Most of B.C.’s large public retailers, manufacturers and distributors are increasing sales and expanding operations faster outside the province than inside.
Often the reason is because they have such a strong presence in B.C. that it is easier to chalk up high growth rates from the smaller revenue base in the rest of the world.
Lululemon Athletica Inc., for example, grew revenue 2,742% to $16.6 million in its Hong Kong and Australian division in the year that ended January 30, 2011.
That compares with a 57% revenue jump overall, to $711.7 million in the same year.
The yogawear-seller’s revenue growth in Canada was hardly sluggish, at 37%, but it was far below the company’s 79% sales jump in the U.S. in that fiscal year.
The company (TSX:LLL; Nasdaq:LULU) has more stores per capita in B.C. than in the rest of Canada but it does not break out its revenue for this province alone.
Neither does Coastal Contacts Inc., which focused on gaining traction in the rest of Canada in 2010.
“Our growth has been faster in Ontario and Quebec than it has been in B.C.,” CEO Roger Hardy told Business in Vancouver.
“2010 was about Canadian growth. I think 2011 will probably be a bit more about more growth out of the U.S. and in Europe.”
Coastal Contacts (TSX:COA) grew revenue 13% to $40.6 million in the quarter that ended January 31 compared with the same quarter a year earlier. Canadian sales growth, at 40%, was several times the company’s overall sales growth of 13%.
U.S. sales growth was a mere 6% between those two quarters although Hardy said growth in the U.S. and Europe in future will be stronger than the company’s overall performance.
His company’s advertising featuring Trevor Linden obviously has more resonance in Vancouver but he is running ads with that former Vancouver Canucks superstar in the U.S. and across Canada.
Sun-Rype Products Ltd. (TSX:SRF), Hardwoods Distribution Income Fund (TSX:HWD.UN) and Premium Brands HoldingCorp. (TSX:PBH) are all growing at least several times faster outside B.C. than within the province.
“The lion’s share of our business is Western Canada,” Sun-Rype CEO Dave McAnerney told BIV. “We’re a mature brand in B.C. and Western Canada. So, as with mature brands, I think, part of the growth strategy is geographic expansion.”
Sun-Rype added a 1.36-litre bottle to its conventional Tetra-Pak juice line in 2008 and produced that juice at co-packers located in Ontario and Washington state.
In September, Sun-Rype bought its Washington state co-packer, Yakima Juice LLC, for an undisclosed amount. It then trimmed staff and streamlined operations.
“Our expansion is really a recognition that as a manufacturer in Canada, if you want to be successful, you have to be able to supply on a national basis because customers are becoming national in scope,” McAnerney said.
Jim Pattison Group CEO Jim Pattison owns a hefty stake in Sun-Rype but the Okanagan-based company does more than distribute simply to Pattison’s Overwaitea Food Group. It also supplies large retailers such as Safeway Inc. (NYSE:SWY), Wal-Mart Stores Inc. (NYSE:WMT) and Costco Wholesale Corp. (Nasdaq:COST).
Because McAnerney’s company ships products to those companies’ central warehouses, it is impossible for him to gauge exactly where his sales are coming from geographically. Instead, he charts it by customer.
So does Premium Brands president and CEO George Paleologou.
“We ship products to a Loblaw or Costco warehouse and we don’t know where the products go. They may ship them to Manitoba or Saskatchewan,” Paleologou said. “I couldn’t say accurately [a geographic breakdown].”
Paleologou has made dozens of acquisitions since he became president of his food manufacturing and distribution venture in 2001.
Of the five acquisitions in 2010 and one so far in 2011, three have been for small B.C. companies while the others were for larger companies in central Canada and the U.S.
So, while Premium Brands grew its revenue 16% to $535.2 million in its fiscal 2010 year, Paleologou told BIV that his company is currently operating at the pace of being a $700 million company.
“Ninety per cent of the growth in our numbers between 2009 and 2010 would have been outside Western Canada,” he said. “The growth for us [in the future] is coming out of the U.S. and central Canada.”
B.C. companies that have long had a foothold in the U.S. are also seeing stronger growth south of the border.
“The U.S. business went down a little bit harder in the economic downturn than it did in Canada,” said Hardwoods Distribution Income Fund CFO Rob Brown. “Now that we’re seeing some stability there, we’re building back up from a lower base.”