After 34 years in operation, CANEX continues to build on its history of success as the provider of retail goods and services to the Canadian Forces (CF).

	"...WE HAVE IMPLEMENTED A SERIES OF CUSTOMER FOCUSED INITIATIVES."

Established in 1968, CANEX has undergone many changes due, in part, to internal restructuring and external market-place forces.

The major downsizing of the CF—which occurred in the late 1990s—reduced our business by 50 per cent. Additionally, aggressive competitors attacked us on all sides.

Our people accepted the challenge, and since 1997 we have implemented a series of Customer Focused Initiatives including:

Best Price Program - guarantees the lowest price on a variety of grocery basics, such as milk,bread, and butter.

Club Xtra - our 56,000-member customer loyalty program that rewards our best clients with rebates on their purchases. Rebates now exceed $250,000 per year.

No Interest Credit Plan - in 2001 we enhanced our highly successful “No Interest Credit Plan” by adding a 24 - month payment feature. This now enables customers to make lower monthly payments at a minimum administrative cost of 5 per cent of the credit amount. The administrative cost is refundable if the balance is paid in full inside of 12 months. A total of 1,047 customers have now benefited from this new feature.

Food Service Franchises - continued introduction of high-quality, recognizable food franchises on CF bases/wings/units (i.e. Tim Hortons, Pizza Hut, Harvey’s, Swiss Chalet, Subway, and Robin’s Donuts).

Modernization of Outlets - an investment of $15.5 million over the last five years to upgrade and renovate our stores, thereby enhancing the shopping experience. In fiscal year 2001/02, we spent $2.9 million on 36 outlets.

Increased Revenue to Base/Wing Funds - royalties paid increased from $3.6 million in 2000/01 to $4.3 million in 2001/02. Total royalties paid since 1997 equal $18.8 million.

IM/IT Upgrades - the introduction of a state-of-the-art retail merchandise and point of sale system (SMS) that allows us to make buying decisions based on customer wants. As a result, employee productivity increased by 8.2 per cent to $114,002, and inventory turnover increased from 5.5 times in 2000/01 to 5.6 times in 2001/02.

Operations in Bosnia - as part of the CFPSA Deployed Operations group, CANEX now operates canteens at the six locations in Bosnia where CF troops are stationed. This endeavour generated wholesale sales of over $5 million, as well as substantial revenue for unit funds.

	"...OUR EMPLOYEES NOW UNDERGO A TRAINING SESSION DESIGNED TO MAKE THEM EXPERTS IN CUSTOMER SATISFACTION."

NATEX - the NATO Exchange System operated in Germany by CANEX has increased its sales from $24.4 million in 1997/98 to $35.5 million in 2001/02.

Crowning the Customer - introduced in September 2001, our employees now undergo a training session designed to make them experts in customer satisfaction. Of our 1,200 employees, 406 have attended these sessions. The remaining 794 employees will receive training in the next fiscal year.

The success of these initiatives is evident in the enclosed financial statements. Some of the highlights include:

FIGURE 1

Figure 1: Sales growth of 5.1 per cent from $116.5 million in 2000/01 to $122.4 million in 2001/02.

FIGURE 2

Figure 2: Royalties paid to bases/wings/units are up 19.4 per cent from $3.6 million in 2000/01 to $4.3 million in 2001/02.

Also, total operating revenue increased by five per cent from $32.8 million in 2000/01 to $34.5 million in 2001/02.

FIGURE 3 ( *Source: Globe & Mail, April 26, 2002 )

Figure 3: Sales per square foot of selling space (Canadian operations) increased from $391/sq ft in 2000/01 to $414/sq ft in 2001/02. This puts CANEX among the best in this key industry benchmark.

With 1,200 employees located in Canada, Germany, and Bosnia, CANEX is uniquely positioned to provide enhanced services and new products to our customers. As part of the CFPSA, CANEX is working to find ways of increasing revenue, so that further improvements will be realized at the base/wing/unit level.

As we look to the future our vision is clear – we have pride in "Serving Those Who Serve." We will do everything within our power to gain the trust of our customers through enhanced facilities, improved product assortments, and service delivery.

Michel Lemoine
President of CANEX