The Canadian Market

Canada has always been a top five market for British magazines. This may come as a surprise considering that British press only accounts for approximately 2% of overall sales. However, unlike many markets in 2006 (including the UK) British press sales increased, with a year-on-year rise of 18% between January and September. With a total market value of $750,000,000, the prize for British publishers is a share of the $15,000,000 on offer. Magazine sales have been boosted by a healthy market economy in 2006. Retail sales overall hit $33.4 billion, maintaining a strong trend of general growth throughout 2006 and suggesting that domestic demand can still power the economy despite a looming US slowdown.

Canada has a population of 32.6 million, 60% of which are English, 23% are French Canadian and 17% are other nationalities (mostly Asian). The French influence is significant. Of the estimated 5% of total imported magazine sales, French language editions account for 3%, mainly in Quebec.

Distribution

Magazine distribution into Canada is a mixture of direct to retail and wholesale, and is dominated by three major distributors. LMPI is the main distributor of imported press in Canada, accounting for approximately 90% of all imported publications distributed. LMPI is wholly owned by Hachette Distribution Services. Distribution through LMPI is predominantly direct to retail, which means distribution is focused on the major Canadian retail chains and key independents; mainly those who are able to sell imported press. This accounts for approximately 2,000 retailers. LMPI is based in Montreal.

The other key distributors are Disticor, who are privately owned and Coast to Coast who are owned by a consortium of Canadian wholesalers. Both Disticor and Coast to Coast are based in Toronto and specialise in domestic title distribution. Disticor are also able to distribute imported press. As well as the direct market, all three distributors are able to access the US and Canadian wholesale markets, providing publishers with a wider canvas to sell their publications. Publishers should seek guidance from their UK distributor on what type of distribution is suitable for their titles, however in the first instance, distribution is usually limited to the direct market as sales efficiencies are usually much higher (between 45% and 50%) protecting publisher profitability.

Retail

Newsstand sales in Canada account for approximately 20% of overall sales, with subscriptions, much like in the US, accounting for 80%. There are approximately 30,000 press outlets in Canada, of which around 5,000 take imported press. This is growing however, as more publishers take advantage of the opportunities offered by wholesale. The direct to retail market is dominated by ChaptersIndigo, a major bookstore chain, similar to WH Smith in the UK and Barnes & Noble and Borders in the US. With 89 superstores throughout Canada, as well as around 285 mall stores, under the name of Coles, the group accounts for around 40% of imported magazine sales. The good news for publishers is that, unlike WH Smith, there are no listing fees restricting entry, and as long as titles achieve a 50%-60% sell through, they will remain displayed alongside domestic titles.

Other key retailers in Canada include HDS Retail (Hachette Distribution Services), who, operating as Relay, Maison de la Presse Internationale and Great Canadian, service airports, railway stations, hotels and mid sized and flagship CTN stores. As a sister company to LMPI, they have over 200 locations across Canada.

Presse Commerce is an association of affiliated members made up of key independents across Canada. With over 450 independent members, Presse Commerce offers publishers the opportunity of coordinated sales development and unique promotional opportunities across their member base. In addition to Presse Commerce, Megapress represents the four biggest independents in Toronto as well as several smaller retailers. Other major retail groups are available to those publishers willing to venture into the wholesale market.

Canadian Wholesale

Publishers who have experienced success in the direct market, may wish to consider further expanding their distribution into the Canadian wholesale market. Each one of the three main distributors offers wholesale distribution. With only 11% of total Canadian newsstand sales coming from the direct market, the opportunities available in wholesale are considerable. The network is dominated by four major wholesale groups, the News Group (Vancouver), Metro News (Toronto) NewsWest (Calgary) and Benjamin News (Montreal). These last three, along with four smaller regional operations are all allied under the umbrella of CMMI (Canadian Mass Media Inc). In total, publishers are able to distribute their publications through 15 wholesalers penetrating a greater number of independents, as well as major retail groups such as Shoppers Drug Mart and 7-Eleven Inc, both of which have considerable influence on magazine sales.

