|
|
|
|
|
|
Translating
Western Canadian Trends
Into U.S. Export Sales
By Brian Woodcock
As the second largest market for U.S. agricultural products, you would think the Canadian market might well be saturated. Far from it. Canada, and western Canada in particular, is still a growing market that holds plenty of opportunity for enterprising U.S. exporters who take the time to learn the nuances and niches it offers.
U.S. agricultural exports to Canada were $6.9 billion in fiscal year 1999, down slightly from the record high of $7 billion a year earlier, but still the second highest level on record.
Population Boom Fuels Growing Demand
Booming western Canada is the fastest growing part of the country. One out of three Canadians lives there. During 1988-98, Vancouver (the largest city in the region) saw its population mushroom 41 percent to 2 million, making it Canada’s third largest city. With the growth in population and economic prosperity has come a boom in food trade as well.
Food trends in western Canada are driven by several factors, some shared with other North American markets and some unique. Significant opportunities exist within the western Canada retail food sector for U.S. exporters with innovative consumer food products that respond to these important emerging food trends.
This article looks at a dozen key food trends in western Canada that are driven by changing consumer attitudes, lifestyles and demographics, as well as by changing distributor focus and retailing strategies. Given those trends, we’ll also spotlight 10 food product opportunities that take advantage of them.
While western Canadian consumers are similar in many ways to their eastern counterparts, there are some notable distinctions. Western Canadians are more concerned about health and nutrition, reflected by high interest in organic foods, Asian ethnic prepared foods, produce, vegetarian foods and health foods. In many ways, the western Canadian consumer identifies with his or her counterpart in the western United States when it comes to food trends.
A Dozen Trends To Take Note of
1. Portability--Consumers are on the run and their food products should be able to keep up with them.
2. Convenience at home–Time-starved families have less time for shopping and food preparation. Fresh and frozen meal solutions are springing up in many categories.
3. Meal excitement–New, unique, high-quality home meals and lunch kits for kids are the answer to "What’s for dinner?"
4. Nutritious, convenient and refreshing beverages–Drinks that not only quench the thirst but also provide nutrition and refreshment are giving milk and soft drinks a run for their money.
5. Baby boomer health consciousness–Feeling
their age, baby boomers look for foods in many categories that
are healthy and nutritional.
6. Ethnic foods–Western Canada has seen a boom in immigration from Asian countries. This shift in demographics has resulted in the rise of specialty ethnic foods, value-added foods with an Asian appeal and more varied and exotic fresh vegetables, fruit and seafood products.
7. Natural or organic foods–Consumers are increasingly interested in products that give reassurances about food safety and environmental soundness, as well as health and nutritional benefits. What used to be an alternative to traditional foods has gone mainstream.
8. Functional foods or "nutriceuticals"– The benefits of high-protein meals, energy bars and herbal-, vitamin- and mineral-enhanced food products have broad appeal.
9. Low-fat foods–Our neighbors to the north are
increasingly concerned about fat intake and health concerns
associated with saturated, hydrogenated and trans fatty acids. As
a result, the stars of low-fat cereals, dairy products and frozen
meals are rising.
10. Indulgence or comfort foods– hile on one hand, consumers may be concerned about fat and nutrition, the other hand is reaching for tasty snacks laden with fat, sugar and salt. These foods reward consumers for all that good eating behavior and for surviving the stresses of everyday life. Whether it’s called tasty snack food, comfort food, indulgence food or a food reward, demand is high in a wide range of food categories.
11. Biotech foods– trend that is currently on many consumers’ minds is that of growing use of foods that are the products of biotechnology. Controversial? Yes. In the food marketing business, perception is reality, and it is obvious that more and more, consumers are looking for reassurances about food wholesomeness and safety.
12. Bigger is better–
onsumers in western Canada have always had a stronger preference
than their eastern Canadian counterparts for large-size packages
of foods. Western food distributors have taken note and adapted
package sizing accordingly.
How does an exporter translate these western Canadian trends into sales? Read on for 10 not-to-be-missed product opportunities.
Opportunity 1. Chilled Fruit Juices. Overall, fruit juice is one of the most dynamic categories in today’s grocery business. Second in size only to flavored soft drinks, this category has seen very strong demand driven mainly by evolving consumer trends and manufacturing innovation. The western Canadian market for juices, drinks and iced teas is a large one with estimated sales of $244 million in 1998 and a growth rate of 12 percent. Sales last year were expected to reach $273 million (final figures not available at press time). Total Canadian sales in the fruit juice category in 1998 were $1.01 billion with a similar 12-percent growth rate.
The market has evolved from plain old fruit juices to
carbonated juices, flavored waters and carbonated fruit drinks,
such as Snapple and Libby’s Real Fruit. Recent innovations
include fortified juices (such as calcium-fortified orange juice)
and fruit-and-dairy drink combinations (smoothies or whipped
fruit drinks).
