STRATEGY

Our ultimate goal is to ensure the growth and profitability of Transcontinental while promoting the common interests of its employees, customers and shareholders, the three pillars of the organization. Our strategy is based on several fundamental principles: to be the leader in the markets we serve, to have a disciplined approach to acquisitions and financial management, and to foster a culture of continuous improvement.

Having said this, TC Transcontinental’s mission is to help its customers identify, reach and retain their target consumers. We do so by offering printing products and services, media content, media vehicles and many new online platforms, which customers are increasingly choosing for their marketing campaigns. We will continue to develop and adjust to new customer realities in order to help them maximize the return on their marketing dollar. Our vision is to remain the Canadian leader in a number of our niches, but also to carve out a leading position as a provider of interactive digital solutions.

Trends in the Marketplace

The Corporation does business in industries that are transforming at a rapid rate. Unprecedented changes are sweeping the publishing and printing industries, presenting both opportunities and risks. Marketing is increasingly based on a one-to-one approach and the customers who use such services are focusing more and more on return on investment and measurability. As such, campaigns are becoming increasingly targeted as advertisers seek to establish and develop a relationship with their customer base. Concurrently, the rise of new media, digital platforms and changing consumer habits coupled with the increasing availability of data and technology to make better use of this data, is increasing audience fragmentation, personalization of content, user-generated content and web-based communities. The velocity of a number of trends has increased. This is especially true for the rate of adoption of digital technologies and the ensuing migration of advertising dollars toward online platforms.

The ongoing transformation of the media and marketing industries is having a profound impact on the printing industry. Print products remain key components in the media mix, but their growth is limited due to the growing impact of the trends noted above. The printers who will be able to benefit from this fast-evolving market are those who have the latest technology. These new technologies enable a better response to customers’ ever-growing needs, while simultaneously enhancing printers’ operational efficiency.

In addition, macroeconomic factors such as the globalization of markets, the rise of environmental and social consciousness and the volatility of the Canadian dollar are all having an effect on our business, as are more recent events including the economic slowdown.

Taken as a whole, these new trends have started to have an impact on the demands and expectations of our customers. In fact, they have driven our customers to increasingly experiment with one-to-one marketing, new platforms and an integrated service offering from their suppliers. The Corporation has therefore designed its strategy to profit from these trends.

Our Two-Pronged Strategy

Given these rapid changes in our industries, we are pursuing our transformation so that we can guide the activation of our customers’ marketing process using our products and services, whether conventional, interactive or web-based. This we believe we can accomplish via a two-pronged approach: (1) build on our existing business and (2) develop new opportunities in interactive marketing and digital solutions. Consequently, in addition to making our existing operations even more efficient, we are ramping up the development of the new online platforms. TC Transcontinental is gradually shifting from a more general offer to a differentiated and innovative client-based offer that draws from all of its products and services—print and digital. Transcontinental is in fact one of the only printers in Canada with an offering that integrates print with the new one-to-one and interactive advertising tools demanded by our customers, particularly retailers. This is how we believe we can maximize our growth potential over the medium and long term.

1) Build on our existing business

TC Transcontinental has, from the very beginning, taken calculated risks to ensure a solid foundation for its operations. Whether this has meant capital investments or business acquisitions, the Corporation has always had only one goal in mind: to serve customers better while generating an attractive return for shareholders. Past decisions have resulted in a strong base for our traditional printing operations, media content and media vehicles. In its traditional industries,
TC Transcontinental is characterized by top-quality employees, a committed base of loyal clients, a leading position in Canada, strong brands and a network of state-of-the-art printing plants. We also have key advantages that can help us grow new services: we control the printing of communications products, we produce excellent content, we know how to disseminate that content through the broad reach of our targeted multi-channel platforms, and we will continue to be a client-centric organization that serves both advertisers and consumers.

Here are some of our achievements in fiscal 2010:

• On October 1, we successfully started printing The Globe and Mail daily paper on our new Canada-wide hybrid printing platform, under an 18-year contract signed in 2008.
  
  
• We acquired or launched six new weekly papers in Quebec, and their websites, to offer more local content to communities and businesses.
  
  
• We launched PREMIUM, an innovative and high-end publication that is Quebec’s first bookzine.
  
  
• New agreements were signed to add print volume to the San Francisco Chronicle at our plant in Fremont.
  
  
• We renewed contracts with terms of one to three years worth more than $350 million in our Printing Sector.

With the significant competitive advantages noted above, and our achievements in fiscal 2010, we believe that going forward, our two Transcontinental sectors can win market share.

2) Develop new opportunities in interactive marketing and digital solutions

Most of TC Transcontinental’s revenues come from the marketing budgets of its customers. In recent quarters, given the rapid change in its traditional activities and new customer needs, TC Transcontinental’s offering has evolved considerably to integrate its diversified mix of print products and media content—both mass and targeted—along with one-to-one advertising and new interactive marketing communications platforms. Below is a list of our selected accomplishments in fiscal 2010:

• We acquired LIPSO Systems, a Quebec company and leading provider of mobile solutions in Canada. With this acquisition Transcontinental adds a number of key services to its marketing communications mix, including cell-phone bar-code readers for mobile couponing in retail sales, and electronic ticketing in transportation and entertainment. Note that in November 2010, after the close of fiscal 2010, Transcontinental also acquired Vortex Mobile, an Ontario company and also a Canadian leader in mobile solutions, to strengthen our product and services offering in our Interactive Sector.
  
  
• We launched a digital representation house, an agency that sells advertising on the Web, to augment our offering to advertisers in our magazines, particularly women’s magazines, through exclusive partnerships with the largest online content publishers in North America.
  
  
• We signed two separate agreements with the Toronto Transit Commission and the Société de transport de Laval to provide real-time custom text messaging that alerts riders to the times of bus and streetcar stops.
  
  
• We made strategic investments of about $10.6 million in the Media Sector, primarily to develop our new digital platforms such as publisac.ca and dealstreet.ca, as well as an online reputation management application through weblocal.ca, our Canada-wide search engine.
  
  
• After the close of fiscal 2010, the Corporation announced that its Marketing Communications Sector would henceforth be called the Interactive Sector. This name change marks our commitment to being the leader in interactive marketing solutions in North America, and to focusing more on integrating recent acquisitions. The units now under Transcontinental Interactive will combine their forces to offer clients integrated marketing, data analytics, premedia, direct online marketing, one-to-one marketing, mobile marketing and custom communications, as well as digital printing of marketing products.
  
  
• The mobile applications we launched in September 2009 for the popular magazine The Hockey News were a great success. The Hockey News Mobile has become the indispensable companion to over one million hockey fans, who can now download game data in real time and access rich content on their smart phones. Downloads have also increased, to a lesser degree, on mobile applications for Elle Canada, Elle Québec, Canadian Living, the Métro daily, Les Affaires, Finance et Investissement and Investment Executive.

In short, we plan to use our unique products and marketing services to ramp up development of our new integrated services for advertisers. The solid foundations laid down over time in our existing operations, our niche strategy and the exploitation of the new emerging channels put us in a very competitive position to take advantage of opportunities in the medium and long term. We plan to deploy these new services at a much faster pace going forward.