Food Processing Ingredients Sector

An Expert's View about Food , Beverages and Tobacco in Canada

Posted on: 12 Jan 2012

Opportunities exist to expand U.S. food product sales to Canada's food and beverage processing sector.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/21/2011 GAIN Report Number: CA11068 Canada Food Processing Ingredients The Food Processing Ingredients Sector in Canada Approved By: Robin Tilsworth Prepared By: Sonya Jenkins Report Highlights: Opportunities exist to expand U.S. food product sales to Canada's food and beverage processing sector. In this C$83 billion industry, demand is increasing for many U.S. raw and processed horticultural products as well as other processed ingredients and food flavorings. The following report highlights the performance of the various sectors of Canada's food and beverage processing industry. Food Processing Ingredients Report: Canada 2011 TABLE OF CONTENTS Section 1: Market summary .......................................................................................................................................... 2 Overview of Canadian Market ................................................................................................................................. 2 U.S. – Canada Exchange Rates ............................................................................................................................ 6 Advantages and Challenges Facing U.S. Products in Canada .................................................................................. 6 Section 2: Road Map for Market Entry ......................................................................................................................... 6 Overview .................................................................................................................................................................. 7 A. Entry Strategy .................................................................................................................................................. 7 B. Market Structure ............................................................................................................................................ 11 C. Company Profiles .......................................................................................................................................... 12 D. Sector Trends ................................................................................................................................................. 15 Section 3: Competition ............................................................................................................................................... 18 Section 4: Best Product Prospects............................................................................................................................... 22 Products Present in the Market with Good Sales Potential .................................................................................... 22 Products Facing Significant Barriers ..................................................................................................................... 22 Section 5: FAS/Canada Contacts ................................................................................................................................ 29 SECTION 1: MARKET SUMMARY OVERVIEW OF CANADIAN MARKET Opportunities exist to expand U.S. food product sales to Canada's food and beverage processing sector. In this C$83 billion industry, demand is increasing for many U.S. raw and processed horticultural products, other processed ingredients and food flavorings. The following report highlights the performance of the various sectors of Canada's food and beverage processing industry. In 2010, U.S. agricultural exports to Canada reached a record $16.8 billion. The U.S. agricultural exports to Canada accounted for 15 per cent of total U.S. food and agricultural products, which totaled $115 billion. Consumer-oriented agricultural products accounted for 14 per cent of total U.S. food and agricultural product sales to Canada in 2010, with fresh fruits and vegetables, snack foods, processed fruits and vegetables and red meat products as the category leaders. American products account for more than 60 per cent of Canada's total agricultural imports. In the first three quarters of CY2011, U.S. agriculture exports to Canada have increased by 13 per cent over the same time frame last year and already stand at $14 billion. Canada is also an important market for U.S. fish and forestry products. Canada is the largest market for U.S. fish and seafood products, with sales increasing 18 per cent from 2009 to 2010 to reach $807 million. Despite being a major producer and world exporter of forest products, Canada is also the largest market for U.S. forestry products, with sales in 2010 totaling $2.2 billion. Combined, total U.S. 2 Food Processing Ingredients Report: Canada 2011 farm, fish and forestry product exports to Canada reached a record $19.9 billion during 2010, approximately $400 million more than to China, the next largest market destination. Total bilateral trade of agricultural products between the U.S. and Canada reached $29 billion in 2010, over $79 million per day. When forestry and fish products are included, bilateral trade reaches over $42 million. Under the tariff elimination provision of the North American Free Trade Agreement (NAFTA), the majority of U.S. agricultural products have entered Canada duty-free since January 1, 1998. On December 4, 1998 the United State and Canada signed a Record of Understanding, an agreement to further open Canadian markets to U.S. farm and ranch products. Trade with Canada is facilitated by proximity, similar culture, language, common lifestyle pursuits, and the ease of travel among citizens for business or pleasure. Many American products have gained an increased competitive edge over goods from other countries as the result of the FTA/NAFTA. Canada's grocery product and food service trades have been quick to seize opportunities under FTA/NAFTA, which permitted them to expand their geographical sourcing area to include the United States. Declining import duties under the trade agreements and an easing of Canadian packaging requirements for processed horticultural products for the food service market have resulted in significant gains in the Canadian market for U.S. consumer-ready foods and food service products. Food and beverage processing in Canada began in the mid-1800's and has successfully evolved into a sophisticated and vital contributor to Canada's food, agriculture and economic sectors. Food and beverage processing is Canada's largest manufacturing industry by sales and employs over 250,000, more than transportation equipment manufacturing which had previously been the largest sector in the manufacturing industry. 