The greater prize, however, is entry into the supermarket channel, which accounts for approximately 34% of total sales in Canada. Loblaws is the biggest player in this channel. Their status, however, will be severely challenged by Wal–Mart Canada Corp, which, although not classed as a supermarket in Canada, still intends to go head to head with the supermarket group through an aggressive expansion campaign in an attempt to dominate the market over the next five years. It is hoped that publishers will benefit from this competition, as both chains seek a competitive edge over the other.

A word of caution however. The wholesale market is only suitable for certain titles. Those with high sell throughs in the bookstore chains and lower than average cover prices have a distinct advantage over those that don't. Publishers interested in expanding into wholesale should seek advice from their distributor before venturing down this route. The market is characterised by lower sales efficiencies (between 30% and 35%) and lower prices, and publishers should be prepared to weigh up the benefits of extra copy sales against the costs of extra price funding and greater print costs.

Rebadging and French language editions

Publishers wishing to significantly expand into the Canadian market may wish to consider cosmetically changing their current British title to better position it in the market. This is termed rebadging. By subtly changing the front cover, introducing a North American barcode and localised coverlines and imprinting North American prices, publishers may be able to sell their publication in as a domestic title. This would enable wider access to some of the larger chains and independent stores who are not able to stock imported press (mainly in the wholesale market). In most cases, this would involve the publisher reducing the Canadian cover price to ensure its competitiveness against the domestic competition. Whilst this would mean publishers giving up additional remit to fund a lower price, this would be balanced out by greater volumes being distributed and hopefully greater sales. More ambitious publishers may also wish to introduce domestic editorial into the magazine, although this could become costly, and is not necessary at the outset.

In addition to rebadging, publishers who already produce French language publications, may wish to consider distributing their magazine into the French speaking areas of Canada (mainly Quebec). With around 23% of the population speaking French, there are significant opportunities for publishers willing to expand their current distribution outside Europe.

Whilst all three major Canadian distributors are able to offer both rebadge and French language distribution, publishers should seek advice from their UK distributor as to the suitability of their titles, as not all magazines will benefit from these initiatives.

Price and VAT

It is also important for UK publishers to seek information and advice from their export distributor with regard to pricing their product competitively. VAT on magazines in Canada is 6% and this is added to the eventual selling price at the time of purchase. This applies to all magazines sold in Canada, however imported UK publications are still priced much higher than their domestic competitors, simply because of the added freight and distribution costs that apply. It is true that imported titles are considered to be premium product and therefore people expect to pay a higher price, however UK magazines can gain readership from other imported and domestic titles, by simply funding a lower, more competitive price. As a price guide, the average price of an imported publication in Canada is $10.99, whilst the average price of domestic titles ranges between $4.95 and $5.95.

Subscriptions

As mentioned earlier, subscription sales account for approximately 80% of total sales in Canada. It would therefore be foolish of publishers to ignore this aspect of Canadian distribution and fortunately both LMPI and Disticor offer international publishers the opportunity to enter the subscription market, through services that complement their existing newsstand business.

Express Mag is a division of LMPI and Disticor Direct part of the Disticor group. Both offer international publishers a complete subscription service, with the added advantage of having a localised call centre and comprehensive website to advertise their publications. Between them, some 2 million international copies are mailed each year to around 100,000 subscribers located in the USA and Canada. Further information can be found at www.expressmag.com and www.disticordirect.com

Conclusion

To a UK publisher, the Canadian magazine market is a multi–layered beast waiting for the layers to be stripped away to reveal the benefits beneath. Peel away the North American skin and Canada reveals itself to be a market dominated by key retail chains, willing to accept new and innovative magazines and delivering sales efficiencies in excess of 50%. Delve deeper and the benefits of wholesale distribution present themselves to publishers willing to face the risks of wider and deeper distribution, through more challenging retail channels. Canada should no longer be looked at as just part of the North American market. It has a unique identity all of its own that offers publishers new and exciting opportunities for driving sales overseas.