While orange juice currently dominates the juice and drink category, there is a definite opportunity for more innovative fruit drinks, be they mixed citrus juices or mixed tropical (exotic) fruit juices or fortified mixed fruit and dairy juices. Sales of chilled fruit drinks continue to grow at the expense of other drink categories, such as carbonated sparkling juices, powdered juices and frozen juices.
Competition for sales comes from a combination of local and eastern-based companies with a number of key brands.
Opportunity 2. Shelf Stable Fruit Drinks. Shelf-stable fruit drinks are also high on the sales opportunity list. In the past, this category was dominated by competing apple juice brands, which were locked in aggressive price competition. Today, it is growing as a result of innovative new products that are doing a better job of appealing to consumers, who are looking more and more for new, innovative products. There are opportunities for sales of:
Opportunity 3. Soy Beverages. Sales in the soy and rice beverage category have grown by over 15 percent for the past several years and by 24 percent in 1998, when it was the third fastest growing beverage category in Canada. Sales of soy products and soy drinks are being driven by consumer demographics and perceptions of the related health and medical benefits of the product. Western Canadians have always been health-conscious and interested in natural and organic foods. But the influx of Asian immigrants to western Canada in the past decade has boosted the market for soy drinks even more.
Western Canada accounted for nearly half of total Canadian soy drink sales of $14.7 million in 1998. Sales in western Canada last year were expected to reach almost $9 million.
Soy products that have found the most favor are innovative ones such as those fortified with vitamins and calcium or drinks that use advanced technology to remove the "bean-y" taste of the product. Flavored soy drinks, particularly chocolate, are also a hit. There’s also opportunity for sales of soy beverages that are new, unique and great tasting. Recent approval in the United States to allow manufacturers to make health claims on product packages, a move that Canada may also follow, will probably do a lot for sales of these products.
Opportunity 4. Vegetarian Meat Substitutes. Vegetarian meat substitutes are an extremely fast-growing category in western Canada. The category leader, Vancouver-based Yves Veggie Cuisine, has been the driving force behind sales for the past 14 years.
While vegetarian meat substitute
products have always been popular with a small segment of
consumers in the west, the number of people buying them has grown
steadily. Today, the category attracts not only vegetarians but
also other consumers who are increasingly concerned about health
and well-being and are turning to meat replacements. This
category includes soy products and meat substitutes made from
grains and vegetables. Products include various meat analogs
(meat-like products made from non-meat sources) such as tofu hot
dogs, soy burgers, ground and sliced vegetarian "meat"
and bacon. Recent innovations in this category include
pasta-based products (pasta with vegetarian "meat"
dishes). Grocery retailers support the trend, even showcasing the
products in the produce section.
The Canadian market for tofu and meat replacement products was projected at $28 million in 1999. Sales growth in 1998 was 29 percent. Consumer acceptance of these products is on the rise, too.
Products with the most potential are those that have the most realistic meat taste and texture. The market is certainly ripe for fast growth, given the consumer trends and health benefits in the category. Continued product innovation and increased competition in the category are expected to spark strong market growth and substantial sales and profit opportunity.
Opportunity 5. Frozen Breakfast Foods. Frozen breakfast foods have enjoyed strong growth over the past several years, appealing as they do to families on the run who want convenient, nutritious and tasty breakfasts. Popular items in this $56-million sector (1999 estimate) include toaster pancakes (buttermilk and blueberry), waffles (with cinnamon, banana bread, wholewheat and blueberry versions) and strudels (fruit and berry flavors or fruit and cream cheese combinations). Products with potential include high-quality specialty items, breakfast foods that are low in fat but high in nutritional value, and items that are vitamin- and mineral-fortified.
Opportunity 6. Frozen Dinners and
Entrees. Canadians purchased $564 million worth of frozen
dinners and entrees in 1998 at a growth rate of 13 percent. Sales
in 1999 were estimated to be $637 million. Growth of this sector
in western Canada was even more robust, with sales growth
reported to be in the 25-percent range. Frozen dinners are
well-positioned to continue as one of the fastest growing and
most dynamic food categories in western Canada. Sales will
benefit from the most influential consumer trend impacting
grocery stores today: home meal solutions for time-starved
consumers. Increasingly, consumers have less and less time for
food shopping and preparation. But at the same time, they want
meals that are great tasting and nutritious. Manufacturers are
taking up the challenge, introducing a wide variety of innovative
frozen dinners and entrees. Take your choice: value-priced items,
high-quality specialty pastas, ethnic meals, low-calorie and
high-nutrition foods. New product innovation will be key to
finding a distinctive competitive advantage in this interesting
category.