3 Food Processing Ingredients Report: Canada 2011 Note: Figures may not add to totals due to rounding. Source: Statistics Canada, Manufacturing indus tries, CANSIM table 304-0014. Food and beverage processing is an important contributor to the Canadian economy. In 2007, the food and beverage manufacturing industry had sales of C$ 83.7 billion and employed 286,000 people. Agriculture and Agri-Food Canada estimates that the Canadian food and beverage processing industry supplies approximately 80 per cent of the processed food and beverage products available in Canada. Beverage processing includes soft drinks and bottled water manufacturing, wineries, breweries and distilleries. A breakdown of the manufacturing industry from 2006, the last year for which data is available, is as follows. 4 Food Processing Ingredients Report: Canada 2011 Source: Agriculture and Agri-Food Canada. Agriculture and Agri-Food Canada has more information on the food and beverage processing industry on their website at: http://www4.agr.gc.ca/AAFC-AAC/display- afficher.do?id=1171288446081&lang=eng. Canadian Exports of Processed Food and Beverage Products Exports of processed food and beverage products stood at C$20.8 billion in 2010, up 7 per cent from 2009. Canadian processed food and beverage products are exported all over the world; however a significant portion is focused in a small number of countries. In 2010, 83 per cent of those exports went to four major markets; the United States (66 per cent), China (8 per cent), Japan (7 per cent) and Mexico (2 per cent). Canada's trade balance in processed food products has remained positive, even throughout the recession. In 2010, exports out-valued imports by over C$2.5 billion. When processed beverages are factored in, Canada posted a negative trade balance in 2009 and 2010. Imports of Ingredients for the Canadian Food Processing Industry The value of processed food imported by Canada in 2010 was C$17.3 billion. The United States was the main supplier providing 64 per cent of this total, or C$11.1 billion. Rounding out the top five are Brazil (4.7%), China (4.1%), Thailand (3.3%) and Italy (2%). Over the same time period, Canada imported C$3.9 billion worth of processed beverages. The United States was again the top supplier with a 31% 5 Food Processing Ingredients Report: Canada 2011 market share. The rest of the top five include; France (14%), Italy (11%), Australia (7%), and the United Kingdom (6%). Canadian food processors utilize both raw and semi-processed ingredients from imported and domestic sources. No data exists on the total value of imported ingredients destined for the Canadian processed food and beverage industry; however imported ingredients are vital inputs to Canadian manufacturers. Imported ingredients cover virtually all food categories. For example, whole raw products such as strawberries, semi-processed products such as concentrated juices and fully prepared products such as cooked poultry have proven to be essential to processors in Canada. Some ingredients, such as tropical and sub-tropical products, are entirely imported whereas manufacturers require substantial imports of numerous other products such as spices, food manufacturing aids and flavorings. U.S. – CANADA EXCHANGE RATES (C$ per 1.00 US$) Year C$ 2011 C$ 1970 1.09 Jan 0.99 1980 1.20 Mar 0.98 1990 1.07 May 0.97 2000 1.48 July 0.96 2002 1.57 Sept 1.00 2008 1.06 Nov 1.03 2009 1.14 2010 1.03 ADVANTAGES AND CHALLENGES FACING U.S. PRODUCTS IN CANADA Advantages Challenges Canadian consumers enjoy a high Canadian food processors are now searching the globe disposable income for low cost ingredients Taste and expectations similar Growth of private label pushing processors to look for less expensive inputs Good perception of U.S. quality and safety Tariff Rate Quotas for certain products Opportunity in global cuisine due to diverse Marketing and distribution costs can be high as population and growing interest in ethnic population is roughly equal to California's and much foods more spread out Canadian growing season is limited, Retail consolidation forcing competitive pricing, opportunity for U.S. producers in off however might be alleviated by new entries to market seasons such as Target Duty free tariff treatment for most products Differences in approved chemicals and reside under NAFTA tolerances Comparable legal systems, time zones, Difference in labeling including nutritional content, regulatory regimes claims and language Proximity: most Canadian live within two Majority of sourcing currently from domestic hours of the U.S. border producers, "Buy Local" SECTION 2: ROAD MAP FOR MARKET ENTRY 6 Food Processing Ingredients Report: Canada 2011 OVERVIEW Any U.S. food ingredient suppliers seeking to enter the Canadian marketplace have many opportunities. The United States is Canada's largest trading partner, with a 64 per cent market share in the food processing market and a 31 per cent share in the beverage processing market. This is a result of a number of factors, including a convenient shipping corridor and a familiarity with consumer tastes and expectations, and most importantly the North American Free Trade Agreement (NAFTA). There are a number of obstacles U.S. exporters must overcome before exporting to Canada. These include currency, customs procedures and labeling requirements. Overcoming these obstacles is simple with the right tools. Following are the main steps to take for U.S. exporters entering the Canadian market: 1) Contact your State Regional Trade Group, 2) Research the competitive marketplace, 3) Locate a broker/distributor/importer, and 4) Understand the Canadian government standards and regulations that pertain to your product. A. ENTRY STRATEGY 1) Contact your State Regional Trade Group State Regional Trade Groups (SRTGs) are non-profit organizations representing state agricultural promotion agencies that use federal, state and industry resources to promote the export of food and agricultural products within specific states. They can help qualifying exporters to obtain partial reimbursement for some marketing costs. SRTG States Represented Website Food Export USA Connecticut, Delaware, Maine, Massachusetts, www.foodexportusa.org Northeast New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont Food Export Illinois, Indiana, Iowa, Kansas, Michigan, www.foodexport.org Association of the Minnesota, Missouri, Nebraska, North Dakota, Midwest USA Ohio, South Dakota, Wisconsin Southern United Alabama, Arkansas, Florida, Georgia, www.susta.org States Trade Kentucky, Louisiana, Maryland, Mississippi, Association (SUSTA) North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia, the commonwealth of Puerto Rico Western United Alaska, Arizona, California, Colorado, Hawaii, www.wusata.org States Agricultural Idaho, Montana, New Mexico, Oregon, Utah, Trade Association Washington, Nevada, Wyoming (WUSATA) 2) Research the Competitive Marketplace 7 Food Processing Ingredients Report: Canada 2011 A thorough understanding of consumer trends and needs are required in developing your market strategy. The internet offers a wealth of