1 106.0 106.2 Fresh Fruit 85.5 112.6 100.0 101.6 100.2 102.1-96.6-92.4-95.4-96.1-89.2-99.1 104.1 101.9 Vegetables 89.5-92.0 100.0 105.9-99.5-95.9-88.4-93.2 100.2-94.8-93.4 100.7 106.3 102.6 Fresh Vegetables 87.3-89.8 100.0 107.5-98.4-93.5-82.9-87.6-95.5-88.7-88.7-98.2 104.7-99.5 Coffee & Tea 100.3 101.4 100.0-98.3 119.7 154.8 139.9 141.0 144.3 144.9 136.9 132.3 129.4 129.3 Other Food 96.7-98.0 100.0 102.3 105.4 114.0 113.6 115.8 118.5 130.7 117.2 119.2 120.9 126.1 Non-Alcoholic Beverages 115.8 103.5 100.0 101.8-91.8-89.2-88.6-84.6-79.1-81.8-78.5-81.9-82.0-80.5 Food Purchased From Restaurants 87.6-97.4 100.0 102.6 105.3 107.7 109.4 111.6 113.9 115.6 117.6 121.3 125.4 127.6 Source: Statistics Canada, Prices Division

Table 2: Number of Establishments in Canada by Type and Region

Retail Bakeries

(NAICS 311811)

Province or Territory

Employers

Non-Employers/

Indeterminate of Canada *

Alberta

British Columbia

Manitoba

New Brunswick

Newfoundland and Labrador

Northwest Territories

Nova Scotia

Nunavut

Ontario

Prince Edward Island

Quebec

Saskatchewan

Yukon Territory

CANADA

Percent Distribution *

Notes:

* May not add up perfectly due to rounding

Source: Statistics Canada, Business Patterns Database, December 2005

Table 3: Number of Employer Establishments in Canada by Employment Size Category and Region

Retail Bakeries

(NAICS 311811)

Province or Territory

Employment Size Category

(Number of employees)

Micro

1-4

Small

5-99

100-499

Large

Alberta

British Columbia

Manitoba

New Brunswick

Newfoundland and Labrador

Northwest Territories

Nova Scotia

Nunavut

Ontario

Prince Edward Island

Quebec

Saskatchewan

Yukon Territory

CANADA

Percent Distribution *

Notes:

* May not add up perfectly due to rounding

Source: Statistics Canada, Business Patterns Database, December 2005

As Tables 2 and 3 illustrate, the entire province of British Columbia is primarily dominated by Micro size (1-4) employees with 55% of the bakery retail establishments have this size of staff, and with 15.6% of all bakeries in Canada within the province, it's clear that a uniquely positioned bakery could have a significant market potential in the Vancouver market specifically.

With 211 total retail bakery outlets in all of British Columbia, the proposed bakery and party supplies story would just several key competitors. The following table provides an analysis of the proposed retail stores' key competitors in Vancouver:

Competitors to Bakery & Party Store

Bakery

Strengths

Weaknesses

Anna's Cake House

Richmond, Burnaby

Regularly wins awards and honors for their cakes and pastries; could easily move into offering party supplies as the demographic groups they sell into are likely to throw their own parities vs. cater one

Lack of retail space for starting a party store; lack of knowledge of that aspect of retailing will limit the stores' ability to move successfully into this market.

Cause for Celebration

The most serious competitor to the proposed store concept; this retail outlet specializes in wedding and special occasion cakes.

Lack of experience in retailing party supplies; sells to a higher-end demographic that may consider catering as well;

Lesley Stowe Fine Foods

Well known as one of the best caterers in Vancouver; expertise in event planning and special occasions; is a special events business first and bakery second.

Potentially difficult for the company to move down-market after getting accustomed to the higher margins possible on event catering.

Lighthouse Cake Company

Specializes in cakes for special occasions and is family owned and operated.

Despite this stores' excellent reputation for cakes, it may find the move into party supplies difficult as their core business is more about bakery than merchandising and product sales.

Sandy's Home-Style Baking Company

Specializes in desserts and catered meals; looking to move into the home dinner segment with cook-to-order meals for take-out.

Well known for their pastries, this potential competitor would consider moving more into catering than supplies.

The Valley Bakery

Began 43 years ago and is highly respected for its use of natural ingredients; health conscious also with a pastries line of products as well;

Not nearly as well-known in the event catering arena; despite the high level of awareness of this specific competitor the inclusion of party supplies does not fit with their market segments

WOW! Factor Desserts

Well capitalized and has a run rate of $75M / year in revenues; brand recognition throughout the British Columbia area; focus on production of events as well

Better known for their high-end desserts than their concentration on events; attracts higher-end clientele that looks to cater events (many businesses use WOW!) factor for events for example

Of all the competitors for the proposed store concept, Cause for Celebration would be the biggest potential threat. Of all specialty bakeries, the seven listed above were the highest rated from business directories covering the Vancouver metro area.

Hidden Risks

The following are the hidden risks of launching a business that has both specialty cakes and party supplies in the same location:

The risk of cannibalization from larger supermarkets including Wal-Mart's grocery department. The most major competitive threat is from the bundling that larger supermarkets do with cakes and party favors. The weakness of this risk is that the quality of cakes from supermarkets is often quite bad, and the merchandise generic or even inappropriate for the event. By having a very high quality reputation of cakes and desserts (to the level of Anna's Cake House or Cause for Celebration) this issue could potentially be overcome.