FOOD SAFETY IS NOT AN OPTION

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• FOOD SAFETY IS NOT AN OPTION
• CFBMC - AG EXCELLENCE CONFERENCE - FEBRUARY
  27, 2004

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OVERVIEW

• Presentation Overview
• CCGD Structure
• Members
• Consumer Spending - Industry Profile
• Consumer Attitudes on Food Safety
• Industry Food Safety Initiatives
• Animal Welfare
• Questions and Answers

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CCGD STRUCTURE

• National Trade Association
• Grocery Wholesalers
• Grocery Retailers
• Food Service Distributors
• Head Office Montreal
• Halifax Montreal Toronto Calgary
• Website www.ccgd.ca

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CANADAS RETAIL MARKET

• Food Sector Represents Second Largest Retail
  Channel
• Retail Sales by Sector
• SECTORS TOTAL (value, 000,000)
• Total All Stores
  306,578
• Motor Vehicle Dealers 82,586
• Supermarkets and Grocery Stores 62,800
• General Merchandise Stores 33,834
• Service Stations 23,249
• Automotive Parts, Accessories and
  Services 17,522
• Clothing, shoe stores 16,154
• Drug Stores 15,535
• Other Food Stores 4,778
• Others 50,871

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AVERAGE HOUSEHOLD EXPENDITURES

• Food is fourth after Tax, Shelter and
  Transportation.

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CHANGING FACE OF GROCERY RETAIL INCREASED
NON-TRADITIONAL COMPETITION

• Share of stomach for traditional grocery retail
  in Canada continues to shrink.
• Drug stores, mass merchandisers, dollars stores
  and Club stores now account for over 25 of the
  grocery products purchased.

Source ACNielsen Homescan Grocery Watch
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MASS IS GROWING IN SHARE AT THE EXPENSE OF MOST
CHANNELS MOST NOTEABLY GROCERY
Share of All Channels
All Channel Growth Ontario 5
Chg Ontario National
2 5 4 3 11 3 1 5 11 0 7 13 -1 9 0 4 4 4 5 8 3 4
5 6 9 15 16 1 0 -1

Source ACNielsen Homescan Grocery Watch, Ontario
52 Weeks Ending June 14, 2003
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GROWTH IN REFRIGERATED/DIARY AND UPCed FRESH
SECTIONS DRIVEN BY INNOVATION AND CONSUMER DESIRE
FOR HEALTHY CONVENIENT ALTERNATIVES
Contribution of All Sales in Grocery Channel
Grocery Chg
5 4 7 6 7 9 4 2 5 5 10 10
All Channel Chg.
5 5 8 7 6 8 11 5 7 4 9 10
Source ACNielsen MarketTrack Database, All
Sales Ontario 52 Weeks Ending August 9,
2003 Fresh only UPCd Categories, no Random
Weight
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INDUSTRY PROFILE

• Canada
• Sales - 68 Billion
• Employees 383,500 (retail)
• Grocers
• Amongst largest employers
• Wide range of opportunities
• Grocery store focal point
• CCGD members touch every community in the country

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A BILLION DOLLAR PENNY BUSINESS

• After tax profit in the grocery industry is
  approximately 1-2.
• On food products approximately 80 of the shelf
  price is the cost of the goods to the retailer.

• The remaining 20 is the gross margin that is
  used to cover operating expenses and generate
  profit.
• Cost of labour and benefits accounts for over 50
  of overhead.

National Food Sales
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VALUE TO CONSUMERS INVESTMENT IN THE COMMUNITY

• By leveraging supply chain efficiencies grocery
  distributors are able to deliver increasing value
  to Canadian consumers.
• Average consumer spends approximately 9 of
  disposable income on food purchase from retail
  has steadily declined since WW II

• Each year grocers spend approximately 1.8
  billion re-modeling or building
  stores/warehouses.
• Each year grocers spend over 2.4 billion on
  goods and services to run their businesses.