information for U.S. exporters interested in researching the many aspects and particularities of the Canadian foods and beverage manufacturing sector. Though some consumer data can only be obtained with a fee, there are several industry-specific publications that continuously report on specific developments of interest for U.S. exporters. These publications includes Canadian Grocer (www.canadiangrocer.ca), a magazine that closely follows key developments in the Canadian grocery industry and Food Service and Hospitality (www.foodserviceworld.com), a periodical that continuously offers updated information on the status of the food service industry in Canada. Sources of information: Organization Function/Purpose Website Statistics Canada The official source for Canadian social and www.statcan.gc.ca economic statistics and products. Industry Canada Trade databases. www.ic.gc.ca Canadian Restaurant The largest hospitality association in Canada. www.crfa.ca and Foodservices Association Canadian Federation of Represents Canada's independently owned and www.cfig.ca Independent Grocers franchised supermarkets. Consumers' Association Represents consumers to all levels of government www.consumer.ca of Canada and to all sectors of society. Agriculture and Agri- Provides information, research and technology www.agr.gc.ca food Canada, Agri- policies and programs. Also provides access to Trade Food Service statistics. This Ministry is the counterpart to the U.S. Department of Agriculture. I.E. Canada (Canadian I.E. Canada is a national, non-profit organization www.iecanada.com Association of committed to providing services to develop and Importers and enhance the international trade activity and Exporters) profitability of importers and exporters. 3) Locate a Broker/Distributor/Importer It is recommended that most new entrants to the Canadian market secure the services of a broker and/or distributor. Local representation provides exporters with a domestic advantage to understanding the local, regional and national markets and the opportunities available. Brokers and distributors provide guidance on best business practices, sales contacts, market development, logistics and government regulations. Many also provide merchandising and marketing programs and their volume purchasing power can help reduce retail slotting fees. The Foreign Agricultural Service offices in Ottawa and Toronto, Canada can provide assistance in locating a broker or distributor. Contacts can be made while exhibiting at USDA endorsed pavilions at SIAL Canada. The office has also assembled a partial list of industry brokers and distributors in a report, Agent and Broker Directory - Central Canada, which can be found on the FAS report website 8 Food Processing Ingredients Report: Canada 2011 http://gain.fas.usda.gov. It is report CA11025 (dated May 6, 2011). In addition, FAS/Canada can develop lists of potential brokers/distributors or buyers in the market. 4) Understand Canadian Government Standards and Regulations that Pertain to Your Product The Canadian government has multiple acts that govern the importation and sales of foods. Some of the most important ones are: Canada Agricultural Products Act and Associated Regulations Consumer Packaging and Labeling Act Fish Inspection Act Food and Drug Act Importation of Intoxicating Liquors act Meat Inspection Act Weight and Measures Act A more thorough outline of applicable acts and regulations can be found on the Canadian Food inspection Agency's website at: http://www.inspection.gc.ca/english/reg/rege.shtml. The Canadian Food Inspection Agency, Health Canada and the Department of Foreign Affairs and International trade are the main government ministries U.S. exporters can contact for specific information when studying regulations with which they need to comply. Though Canada and the U.S. share many consumer trends, cultural similarities and lifestyles; many regulations differ including nutrition facts, ingredient declarations and health claim labeling regulations. 9 Food Processing Ingredients Report: Canada 2011 Government Organi Function Information zation Canadian Food Government of Canada's regulator for food www.inspection.gc.ca Inspection Agency safety (along with Health Canada), animal health and plant protection. (CFIA) Canada Revenue The Canada Revenue Agency (CRA) www.cra-arc.gc.ca Agency administers tax laws for the Government of Canada and for most provinces and territories as well as various social and economic benefit and incentive programs delivered through the tax system. Canada Border The Canada Border Services Agency www.cbsa.gc.ca Services Agency (CBSA) ensures the security and prosperity of Canada by managing the access of people and goods to and from Canada. Health Canada Administers the Food Safety Assessment www.hc-sc.gc.ca Program, which assesses the effectiveness of the CFIA's activities related to food safety. Department of The mandate of Foreign Affairs and www.international.gc.ca Foreign Affairs and International Trade Canada is to manage In Canada's diplomatic and consular relations ternational Trade and to encourage the country's international (DFAIT) trade. DFAIT manages all tariff rate quotas. Measurement Responsible for ensuring the integrity and www.ic.gc.ca/eic/site/mc- Canada accuracy of measurement in the Canadian mc.nsf/eng/Home marketplace. For more information on food labeling regulations and other information useful to U.S. food exporters, refer to the Canada 2011 Exporter Guide on the FAS website: http://gain.fas.usda.gov. 10 Food Processing Ingredients Report: Canada 2011 Information exporters need to understand about labeling regulations can be found on the following sites: Nutrition Labelling Resource Page: www.inspection.gc.ca/english/fssa/labeti/nutrition-pagee.shtml. The Guide to Food Labeling and Advertising guide can be found at: http://www.inspection.gc.ca/english/fssa/labeti/guide/toce.shtml In order to better provide information, the CFIA maintains a National Import Service Centre (NISC), which handles telephone inquiries regarding import requirements and inspections in addition to processing import documentation and data. The contact information for the NISC is: 7:00 a.m. to 03:00 a.m. (Eastern Time) Telephone and EDI: 1-800-835-4486 (Canada or U.S.A.) 1-905-795-7834 (local calls and all other countries) Facsimile: 1-905-795-9658 B. MARKET STRUCTURE U.S. Exporter Regulators Importer Distributor Wholesaler Broker Repacker Food Processor Retail Foodservice Consumer Consolidation of the Canadian food industry has eliminated numerous intermediary procurement processes. Most food and beverage processing companies now prefer to import directly. Buying direct reduces handling, expedites shipments and generally reduces product costs, provided that volumes are large enough to benefit from a full truck load or consolidated shipments. Small volumes (less than a truckload) are usually procured locally from a Canadian wholesaler, importer, broker or agent. 