Retail Natural Foods Industry Poised for Change

EDMONTON–Canada’s retail natural foods industry, which is characterized by small independent owners with little purchasing power, is poised to begin a period of consolidation and redevelopment through the efforts of two store owners who like to think big.

Beachhead for the industry consolidation is Terra Natural Foods Market on Edmonton’s trendy Whyte Avenue. Terra, which has been growing at around 13% annually, announced today that it will be acquired by Planet Organic Health Corp., a new public company on the Canadian Venture Exchange (POH).

Terra’s owners, Mark Craft and Diane Shaskin, are the founders of Planet Organic Health Corp.

Planet Organic was set up to acquire profitable existing natural food stores and maximize the potential of each location through marketing and operational strategies that have already been tested and proven in the marketplace. Craft and Shaskin believe this staged consolidation in the natural food industry will be similar to the profitable consolidations already achieved in other sectors. The company plans to expand from 3-4 locations in the first year to 21-25 in five years.

"Terra is a model store for the natural foods industry with highly developed systems, marketing plans, and an award-winning design," said Craft. "We will apply these proven techniques to our new acquisitions to attract customers, improve service and increase profitability."

Craft noted that because of their size, most of the retailers that characterize this marketplace are unable to do much marketing, staff training or even negotiate volume discounts for their purchases. Typically, the average independent natural food store negotiates with over 200 suppliers. Through consolidation, Planet Organic will be able to centralize purchasing, establish product standards and negotiate discounts.

Shaskin said stores acquired by Planet Organic will retain their community connections and specialized knowledge about the needs of their customers. Local managers, for example, will still have the ability to acquire the products that best meet the needs of their particular markets.

"Our goals are to provide the highest quality organic and natural foods, supplements, body-care products and organic produce while emphasizing customer service, community involvement and employee satisfaction," Shaskin said.

The natural foods industry in Canada, which consists of about 1,500 small stores, has experienced double-digit growth in the past few years. This is attributed to increased awareness about nutrition and health, including a desire to avoid pesticides, agro-chemicals and food additives, and to encourage organic farming. The mainstream grocery industry, by comparison, has struggled to reach 2-3% annual growth.

Nonetheless, owners of independent natural food stores that wish to sell their business normally find that there are no serious buyers to be found. Typical stories with annual normalized earnings of $150,000 to $300,000 are usually too big for individual buyers ("Mom and Pop" stores) and too small and often too far from other markets for larger corporate entities not set up like Planet Organic to handle such arrangements.

Under the Planet Organic plan, owners will receive a fair price for their business, partly in shares and debentures in an expanding company. Individual stores will become part of a larger organization with better support and more buying power.

Background

Many natural food stores began as food-buying co-operatives. Terra Natural Food Market in Edmonton can trace its roots to 1978 and the High Level Natural Foods Co-op. The co-op was purchased by the owners of Terra in 1993.

Terra now plans to expand operations in the last half of 2001 by moving to a larger location with convenient parking just a few blocks away in the same community.

Terra Natural Food Market offers certified organic produce, both local and imported, freshly baked goods, healthy deli and specialty items, natural meats, a wide variety of grains and grocery items, and vitamins, supplements and personal care items, some under its own house label.

For additional information:
Mark Craft or Diane Shaskin
Terra Natural Food Market
780 429-7133
terra@compusmart.ab.ca