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THE VILLAGERS ARE RESTLESS

• PARIS, MARCH 28, 2001 Majorities in 19 of 34
  countries surveyed by international market
  research firm Ipsos-Reid say they feel that their
  food is less safe than it was 10 years ago,
  despite major advances in food production and
  processing in the last decade.
• In fact, the research company could not find
  one country among the 34 countries studied where
  a majority of residents feel their food is safer
  than it was ten years ago
• Source Ipsos-Reid

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WHAT THE VILLAGERS ARE SAYING
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GLOBAL FOOD SAFETY

• The Global Village Shopping the World
• Developing Countries are Leading on Food Safety
  BUT
• BSE
• Foot and Mouth
• Dioxin in Feed
• Allergens in Chocolate
• SQF Australia and USA
• Global Food Safety Initiative Europe
• Canada
• FSEP
• Canadian Food Safety Adaptation Program
• OFFS APF

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WHAT CANADIANS THINK ABOUT FOOD SAFETY

• Toronto, ON According to an Ipsos-Reid/CTV/Globe
  and Mail poll released today, three-quarters
  (74) of Canadians say that they are concerned
  with the safety of the food they eat, nearly half
  (35 of the total) of whom are very concerned
  about the safety of their food. Four-in-ten (39)
  Canadians say that they are somewhat concerned
  with the safety of the food they eat, while 16
  percent are not really concerned. Just
  one-in-ten (10) Canadians indicate being not at
  all concerned about the safety of the food they
  eat.
• Source Ipsos-Reid 2001

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SUPPLY CHAIN FOOD SAFETY

• We need to have a clean hand off
• If there is a fumble we all lose
• Canadian Supply Chain Food Safety Coalition 3
  Years Old
• Vision
• Mission
• Membership
• Priorities
• Food Safety Summit Pursuit of better policy
  making milieu
• New Members Welcome

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WHERE HAS YOUR FOOD BEEN?
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FOOD SAFETY SEVEN KEY PRIORITIES

• Establish and maintain an early warning system to
  determine, anticipate and communicate food safety
  issues
• Facilitate the co-ordination of the product
  recall process
• Develop and recommend HACCP based standards -
  seek government approval and drive for regulatory
  alignment across Canada.
• Promote and support members in educating
  employees and consumers on food safety
• Assist members to minimize risk and respond to
  food safety crises and coordinate industry action
  when crises emerge
• Lead in developing positions on consumer issues
• Invest in technical expertise to assist members
  and support advocacy efforts

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EARLY WARNING

• List Servers
• FSNet
• AgNet
• AnimalNet
• Coalition Communication
• Supply chain issues touch retailer/food service
• Commercial Sources
• Food Track

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RECALLS

• April 1, 2002 - March 31, 2003
• Allergen 158 ( 41)
• Chemical 89 ( 23)
• Microbiological 78 ( 21)
• Extraneous material 38 ( 10)
• Other 18 ( 5)
• Total 381 (100)
• Imported product contributed to 203 recalls
  (54) - 2002/2003
• Source Canadian Food Inspection Agency

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FACILITATING RECALL EFFECTIVENESS

• Supply Chain Food Product Recall Manual 3rd
  Edition
• Nation Wide Recall Workshop 6 Association
  Partners
• Promote Best Practices with Importers
• Refine Traceability Systems

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HACCP BASED SYSTEMS DCs RETAIL

• Complete HACCP based systems for Distribution
  Centres and Retail Stores
• Roll Out and Execution Will be challenging
• Strengthen ties with CFIA, AAFC and Health Canada
• Promote the Food Safety Summit May 18, 2004
• Procurement Standards (VRP/SQF/Third Party Audits)

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TRAINING AND INFORMING

• FoodWise Industry Training Program
• Need a National Approval Process for Training
  Programs
• Strengthen commitment to Canadian Partnership for
  Consumer Food Safety Education (FightBAC)

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MANAGING INDUSTRY CRISES

• Crisis Management Manual and Checklists
• Food Safety Resource Kit
• CD Contact Lists and Fact Sheets
• Desk Top Exercise with CFIA
• CCGD Role in a Crisis
• Contact Management
• Media Relations
• Coordinating Industry Response