11 Food Processing Ingredients Report: Canada 2011 Procurement methods do vary from company to company and from product to product however regardless of them method of procurement, all products must be in alignment with government import regulation and meet minimum Canadian standards. Consolidation of the Canadian retail and food service industry has meant that U.S. food and beverage processing companies face increasingly demanding buyers with significant market power. Aside from the continuous pressure on margins, processors are being asked to assist retail and food service companies to help define points of differentiation. New products that truly address specific consumer needs are the best means for processors to stave off the inevitable demand to produce private label product for retail and food service operators. Processors should be aware that there is a heightened interest in food safety and information ingredients including origin of major ingredients and processing methods. Food service and retail operators are also seeking longer shelf life to deal with both the consumer trend toward fresh products and the geographic challenges of distribution in Canada. Opportunities are increasing in Canada for export ready processors able to meet the rapidly evolving consumer demands and having strong logistics capabilities. C. COMPANY PROFILES Top 10 Food and Beverage Manufacturing Firms in Canada Company (Product Types) Sales End-use Production Procurement $1,000/year channels Location Channels (#) George Weston Ltd. $32,008,000 Retail Canada (35) Distributor/Broker (Fresh and frozen baked (2010) goods, also owns Loblaw) U.S. (33) Importer Direct McCain Foods Ltd. $6,098,143 Retail Canada (10) Direct (potato, appetizer and (2010) U.S. (10) snack ) S. America HR (3) I Europe (12) S. Africa (3) Asia-Pacific (7) Saputo Inc. (dairy and $5,810,582 Retail Dairy - Direct bakery) (2010) Canada (26) HRI U.S. (16) Argentina (2) Europe (2) Grocery - Canada (1) 12 Food Processing Ingredients Report: Canada 2011 Company (Product Types) Sales End-use Production Procurement $1,000/year channels Location Channels (#) Maple Leaf Foods Inc. $4,968,119 Retail Canada Direct (pork, poultry, bakery) (2010) U.S. HRI U.K. Asia Mexico Molson Coors Brewing Co. $3,355,286 Retail Canada (7) Direct (beer) (2010) U.S. (9) HRI U.K. (4) Asia (1) Agropur Coopérative $3,345,177 Retail Canada (18) Self (dairy products) (2010) U.S. (7) HRI S. America (2) PepsiCo Foods Canada $3,173,430 Retail Canada (8) Direct (oatmeal, snack foods) (2010) HRI Parmalat Canada Inc. $2,198,303 Retail Canada (18) Direct (dairy and fruit juices) (2010) HRI Importer Cott Corp. (beverages) $1,857,399 Retail Canada (6) Direct (2010) U.S. (9) HRI Mexico (2) U.K. (3) Pepsi Beverages Co. $1,150,726 Retail Canada (6) Direct (2010) HRI 13 Food Processing Ingredients Report: Canada 2011 Top Five Foreign Controlled Food and Beverage Manufacturing Firms in Canada Company (Product Types) Sales End-use Production Procurement ($Thou)/year channels Location Channels PepsiCo Foods Canada $3,173,430 Retail Canada (8) Direct (oatmeal, snack foods) (2010) HRI Parmalat Canada Inc. (dairy $2,198,303 Retail Canada (18) Direct and fruit juices) (2010) HRI Importer Pepsi Beverages Co. $1,150,726 Retail Canada (6) Direct (2010) HRI General Mills Corp. (cereals, $761,398 Retail U.S. (28) Direct bakery, snack foods, frozen and (2010) HRI Canada (2) shelf stable fruits and Asia/Pacific vegetables) (10) Europe (5) Latin America and Mexico (4) S. Africa (1) Smucker Foods of Canada $413,652 Retail U.S. (17) Direct (fruit spreads, retail packaged (2010) HRI Canada (4) coffee, peanut butter, Importer shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages) Industry Canada maintains a more complete company directory on their website. A directory of food manufacturing companies can be found at: http://strategis.ic.gc.ca/app/ccc/sld/cmpny.do?letter=A&lang=eng&profileId=1461&naics=311. A listing of beverage manufacturing companies can be found at: http://strategis.ic.gc.ca/app/ccc/sld/cmpny.do?letter=A&lang=eng&profileId=1461&naics=312. 14 Food Processing Ingredients Report: Canada 2011 D. SECTOR TRENDS Consumer trends have always created opportunities for food manufacturers. However, more recently consumer trends have affected choice and source of ingredients used in food manufacturing. Some of the more important drivers of change influencing consumer trends and manufacturing opportunities include: Aging population, obesity and the health care crisis leading to the wellness trend Increasing reliance on imported foods and growing worries of food contamination raising the organic, natural and local food trend Global warming and other serious environmental challenges driving the ethical eating trends Traceability Ethnic shoppers Food allergies 1. General Health and Wellness As consumers get older, their desire to lead healthy and active lives is of increasing importance to them. In response to initiatives by governments, health organizations and consumers, 88 percent of manufacturers report that they are planning to release new products with specific nutritional benefits in the next two to three years. Already, 61 per cent of manufacturers have reformulated products to make them healthier. Companies will continue to work to lower the amount of sodium, sugar and high- fructose corn syrup in their products. One of the fastest growing areas under wellness is functional foods. The market in Canada is current valued at US$ 4 billion. Functional foods are conventional foods that have had healthy ingredients added to them that go beyond regular nutritional functions. Examples of functional foods include probiotic yogurts (added bacteria cultures to promote health in the gastrointestinal tract); omega-3 fortified eggs, and beverages with added vitamins and minerals. The market for functional foods is large and growing as more and more people are beginning to see the benefits of making small changes to their diets. The market is expected to continue to grow rapidly as consumers gain a better understanding of the relationship between diet and health and as the aging population increasingly turns to preventative health initiatives. For more information on functional foods and nutraceuticals in Canada, visit http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1241014770211&lang=eng. 2. Organic and Natural The Canadian introduction of retail chain giant Whole Foods has solidified an industry commitment to healthy eating alternatives. There is increasing interest for food grown under a production system that prohibits the use of synthetic chemicals and also promotes soil health, biodiversity, low stress treatment of animals and sound environmental practices. Although the natural and organic market represents a fraction of overall food spending, the market is growing at a rate of 20 per cent annually and will represent, some experts say, the largest potential for growth in retail in the coming years. The number of organic items carried in mainstream supermarkets is rising steadily and many of the largest companies including major U.S. food processors have now launched organic products under 15 Food Processing Ingredients Report: Canada 2011 some of Canada's best known brands. An example of this is the new organic line of products from Kraft Foods. Products that claim attributes such as "no antibiotics", "no hormones", and "100% vegetarian feed" do not command the same price premiums as those labeled as certified organic. However, these products are growing because they serve the store interest of differentiation and still carry a 10% to 20% premium compared to regular products while being generally more affordable than organics. 