Food Export Blog

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Food Export Blog

Food Export – Country Market Highlight: Canada

Apr 25, 2019

Canada once again ranks as the top U.S. export destination for food and agricultural exports.

According to the USDA’s Foreign Agricultural Service (FAS) “Unparalleled regulatory cooperation, sophisticated transportation logistics and financial markets, geographic proximity, similar consumer preferences and relatively affluent consumers are part of the reason why Canada continues to offer excellent export opportunities for new-to-export small and medium sized U.S. companies.”

The U.S. agricultural export total has increased by 286% since 1993 and the amount of sourcing from the U.S. has continued to grow.

Canada’s wholesale, retail, and food service industries watch and follow the trends in packaged and processed foods in the U.S.  While there are differences in the consumption patterns of selected food items in the two countries there is a growing demand in Canada for innovative value-added foods that are market-proven in the U.S.

Market Overview

USDA FAS Canada

In 2018 U.S. Agricultural Exports totaled nearly $20.7 Billion, an increase from $20.5 Billion in 2017.
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In 2017 Canada accounted for nearly 15% of total U.S. food and agricultural product exports totaling $138.4 Billion
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In 2017 Canada remained the top market for U.S. exports of consumer-oriented products totaling $16.2 Billion, the same as the prior year.
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The U.S. and Canada are very similar in many areas including tastes and food trends, however there are distinct differences that exporters need to recognize as they plan to enter or expand in the market. 

Understanding the nuances of a market is critical to successfully launching a product.

  • There are tariff rate quotas for certain products, particularly dairy, which make it a challenge for U.S. exporters to enter the market
  • Often, because of the dominance of three large grocery retailers it is difficult to reach them without the use of a broker as intermediary
  • There are distinct differences in standard package sizes, chemical residue tolerances and nutrition labeling
  • Conversion of measurements to metric system is required and standard Canadian English is required on the labels which also need to be bilingual (English & French) for products in retail
  • A sophisticated selection of product is already available in the Canadian market, which makes for intense competition on added value and costs.

Canada - Top U.S. Processed Food Exports

Free Trade Agreement

In 2018 the United States announced that it was working on a tri-lateral trade agreement with Canada and Mexico called the United States – Mexico – Canada Agreement or USMCA for short.

The deal has yet to be finalized or implemented but it is expected that the final version will have many benefits for U.S. exporters of food and agricultural products.  We will keep you updated as this agreement is finalized and any changes that it brings to the U.S. – Canada trade landscape.

Retail Sector

 

In the last 5+ years the retail landscape in Canada has changed considerably as there has been a shift from independent to chain stores. Two major retail chains acquired a large number of regional grocers and drug retailers which continued to alter the landscape.

Typically over half of food sales are made through traditional grocery stores, primarily dominated by the "Big 3" Loblaws, Sobeys, and Metro.  However non-grocery retailers, particularly Costco and Walmart have gained market share in the last five or so years and now account for 20% of the retail grocery market. 

Best Product Prospects for U.S. exporters in this sector include:

  • Sugar free and low sugar as well as low sodium foods, functional and super foods
  • Organic products, and gluten free items
  • Pre-packaged foods with low levels of trans-fats, low glycemic diet food, functional/superfoods
  • Low calorie snack foods and what is known as “clean diet” foods, which are those in which the ingredients can be easily pronounced by the common consumer
  • A trend on buying “local foods” is also taking place with emphasis on supporting the local economy.

Imported food products into the Canadian market can be sold directly to the retailer or to importers, brokers, distributors, or wholesalers. Forecast growth in this category is to reach over 45.2 Billion by 2022.

Canada - High Growth Categories

Food Service Sector

Consumer food service continues to profit from the introduction of new healthy ingredients and flavors, growth however is constrained to a certain extent by rising economic concerns, a weak Canadian dollar and a high debt-to-income ratio for many consumers.

Recent trends in the foodservice market in Canada include:

  • Millennials drive demand
    • Millennials are perceived as more adventurous with their food choices in comparison to baby-boomers, often seeking distinctive taste experiences and superior ingredients. Millennials care about the source of ingredients and their quality and taste. They prefer fresh local food.
  • Leading chains benefit from acquisitions and takeovers
    • Competition between the key foodservice players in Canada intensified in 2016 as a result of takeovers and acquisitions. Leading players such as Cara Operations, MTY Food Group and Restaurant Brands International continued to benefit from new acquisitions, enabling them to extend their presence and achieve both wider national and international penetration.
  • Independents continue to struggle as competition intensifies
    • Increased competition in the industry drove less profitable independent restaurants out of business.

    Food Service

The economy is predicted to continue to grow resulting in higher employment and disposable incomes.  As a result consumers will likely spend more money on eating out and the demand for convenience will be supported by the increase in digital ordering and payment platforms.

It is expected that consumers will become increasingly willing to pay more for high-quality, healthy and ethical ingredients.

Food-Processing Sector

Canadian food and beverage processors utilize both raw and semi-processed ingredients from imported and domestic sources.  Imported ingredients are vital inputs to Canadian manufacturers. 

Recent trends of consolidation of the Canadian food industry have 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 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
  • Procurement methods do vary from company to company and from product to product
  • However, regardless of the method of procurement, all products must be in alignment with government import regulation and meet minimum Canadian standards

iStock_000013956058Large[1]_pasta (2)

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.

Processors should be aware that there is a heightened interest in food safety and information about ingredients including the 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.

The good news is that opportunities are increasing in Canada for export ready processors able to meet the rapidly evolving consumer demands and having strong logistics capabilities!

Market Builder

Thinking of exporting to Canada but want to do more research first?  Take advantage of our Market Builder program which provides customized research to help your company uncover potential in international markets.  Read more about the program on our website and in our recent blog.

Canadian Market Builder

Upcoming Activities

We have a number of upcoming activities still open for registration in Canada for 2019!  Read below to see which one might be a fit for you and your product.

Food Show PLUS! at CHFA East 2019

CHFA East

Food Show PLUS! at Grocery Innovations Canada

Grocery Innovation Canada


USDA Trade Mission to Canada

USDA Trade Mission

Success Stories

Learn from those who have gone before you with the Success Stories from Midwest and Northeast suppliers that have found export success in the Canadian market.

Growing Gluten-Free Exports to Canada

Spreading Export Sales for Pennsylvania Company

Indispensable to Export Success

Massachusetts Supplier Increases Apple Cider Vinegar Exports to Canada

Food Export Resources

Enter New Markets

Enter New Markets
Market Builder - Canada


    
Export Education

Export Education
Canadian Retail Landscape & The Importance of Brokers
Export Intelligence Video Series – Canada


Webinars

Webinars
The Safe Food for Canadians Regulations - A Regulatory Overview An Overview of Canadian Packaging and Labeling Requirements



Other Resources

USTR – Canada

FAS - Canada

Foreign Ag Service GAIN Report: Exporter Guide

Foreign Ag Service GAIN Report: Overview of the Food and Beverage Processing Sector in Canada

Foreign Ag Service GAIN Report: Food Service – Hotel Restaurant Institutional HRI Market Report

Foreign Ag Service GAIN Report: Canada Retail Sector Overview

Foreign Ag Service GAIN Report: Canada Exporter Guide – An Exporting Resource Manual