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CONSUMER ISSUES TO GO

• Hepatitis A
• BSE
• Recalls
• Food Security
• Allergens
• Transfats
• Labelling
• Obesity
• Farmed Salmon
• Food Irradiation

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TECHNICAL SUPPORT

• Supply Chain Partners Resources
• Food Safety Network

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VENDOR RECOGNITION PROGRAM

• Adopted idea from FMI in the USA
• Canadian Food Safety Adaptation Program Support
• Modified with input from vendor community
• Compliments other programs
• Fills a void Common platform for retailers and
  vendors to discuss food safety
• Guidance Document Questionnaires

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WHY A VRP?

• Retailers did not have a common approach to
  suppliers on food safety
• VRP focused the CCGD members
• Suppliers wanted a consistent approach from
  retailers
• Focus is food safety Not Quality
• Includes section on Animal Welfare
• Process is evolving VRP/SQF/Third Party Audits

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ANIMAL WELFARE

• Issue is on the Rise Council of Rome
  1997(Sentient beings)
• Pets as Kid Replacement Governor Spares Biting
  Dog
• PETA has been active Foodservice then Retail
• Safeway et al CEOs looking for solutions from
  producers
• CCGD working in Partnership AFAC, Alberta Pork
  and others
• Discussion Paper in Circulation Two forums
• Require Minimum Decent Standards
• Verification is Needed Time is of the Essence

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FAST FOOD WAS FIRST NOW ON TO RETAIL
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PETA HITS THE ROAD INDUSTRY RESPONDS

• Feb 5 in San FranciscoPETA launches Safeway
  Boycott.
• Grocery Giant Fails to meet Minimum standards
  for Raising and Killing Animals Shocking Video
  Footage Tells Story of Cruelty
• April 2-4Press Conf in Vancouver, Calgary
  Winnipeg
• April 29-30, May 1Press Conf in Edmonton
  Saskatoon
• Video Presented to Media Gets attention
• Surprise leaflet sticker campaign in stores
• Letter writing e-mail campaign

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PETA ACTIVITY SOLELY TO GAIN MEDIA ATTENTION

• The naked woman stunt
• Video Tape 8 minutes of horror
• CCGD letter to media
• Ethical Treatment of a Story
• Extreme activity an affront to human decency
  Vancouver Sun Ad (refused)

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VANCOUVER SUN NOVEMBER 13,2002
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NO AD BUT HALF PAGE ON A3!
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PAGE A3 ..CONTINUED
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SAFEWAY ISNT ENOUGH IN CANADA LETTERS TO CEOs
OF OTHER GROCERS

• PETAs agreement with Safeway includes
• Implementation of unannounced audits of Seaboard
  Farms
• Implementation within 6 to 18 months of release,
  the FMI Guidelines
• PETA moves on to Wal-Mart, Albertsons
  Kroeger (all publicly traded companies)

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FOOD MARKETING INSTITUTE (FMI) GUIDELINES

• Consistency across retail sector
• A measurable audit process
• Implementation of practicable and attainable
  guidelines based on science
• An ongoing Advisory council of third party,
  independent animal welfare experts
• Improved communications across supply chain on
  animal welfare issues

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CCGDs PROCESS BEGINS WITH COLLABORATION

• Codes of Practice living document
• Tie in with on farm food safety
• Industry must work together with trade to develop
  livestock welfare audit system

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CONSUMERS HAVE EXPECTATIONS

• Customers are the last link in supply chain
• Expectation retailer is an advocate for
  customer
• Have implicit trust procedures followed, laws
  adhered to
• Retailers partners need to have a cohesive
  direction and be able to make a strong statement
  to the customer about food safety

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QUESTIONS?

• Only easy ones SVP
• THANK YOU
• Presented by
• Bryan Walton, Vice President Western Region
• Canadian Council of Grocery Distributors
• [phone].