3. Ethical/Environmental Eating Experts are suggesting that the trend is destined to have the most impact on the food processing industry is the growing interest in sustainability. This trend overlaps with the wellness and organic foods, however ethical eating goes beyond taste and health concerns and into the realm of green politics and anti-globalization. It includes concepts of "fair trade" and "sustainable" and also "food miles" which bring together the related concepts of locality and seasonality. Good farming practices in terms of the treatment of livestock are also part of this trend. Multinational food processors are actively involved in the sustainability movement with many seeking sustainability certifications from third party organizations such as Ocean Wise, administered by the Vancouver Aquarium, or the Marine Stewardship Council for seafood products. For other products, organizations like the World Wildlife Federation (WWF) and the Forest Stewardship Council (FSC) can provide certification that products were produced in a sustainable fashion. Large companies such as Loblaw, McDonald's and Wal-Mart are beginning to make sustainability an important part of their business plans throughout their entire supply chains. 4. Traceability As seen in the growing "Buy Local" movement in Canada, consumers increasingly care about where their food comes from. Reasons for this include concern for the local economy and environmental concerns regarding how far food must travel before it reaches the consumers. The concern is also being driven by high profile food safety breaches some of which are related to imported foods as well as issues raised under the wellness and ethical eating headings. However, it is also a food trend in its own right as traditionally certain foods from certain areas were considered to be the gold standard in taste or health. This trend can be an opportunity for U.S. producers since Canadian consumers view products from the United States as safer and of better quality than imports from other countries. Consumers in the internet age no longer accept anything less than transparency. As is the case for the ethical food and organic trend, the ability to prosper from this trend will be closely ties to the ability to track, trace and verify product. This represents more changes for food processors as it requires an ability to know one's supply chain to a far greater degree than is the case today. Significant improvements have been made in technologies to assist with trace back and product verification. For example, Sobey's (major Canadian supermarket chain) has launched an initiative that allows consumers to enter a code found on the packaging of their seafood on the Sobey's website to fund out exactly when, where and how their fish was caught, right down to the name of the fisherman who landed the fish. 16 Food Processing Ingredients Report: Canada 2011 5. Ethnic Shoppers Ethnic food markets in Canada are worth an estimated C$65 billion today and are growing by an approximate 15 to 20 per cent annually. They are projected to reach C$128 billion by 2020. By 2031, 72 per cent of the population growth in Canada will be driven by people who are visible minorities. Consumers of South Asian and Chinese backgrounds make up the largest ethnic groups and are projected to continue growing. Immigration from Europe accounts for a smaller percentage than it traditionally has. Within immigrants from the Americas, origin is shifting from the United States and Caribbean to Mexico and South America. 6. Food Allergies Approximately one in every 13 Canadians is affected by a food allergy and products that cater to those with allergies have been enjoying strong growth. From March 2009 to March 2010, gluten-free products alone grew 12.2 per cent to reach US$3.63 billion. In Canada, the priority allergens are: peanuts, tree nuts, sesame seeds, wheat and triticale, milk, eggs, fish, crustaceans, shellfish, soybeans, mustard seeds, grains containing gluten, and added sulphites. Beginning August 4, 2012 these allergens must be listed on a product label, even food allergens and labeling at: http://www.inspection.gc.ca/english/fssa/labeti/allerg/allerginduse.shtml 17 Food Processing Ingredients Report: Canada 2011 SECTION 3: COMPETITION Product Major supply Strengths of Key Advantages/Disadvantages of Local Category Sources by Supply Countries Suppliers Value Red Meat Fresh, chilled Availability of year- Fifty per cent of Canada's pork is or frozen round grazing lowers exported and is third largest exporter Domestic 1. U.S.: 78% production costs for in the world. Federal Government Production 2. New Australia and New contributes funds to promoting pork. C$19.8 Zealand: 11% Zealand. China re-opening markets to billion (2009) 3. Australia: Hog and cattle herd Canadian pork again after H1N1, but 6% numbers remain low requires certification. Imports in Canada, providing Fresh, Prepared or an opportunity for chilled or preserved exports. frozen: 1. U.S.: 93% US$1.3 2. Brazil: 2% billion (2010) 3. Thailand: Prepared or 1% preserved: US$ 615 million (2010) Poultry The U.S. is the The Canadian poultry industry is a 1. U.S.: 82% world's largest tariff rate quota regulated industry Domestic 2. Brazil: 15% producer of poultry with live bird and meat prices well Production 3. Chile: 2% meat, while Brazil is above the world market. C$7.5 billion the largest exporter. Canadian strategy has been to (2009) Brazil is rapidly differentiate the product, particularly expanding its market at retail through air chilling and Imports share in Canada, attributes such as vegetable or grain US$ 350 except with further fed. million processing plants that The scale of plant operations in (2010) do not want to take Canada remains relatively small due the risk of mixing to the controlled supply system. In poultry of U.S. and an effort to mitigate this and to Brazilian origin offset difficulty obtaining labor, which would result in Canadian processing plants are being unable to sell among the most highly mechanized processed products to sectors in Canadian agriculture and the U.S. employ the latest in robotics. U.S. poultry has the advantage of being able to be shipped fresh as well as 18 Food Processing Ingredients Report: Canada 2011 Product Major supply Strengths of Key Advantages/Disadvantages of Local Category Sources by Supply Countries Suppliers Value frozen. Fish and Fish filleting is Canada is home to more than 160 Seafood 1. U.S.: 38% extremely labor species of saltwater and freshwater Products 2. China: intensive, which fish and shellfish. 