Current Market and Situational Analysis
McCain Foods is the world leader in the frozen French fry market. Founded in 1957 in Canada by the McCain brothers, McCain Food commands a market share of almost of 33% globally. With an employee base of 20,000 across the 57 countries of its operation, it is one of the fastest growing frozen food companies in the world. From the very beginning, the company followed a simple of philosophy of “Good ethics is good business” in running its business operations (MFL #1, 2011).
McCain Food is in the frozen food business for over four decades, leading the market in frozen food technologies. With a good network of suppliers (farmers), the company gets one of the premium quality of potatoes for its French fries and chips. The goal of the company is to make people smile by providing them with gourmet food that not only is delicious, but also healthy and nutritious. McCain products contain almost 50% less salt and 20% less fat than its competitors, making it one of the leanest French fries available in the market (MFL #1, 2011). McCain not only has a lot of competitors in Canada, but also has a few US based companies competing in the Canadian market. Companies like Alexia Food, Simplot Canada, Conagra Foods Canada, and Cavendish Farm are the major competitors to McCain in the Canadian market (Lupescu, 2012). All of these companies offer similar kinds of products and operate locally as well as globally.
Canada is the second largest exporter of French fries only next to the USA. It not only has a high growth in the domestic market, but also has a huge export growth, mainly in the northern European countries like Russia, Sweden, Norway, and the Great Britain (BCS, 2014). In the frozen French fry business, it is important to collaborate with the supply chain partners as the companies do not directly interact with the end customers. Therefore, developing a good network of farmers on the supplier side and creating a great relationship with the wholesalers and retailers can really provide a company with a competitive advantage, which McCain enjoys already.
Market Size Potential, Opportunities, and Segmentation
In 2007, the market size of the Canadian frozen French fries was 970,000 metric tons. However, post-recession, the market experienced a huge decline and a reduction in consumption. Since 2011, the market has started going up again. In the past two years, the market has cumulatively gone up by almost 12% to 1.2 million metric tons of frozen French fries (Lupescu, 2012). Although 87% of the frozen French fries sold in the Canadian market are produced locally, but the rest 13% of the French fries are imported from the USA. As per the report of the Canadian Potato Farmers Association, the frozen French fry market was slated to go up by 8% in 2013, and almost by 6% in 2014 (Lupescu, 2012). This is primarily because of the increase of potato production and the decrease of potato prices.
Currently, the frozen French fry market is competitive, with most of the competitors offering long, crisp French fries and potato wedges of similar quality. However, McCain offers a variety of chips and fries, such as crinkle cut, red skin chunks, lattice cut, skin straight cut, and planks (MFL #1, 2011). Although the long straight cut French fries command the maximum market share currently, it is predicted, however, that other types of French fries will see a higher growth rate than the traditional straight cut one in the future, giving McCain a huge competitive advantage.
Ready to eat frozen foods were not in popular demand even two decades back. However, in the last two decades, the demand for frozen foods and ready to eat foods has seen a huge growth. The demand for this kind of food has mainly increased among families where both the couples are working and families with two kids or more. In fact, there is a huge demand for this kind of food among people aged over 60 years (Lupescu, 2012). Initially, most of these ready to eat foods were consumed in fast food outlets like McDonalds, KFC, and Wendy’s. However, with the available of a lot of variety and quality of products in the frozen food market, the demand for this kind of product has increased substantially. Also, McCain French fries have a huge market potential in neighboring US states like Maine, New York, and Washington.
Target Market and Their Characteristics in Canada
McCain products appeal to all kinds of customers of all ages. However, unlike other companies, McCain does not sell its products directly to the customers. It follows a B2B business model in which it sells its products to wholesalers like Costco and Metro Cash & Carry, and retailers like Wal-Mart and Mayer’s. McCain has established contracts with farmers all across Canada so that all the potatoes produced can be locally processed, and the overall distribution distance is reduced drastically, bringing down the supply chain cost (MFL #2, 2010). This also provides McCain with an advantage of targeting all the potential local customers to increase its business. One of the segments in which McCain can still increase its presence include local restaurants and fast food chains that sell French fries. Frozen French fries are less costly than fresh French fries, and hence, McCain can get into a contract with these small local restaurateurs, which will help the restaurants reduce their input costs and help McCain increase revenues.
French fries are extremely popular among teenagers, young adults, and the working class people. Most of the teenagers and young adults like to have their French fries fresh from the oven, and they eat outside at fast food outlets. However, the main market for McCain French fries are from the families where both the couples work or couples with young kids. Therefore, there is a huge potential for McCain to increase the market share by tapping the young adults and teenager segment through marketing.
Program Activities of 2015-2016
McCain strives to be a company making good and simple food in a sustainable way. Its product goal for the future is to make food that looks as well as tastes good, and satisfies different types of customer needs. McCain is learning from its global operations and planning to bring in new innovative products in the frozen chips market like alu tikki from India and potato roll from China. McCain is currently the price leader in the market because of its good contractual agreement with the farmers as well as the customers (wholesalers). It has a plan to continue to keep a good relation with its suppliers and customers, and continue to donate some of its profits for local community development. The company is also quite focused on creating a wide-raging healthier product options within the next three years (MFL #2, 2010). It has already started initiatives like the use of sunflower oil instead of standard vegetable oil for frying its chip, reducing the fat content of its products by 20%. Finally, the company will continue to operate ethically and sustainably that it has done from the first day of its operation.
Lupescu, M. (2012). Canada Potatoes and Potato Products Annual. USDA Foreign Agricultural Service. Retrieved on 25th November, 2014 from <http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Potatoes%20and%20Potato%20Products%20Annual_Ottawa_Canada_09-14-2012.pdf>
Guevarra, M. (2013). McCain Superfries PR Plan. Slide Share. Retrieved on 25th November, 2014 from <http://www.slideshare.net/Mercy-Anne/mercy-pr-plan-presentation?next_slideshow=1>
Business Case Studies (BCS). (2014). A McCain Foods case study. Retrieved on 25th November, 2014 from <http://businesscasestudies.co.uk/mccain-foods/the-marketing-mix-in-the-food-industry/introduction.html#axzz3K7tTcOZc>
McCain Foods Limited (MFL) #1. (2011). About McCain. Retrieved on 25th November, 2014 from <http://www.mccain.com/GoodBusiness/Pages/History.aspx>
McCain Foods Limited (MFL) #2. (2010). McCain’s first global social responsibility report wins best annual report at CSR Awards. Retrieved on 25th November, 2014 from <http://www.mccain.com/newsroom/Pages/McCain%27sFirstGlobalCSRReportWins.aspx>
Government of Canada (GOC). (2014). The Canadian Snack Food Manufacturing Industry. Retrieved on 25th November, 2014 from <http://www.agr.gc.ca/eng/industry-markets-and-trade/statistics-and-market-information/by-product-sector/processed-food-and-beverages/the-canadian-snack-food-manufacturing-industry/?id=1172692863066>