Opportunity 7. Nutritious
Portable Foods/Snacks. Everybody loves a snack...but snacks
are coming of age. Nutritious portable snacks (NPS) are one of
the fastest growing product categories, a category driven by
contemporary consumer trends. Without the time to sit down for a
leisurely meal, consumers are turning to nutritious portable
snacks for a quick meal on the fly.
In addition to meal replacement, they are also snacks in and of themselves– and indulgence rewards. As in other food categories, consumers are also looking for products that meet their concerns about health and well-being. Examples of this product category are energy bars, granola bars (fruit and chocolate combinations), dried fruit snacks and fruit rollups. Projected sales for this category in 1999 in western Canada were $78 million.
Originally targeted at athletes and fitness seekers, NPS such as energy bars can be enjoyed by office workers and couch potatoes alike. They provide nutritious meal alternatives. Opportunities exist to develop portable snacks with a distinctive difference that focuses on the indulgence angle, perhaps bridging the gap between NPS and candy bars.
Opportunity 8. Children's Lunch Kits.
Lunch snack kits are actually a subcategory of nutritious
portable foods. This product group has shown strong consumer
acceptance. The fastest growth is in lunch snack kits targeted at
school children. This category includes a growing number of
prepacked lunch kits such as: cheese dip and bread sticks;
cheese, cracker, ham and drinks; a hot dog, taco, nachos or
pizza; and an array of individual snacks and drinks targeted at
the same market including portable juices, salted snacks,
confectionery items, granola bars and fruit bars.
This category is being driven by some of the same trends seen in other categories–the desire for convenient, time-saving meal solutions, good nutrition and meal excitement. These kits also fight the "lunch boredom factor" while easing the consciences of nutrition-minded parents.
As in the United States, lunch kits appeal to the modern family’s needs. Given the demographic and social trends today, development and sales of these products are destined to grow. According to industry experts, innovation in products and promotion will fuel larger sales.
Opportunity 9. Pet Foods and Treats. Canadian ownership of pets is high: over one-fourth of Canadian households own a dog, 38 percent own a cat and 22 percent own both a cat and a dog. Those pets are being pampered as never before with premium pet foods and pet snacks as evidenced by strong growth rates in both categories. Owners are also concerned about Fido’s and Tabby’s health, making sure they get the proper nutrition and dental hygiene. Translation: opportunity for sales of pet treats that have that extra "something" that offers pet indulgence and/or nutritional and dental care.
Pet food sales in Canada in 1998 were
$223 million. Dog and cat treats were the fastest growing
subcategories ($9 million and $3.8 million, respectively). Both
of these groups showed strong, 19-percent growth in 1998. But
these figures may be undercounted by at least half, as they do
not account for pet food sales at large pet food discounters,
veterinary sales and mass merchandisers.
There is a lot of duplication of product mixes in the pet treat category. For dogs, there are a number of similar products of jerky strips and chewing sticks (chicken-, beef- and bacon-flavored), and biscuits with different formulations and nutritional and dental hygiene benefits. Some have reduced fat content; others have added calcium. There are fewer options in the cat treat category. Treats include chicken-, salmon- or tuna-flavored products by several manufacturers.
Opportunity 10. Natural Foods, Including Organic Foods and Supplements. Increased sales of these products is a major trend in the food industry in western Canada. Natural foods are going mainstream, driven by baby boomers and their health concerns. Consumers are making the switch to organic foods for a variety of reasons, including perceived health benefits, the desire to support sustainable agriculture and a shift to vegetarianism. Purchasers tend to be environmentally conscious with higher incomes. Western Canada has always had a higher level of interest in organic and natural foods and supplements, but previously sales were confined to health food and specialty stores. Today, however, they can be found in traditional grocers, often in their own sections.
This category of products includes organic produce, products made from certified organically grown foods and natural ingredients, and vitamin and herbal supplements.
Sales in some natural foods sections of mainstream grocery stores have been slow to catch on. Innovative products and innovative marketing and merchandising programs to support the products present a major opportunity in the mainstream grocery channel in western Canada.
Commercial marketing data do not track natural food and organic categories. They do, however, measure sales of herbal and vitamin supplements, which totaled $6.4 million and $16 million, respectively, in western Canada in 1998. Growth rates that year were 33 percent and 4 percent, respectively.
Canada’s Organic Advisory Board estimated the total market at approximately $350 million in 1998, with growth rates in the 15- to 25-percent range.
The natural foods category is a diverse one, highly fragmented with products in a range of categories. In the packaged foods segment, the competitive environment is typically made up of large number of smaller premium-priced brands (with premiums 10 to 50 percent above traditional packaged food products).
For More Information...
For more information on food product export opportunities in Canada, refer to the full report: Food Product Export Opportunities in Western Canada. Find it on the world wide web at: ______________________
The author is the director of USA Food Export, a marketing firm in Vancouver, British Columbia. Tel./fax: (604) 222-8433. E-mail: woodcock@istar.ca
|
|