16.3% accounts for the rapid Aquaculture is growing and could Domestic 3. Thailand: penetration of China exceed US$ 5 billion within 15 Production 16% and Thailand in this years. C$ 4.9 billion segment. The capture fishery accounts for (2009) China is a major 76% of total fish and seafood player in aquaculture, production, 80% comes from the Imports which is becoming Atlantic. US$ 2 billion more important as Canada is the 7th largest exporter (2010) ocean fish stocks fall. of fish and seafood in the world. Dairy Dairy The close proximity The Canadian dairy market (excluding of the U.S. as well as operates under a supply Domestic cheese) significant management system, which Production 1. U.S.: 59% transportation attempts to match domestic supply C$16.2 2. New advantage has with domestic demand while billion (2009) Zealand: 18% allowed it to be paying producers on a cost of 3. Germany: competitive in the production related formula. This Imports 7% Import for Re-export system has tended to keep dairy (excluding Program (IREP) prices in Canada above prevailing cheese) Cheese which allows dairy global levels. Imports are US$267 1. U.S.: 22% products for further controlled under TRQ and over million 2. France: processing to be quota imports are subject to very (2010) 21% imported into Canada high tariffs. 3. Italy: 20%s duty-free provided the American suppliers have taken Imports final product is advantage of the Import for Re- (cheese) US$ subsequently export Program (IREP). The U.S. 239 million exported. is the largest user of this program (2010) The E.U. has an due to the perishable nature of the advantage in the products. cheese sector as they Canadian TRQs stipulate 50% have been allocated dairy content guideline for 66% of Canada's imported products, resulting in the cheese quota as a creation of blended ingredients and result of the products that are designed to cir- Agreement on cumvent this guide- line. Butter- Agriculture. oil-sugar blends were the first New Zealand's major products to be imported 19 Food Processing Ingredients Report: Canada 2011 Product Major supply Strengths of Key Advantages/Disadvantages of Local Category Sources by Supply Countries Suppliers Value availability of year- tariff-free, displacing Canadian round pastures helps milk for ice cream. More recently to lower production there has been an increase in costs. It also holds flavored milks imported as "bev- 61% of Canada's erages" and a number of milk import quota for proteins which are not captured by butter. the dairy TRQ. Prepared Prepared U.S. suppliers have Many firms produce a variety of Fruits and Fruits and been well positioned traditional value-added products Vegetables Vegetables: to take advantage of such as pickles, relishes, jams, 1. U.S.: 58% the rapidly growing soups, sauces and other items that Domestic 2. China: 9% consumer demand for incorporate a mix of vegetables Production 3. Chile: 2% fresh cut, pre- and juices. C$8.4 billion packaged fruits and The industry has been shifting Fruit and vegetables. The away from traditional Canadian Imports Vegetable demand for these vegetables such as squash, beans, Prepared Juices products has grown in potatoes etc. as consumer tastes Fruits and 1. U.S.: 64% recent years. shift to more exotic items. Vegetables: 2. Brazil: 16% Concern is growing Canada has a large greenhouse US$ 1.6 3. China: 6% regarding the safety sub-sector. However the billion of imported fruits and strengthening Canadian and high vegetables. To the energy costs is creating increased Juices: US$ extent U.S. exporters opportunity for U.S. suppliers. 622 million can position their products as leaders in these areas, there will be growing market opportunities over other countries. Snack Foods The U.S. is a major The majority of snack food 1. U.S.: 58% player in the manufacturing talks place in Domestic 2. Germany: Canadian market due Ontario and Quebec. Production 5% to strong brands and The snack food industry is served C$ 3.4 billion 3. the perishable and primarily by domestic Switzerland: bulky nature of many manufacturers, however they are Imports 4% products which quickly losing share. US$ 1.3 magnifies the freight Canada has to import sugar, billion advantage. chocolate, cacao and nuts for manufacturing and is not competitive on dairy and egg products. Beverages 20 Food Processing Ingredients Report: Canada 2011 Product Major supply Strengths of Key Advantages/Disadvantages of Local Category Sources by Supply Countries Suppliers Value Waters with Waters with U.S. brands of soft and without and without drinks are well sweeteners sweeteners or recognized in the or flavorings flavorings Canadian market. (including (including soft drinks) soft drinks) 1. U.S.: 74% Domestic 2. France: 7% Production 3. Italy: 5% C$ 5.9 billion Imports US$ 658 million Beer Beer Beer sales increased 3.8% in the 1. year ending March 2010 to total Domestic Netherlands: C$9.2 billion. Production 21.4% Beer's market share has fallen C$8.4 billion 2. U.S.: 21.2% from 52% to 46% over the last Imports 3. Mexico: decade while wine's has increased US$610 18% from 23% to 29% over the same million time period. Canadian climate not ideal for grow- ing red wines, domestic whites fare better against imports. Sales of U.S. wines in Wine Canada grew 30% in Domestic Wine 2010 to reach $269 Production 1. France: million. C$ 1.6 billion 22% 2. Italy: 20% Imports US$ 3. U.S.: 16% 1.7 billion Fermented Beverages Imports US$ Fermented 36 million Beverages 1. U.K.: 40% Spirits 2. U.S.: 38% 3. Japan: 8% 21 Food Processing Ingredients Report: Canada 2011 Product Major supply Strengths of Key Advantages/Disadvantages of Local Category Sources by Supply Countries Suppliers Value Domestic Spirits Production 1. U.S.: 98% C$ 1 billion 2. Guyana: Imports US$ 0.08% 286 million 3. Mexico: 0.06% SECTION 4: BEST PRODUCT PROSPECTS PRODUCTS PRESENT IN THE MARKET WITH GOOD SALES POTENTIAL High Physical Growth – Year 2010 Growing Category +4% to 10% Over 10% Beverages Whole Bean Coffee (5%) Single Serve Coffee (126%) Traditional Ground Coffee (11%) Dry Grocery Bread – grains/diet/organic (4.4%) Specialty (8.5%) Bagels (6.2%) Sugar (8%) Baking Nuts (10%) Baking chips chocolate (10%) Breakfast cereal (4%) Frozen Foods Thin Crust Pizza (8%) Alternative Pizza incl. organic, gluten-free, ethnic and seafood (18%) Perishables Turkey products (6%) Prepared Foods Dips (8%) Processed Fruits – especially dried (7%) Refrigerated & Cheese (8%) Drinkable Yogurt (15%) Dairy Yogurt in tubes (17%) PRODUCTS FACING SIGNIFICANT BARRIERS For a more in-depth review of Canada's food laws and regulations and how they may affect U.S. food exporters, please see FAS Canada's Food and Agricultural Import regulations (FAIRS) Report. Due to the complexity of legislative requirements, it is recommended to contact a Canadian Food Inspection Agency (CFIA) Import Service Centre to obtain complete and current information regarding your 22 Food Processing Ingredients Report: Canada 2011 specific product. The CFIA is responsible for the inspection of food products at all levels of trade. Following are some of the key restrictions that could inhibit certain products from entering the country. Tariff Rate Quota (TRQ) Under the General Agreement on Tariffs and Trade (GATT), Canada is permitted to control and limit certain imports under its supply management system. With the signing of the World Trade Organization's (WTO) Agreement on Agriculture in December 1993, Canada converted its existing agricultural quantitative import controls to a system of tariff rate quotas (TRQs) that came into effect in 1995. Under the TRQ system, applicable products up to a certain volume are imported at the "within access commitment" tariff rate. Over this permitted level, the "over-access commitment" tariff rate escalates. These higher tariffs enable Canada to maintain its system of supply management for certain agricultural products. The method for establishing the allocation of import access quantities is prescribed in the Exports and Import Permits Act and is administered by the Export and Import Controls Bureau (EICB) of the Department of Foreign Affairs and International Trade (DFAIT). Documentation on the allocation system and principle of TRQ allocation, together with data on permits issued can be found at: www.dfait-maeci.gc.ca/eicb. Issuance and control of import quota is administered by the EICB in collaboration with the Canada Border services Agency. U.S. products that fall into this category include: Broiler hatching chicks and eggs Chicken Turkey Butter Cheese Buttermilk Milk and Cream Dairy Blends Yogurt Margarine Eggs 23 Food Processing Ingredients Report: Canada 2011 Other Information Affecting Imports of Food Ingredients Health Canada Health Canada continues to develop standards and policies for the safety of the food supply, which are applied by the CFIA. All foods sold in Canada are subject to the Food and Drugs Act and Regulations which contains health and safety requirements, labeling requirements and provision preventing deception and fraud. However, many agricultural and fish products are also subject to other legislations. Consequently, the need for licensing, permits and certificates depends upon the type of food being imported and in some cases on the country or area from which the food is imported. It should be noted that in some provinces, there are additional requirements for certain foods, such as dairy products, bottled water and maple syrup. The Food and Drug Regulations (FDR) outline the specifications and further requirements for standardized and non-standardized products. The following are just a few examples of regulatory issues, which could pose a barrier for some United States food companies attempting to sell in Canada. Food Additives: In the absence of specifications under the FDR, food additives must conform to specification in the Food Chemical Codex (as required by section B.01.045 of the FDR). There are differences between Canadian and United States rules. A list of food additives permitted for use in Canada can be found at: http://www.hc-sc.gc.ca/fn-an/securit/addit/diction/dict_food-alim_add-eng.php. Food Color: Synthetic food colors are the only additives that must be certified by the Health Products and Food Branch of Health Canada before being used in foods. Regulations concerning food colors are listed in Division 6 and Table III of Division 16 of the FDR. Diet-Related Health Claims: The Canadian Food Inspection Agency enforces specific regulations regarding health claims that can be made about a product or ingredient. These regulations are in place to ensure accuracy and validity. For exact wording, visit http://www.inspection.gc.ca/english/fssa/labeti/guide/ch8e.shtml#8.4. Agricultural Pesticide and other contaminants: Some agricultural pesticides approved for use in the United States are not registered for use in Canada. Foods which are found to contain unregistered residues over 0.1 parts per million are deemed to be adulterated. Specific acceptable Maximum Residue Limits (MRLs) exist for registered pesticides. For further information see: http://www.hc-sc.gc.ca/cps- spc/pest/part/protect-proteger/food-nourriture/mrl-lmr-eng.php. Vitamin and Mineral Fortification: Fortification in Canada is under review. Health Canada has signaled it is looking at expanding discretionary fortification but with restrictions on which vitamins and minerals and what amounts. However, differences remain such as the folic acid exclusion on milled grain and bakery products. For more information on fortification see: www.hc-sc.gc.ca/fn-an/nutrition/vitamin/index_e.html. Trans Fats: In July 2007, Health Canada announced that it is adopting the Trans Fat Task Force's recommendation on trans fats, but will ask industry to voluntarily limit the trans fat content of vegetable 24 Food Processing Ingredients Report: Canada 2011 oils and soft, spreadable margarines to 2 per cent of the total fat content and to limit the trans fat content for all other foods to 5 per cent, including ingredients sold to restaurants. Canada also requires that the levels of trans fat in pre-packaged food be included on the mandatory nutrition label. For more information on trans fat regulations, visit http://www.hc-sc.gc.ca/fn-an/nutrition/gras-trans-fats/index- eng.php. Organic Standards: As of June 30, 2009, the Organic Products Regulations require mandatory certification to the revised National Organic Standard for agricultural products represented as organic in international and inter-provincial trade, or that bear the federal organic agricultural product legend (or federal logo). Due to the equivalency agreement with the United States, the USDA organic certification is fully recognized in Canada and there is no need for further certification in Canada for USDA-certified organic products. The CFIA has more information on regulations for organic products on their website at: http://www.inspection.gc.ca/food/organic-products/eng/1300139461200/1300140373901. Novel Foods: Health Canada defines novel foods as products that have never been used as food, foods which result from a process that has not previously been used for food, or foods that have been modified by genetic manipulation. Novel foods regulations cover a variety of new food processes including the addition or deletion of genes (commonly referred to as genetically modified foods). For example, Health Canada has reviewed food produced by chemical mutagenesis of seed combined with traditional breeding, the use of new food processing techniques to extend shelf life and improve food quality and the use of natural coloring products introduced to food for purposes either than coloring. Canada's novel foods regulations require that the company, who wants to sell the products, prior to the marketing or advertising of a novel food, make notification to Health Products and Food Branch 9HPFB). For more information on the novel food regulations and approval procedure, see: www.hc-sc.gc.ca/fn-an/gmf- agm/index_e.html. 25 Food Processing Ingredients Report: Canada 2011 Government Organizations Agriculture and Agri-Food 1341 Baseline Road Canada Ottawa, Ontario K1A 0C5 Telephone: 613-773-1000 Fax: 613-773-2772 TDD/TTY: 613-773-2600 Email: info@agr.gc.ca www.agr.gc.ca Statistics Canada 150 Tunney's Pasture Driveway Ottawa, Ontario K1A 0T6 Online requests: infostats@statcan.gc.ca Telephone: 1-800-263-1136 or 613-951-8116 Fax: 1-877-287-4369 or 613-951-0581 TTY: 1-800-363-7629 www.statcan.gc.ca Department of Foreign Affairs 125 Sussex Drive and International Trade Ottawa, ON, Canada K1A 0G2 Facsimile: 613-996-9709 Email: enqserv@international.gc.ca Telephone: 1-800-267-8376 (toll-free in Canada) 613-944-4000 (in the National Capital Region and outside Canada) www.international.gc.ca Canada Revenue Agency For a complete list on how to contact CRA, please consult: http://www.cra-arc.gc.ca/cntct/menu-eng.html Businesses and self-employed individuals can contact 1-800-959- 5525 The International Tax Services Office for non-resident enquiries can be reached at: International Tax Services Office Post Office Box 9769, Station T Ottawa ON K1G 3Y4 CANADA Individuals 1-613-952- 3741 Non-resident corporations and corporation 1-613-954- accounts 9681 Non-resident trusts 1-613-952- 26 Food Processing Ingredients Report: Canada 2011 8753 Part XIII tax and Non-resident withholding 1-613-952- accounts 2344 Canada Border Services Agency Canada Border Services Agency Ottawa ON, K1A 0L8 Call within Canada: Service in English: 1-800-461-9999 Service in French: 1-800-959-2036 Calls outside Canada: Service in English: 204-983-3500 or 506-636-5064 Service in French: 204-983-3700 or 506-636-5067 Contact@cbsa.gc.ca www.cbsa.gc.ca Canadian Food Inspection 1400 Merivale Road Agency Ottawa, Ontario K1A 0Y9 Tel: 1-800-442-2342 / 613-225-2342 TTY: 1-800-465-7735 Fax: 613-228-6601 www.inspection.gc.ca Health Canada Address Locator 0900C2 Ottawa, Ontario K1A 0K9 Email: Info@hc-sc.gc.ca Telephone: 613-957-2991 Toll free: 1-866-225-0709 Facsimile: 613-941-5366 Teletypewriter: 1-800-267-1245 (Health Canada) www.hc-sc.gc.ca Industry Canada C.D. Howe Building 235 Queen Street Ottawa, Ontario K1A 0H5 Canada Online: info@ic.gc.ca Telephone: 613-954-5031 Toll-free: 1-800-328-6189 (Canada) TTY (for hearing-impaired only): 1-866-694-8389 (toll-free) Fax: 613-954-2340 www.ic.gc.ca 27 Food Processing Ingredients Report: Canada 2011 Industry Associations This is not an exhaustive list or all industry association in operation in Canada; however these are some of the most general. For additional associations, please consult http://www4.agr.gc.ca/AAFC- AAC/display-afficher.do?id=1171041784063&lang=eng. Canadian Federation of Independent Grocers 2235 Sheppard Ave. E., Suite 902 Willowdale, ON M2J 5B5 Tel: 1-800-661-2344 / 416-492-2311 Fax: 416-492-2347 Email: info@cfig.ca www.cfig.ca Canadian Produce Marketing Association (CPMA) 162 Cleopatra Drive Ottawa, Ontario, Canada K2G 5X2 Telephone: (+1) 613-226-4187 Fax: (+1) 613-226-2984 www.cpma.ca Fruit and Vegetable Dispute Resolution Corporation Building 75, Central Experimental (FVDRC) Farm 930 Carling Ave. Ottawa, Ontario K1A 0C6 CANADA Phone: 613 234-0982 Fax: 613 234-8036 General E-mail: info@fvdrc.com www.fvdrc.com Food and Consumer Product Manufacturers of Canada Phone: 416-510-8024 Fax: 416-510-8043 Email: info@fcpc.ca 100 Sheppard Ave E Toronto, ON M2N 6Z1 www.fcpmc.com 28 Food Processing Ingredients Report: Canada 2011 Publications Food in Canada www.canadianmanufacturing.com/food Canadian Grocer www.canadiangrocer.com Foodservice and Hospitality www.foodserviceworld.com/ C-Store Canada www.c-storecanada.com Western Grocer www.westerngrocer.com Baker's Journal www.bakersjournal.com SECTION 5: FAS/CANADA CONTACTS USDA/FAS Canada endorses and organizes a U.S. pavilion at SIAL Canada every year. The next SIAL Canada show is scheduled for May 9th to 11th 2012 in Montreal, Quebec. For further information, please contact: Office of Agricultural Affairs Embassy of the United States of America P.O. Box 866, Station B Ottawa Ontario Phone: 613-688-5267 Fax: 613-688-3124 Email: agottawa@fas.usda,gov Find us on the World Wide Web Visit the FAS home page at www.fas.usda.gov for a complete listing of FAS' worldwide agricultural reporting. To access these reports, click on "Attaché Reports." Available Market Reports on Canada: CA11067 Marketing Freedom For Grain Farmers Act Becomes Law CA11065 Exporter Guide CA11062 Grain and Feed Quarterly CA11061 Fruit Annual CA11060 Success Story: U.S. Gourmet Company Tastes Sweet Success in Canadian Market CA11059 Bill C-18 – Marketing Freedom for Grain Farmers Act CA11058 Success Story: Hawaii Export International (Coffee) CA11057 This Week in Canadian Agriculture 21 CA11056 This Week in Canadian Agriculture 20 CA11055 Livestock Annual CA11053 Potatoes Annual CA11051 This Week in Canadian Agriculture 19 29 Food Processing Ingredients Report: Canada 2011 CA11050 This Week in Canadian Agriculture 18 CA11048 Northern Trends – Fall Edition CA11047 This Week in Canadian Agriculture 17 CA11046 Poultry Annual CA11044 Grain and Feed Quarterly CA11042 This Week in Canadian Agriculture 16 CA11040 This Week in Canadian Agriculture 15 CA11039 Biotechnology Annual CA11037 This Week in Canadian Agriculture 14 CA11036 Biofuels Annual Report CA11035 This Week in Canadian Agriculture 13 CA11034 This Week in Canadian Agriculture 12 CA11033 Northern Trends – Spring Edition CA11032 Top Ten U.S. Fresh Vegetable Exports to Canada CA11031 This Week in Canadian Agriculture 11 CA11030 This Week in Canadian Agriculture 10 CA11029 Top Ten U.S. Fresh Fruit Exports to Canada CA11027 This Week in Canadian Agriculture 9 CA11025 Voluntary- 2011 Agent/Broker Directory – Central Canada CA11024 This Week in Canadian Agriculture 8 CA11023 Voluntary- 2011 Canadian March Planting Intentions CA11022 American Wines in Canada CA11020 Meeting Report from the CGC meeting (April 4-5) CA11019 In a Nutshell: Explaining Dairy Trade Flows Between the United States and Canada (Voluntary) CA11017 Exporting Alcoholic Beverages into the Canadian Market CA11016 Actions Taken Regarding Food Imports from Japan CA11015 Oilseed and Products CA11014 Grain and Feed Annual CA11013 This Week in Canadian Agriculture 7 CA11011 Livestock - Semiannual CA11009 This Week in Canadian Agriculture 6 CA11008 This Week in Canadian Agriculture 5 CA11007 This Week in Canadian Agriculture 4 CA11006 Canada Food Trends – February 2011 CA11005 This Week in Canadian Agriculture 3 CA11004 Grain and Feed CA11003 This Week in Canadian Agriculture 2 CA11001 This Week in Canadian Agriculture 1 30
Posted: 12 January 2012

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