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Exporter Guide Required Report: Required - Public Distribution Date: December 31,2020 Report Number: CA2020-0100 Report Name: Exporter Guide Country: Canada Post: Ottawa Report Category: Exporter Guide Prepared By: Aurela Delibashi, Agricultural Marketing Specialist Approved By: Evan Mangino Report Highlights: Canada was the number one overseas market for U.S. food and agricultural exports in 2019, importing more than $16 billion of U.S. high-value, consumer-oriented goods. Unparalleled regulatory cooperation, comparability and trustworthiness in food safety systems, sophisticated transportation logistics and financial markets, geographic proximity, similar consumer preferences, and relatively affluent consumers are among the reasons why Canada continues to offer excellent export opportunities for new-to-export small- and medium-sized U.S. companies. THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Market Fact Sheet: Canada Executive Summary CANADA QUICK FACTS 2019 The population of Canada is approximately 38 million with Total Imports of Consumer-Oriented Products roughly 90 percent of Canadians living within 100 miles of the $27 billion U.S. border. In 2019, Canada was the leading export destination Imports of U.S. Consumer-Oriented Products for U.S. agricultural products. For new-to-market and new-to- $16 billion export firms, Canada offers stable financial markets and a List of Top 10 Growth Packaged Food Products in Canada sophisticated logistics network supporting $136 million of daily 1) Biscuits/Snack Bars/Fruit Snacks 6) Confectionary two-way trade in food and agricultural products. In 2019, 2) Savory Snacks 7) Baked Goods Canada’s food and beverage sector was valued at $262 billion, 3) Spreads 8) Processed Fruits/Veg. providing opportunities across retail, food service, and 4) Edible Oils 9) Sauce/Dressing/Condiments processing sectors for U.S. food and beverage companies. 5) Rice/Pasta/Noodles 10) Packaged Foods Imports of Consumer-Oriented Products Food Industry Sales by Channel ($ billions) Retail Canada is the number one market for high-value, consumer- $100 Food Service $71 oriented U.S. food and agricultural exports, surpassing $16 Processing Food & Beverage Sales $91 billion in 2019 and representing 60 percent of total Canadian imports from abroad. This segment of food and agricultural Top 10 Canadian Food Processors (by retail sales) products includes snack foods, breakfast cereals, sauces, 1) Saputo Inc. confectionery, and pet food as well as wine, spirits, beer, and 2) McCain Foods Ltd. 3) Agropur Cooperative soft drinks. U.S. products lead many imported goods categories 4) Maple Leaf Foods in the Canadian market, but trade agreements with 3rd country 5) Primo Water Corporation trading blocs – CETA (Canada-European Union Comprehensive 6) Kraft Canada Inc. Economic and Trade Agreement) and the CPTPP 7) PepsiCo Inc. (Comprehensive and Progressive Agreement for Trans-Pacific 8) Nestlé Canada Inc. Partnership) – contributed to increased agricultural export 9) Parmalat Canada Ltd. competition in the Canadian market. 10) Weston Foods Note: The $1 USD: $1.3 CAD exchange rate has been applied for 2019. Source: Statistics Canada, GATS, Euromonitor International, Trade Data Monitor Strengths / Weaknesses / Opportunities / Threats Strengths Weaknesses Relatively high consumer disposable Strong U.S. dollar, high levels of income levels and similar cultures, household debt, and a consolidated tastes, and preferences. retail sector. Opportunities Threats Canada’s Food Processing Sector Duty free tariff treatment for most Increasing competition from 3rd products, Canadians’ familiarity with country competitors, “buy local” Canada’s food and beverage processing sector is sophisticated, U.S. products, and open attitudes sentiment, and lasting shifts in diverse and a vital contributor to the economy. In 2019, toward new, innovative products. consumer behavior after COVID. Canadian food manufacturing sales reached $82 billion, while beverage manufacturing reached $9.5 billion. There are Canada’s Food Service Sector approximately 6,500 food processing establishments in Canada, employing approximately 250,000 workers. In 2019, Canadian Canada’s 2019 foodservice sales amounted to $71 billion, up three processed food exports reached $22 billion. The Government of percent from 2018 and the fastest growth of any major sector over the Canada has prioritized continued export growth, increasing last decade. Foodservice sales in 2019 were more than double the value demand for imported and domestically sourced inputs. reported in 2000. Canada’s foodservice industry was on track to hit $75 billion in 2020 before COVID-19 inflicted losses of up to $30 billion. Canada’s Food Retail Sector Within Canada’s mature and consolidated retail market, five majors (three traditional grocers and two general merchandisers) command over 60 percent ($100 billion) of the market. The Canadian food market displays a dichotomy of demand, with low-priced, value items as well as premium and specialty items. SECTION I. MARKET OVERVIEW Canada continued to be the top agricultural trading partner for the United States in 2019. Total U.S. food and agricultural exports exceeded $22 billion, including distilled spirits and fish products, and total two- way agricultural trade exceeding $49 billion.1 The United States and Canada maintain the world's most extensive bilateral trading relationship with nearly $1 billion worth of food and agricultural products crossing the U.S.-Canada border every week. In 2019, U.S. products represented 55 percent of Canada's global imports of agricultural products. High-value, consumer-oriented products accounted for $16 billion, representing 73 percent of the total value of U.S. exports to Canada. The top three consumer-oriented agricultural categories were prepared and processed foods ($3.5 billion), fresh vegetables ($1.7 billion), and fresh fruits ($1.4 billion). The retail sector is concentrated among five significant companies, and transportation costs within Canada (the second-largest country in the world in terms of landmass) can be relatively high. A lack of diversity in Canadian import suppliers, a strong and growing "buy local" movement, and a relatively strong dollar can present challenges to small- and medium-sized U.S. companies. However, stable financial markets, sophisticated logistics networks, a well-developed food safety regulatory structure, high familiarity with U.S. products, and broad market access secured under the North American Free Trade Agreement (NAFTA) and retained in the newly ratified U.S.-Mexico-Canada Agreement (USMCA) continue to make Canada an excellent candidate for U.S. new-to-market and new-to-export firms. The significant bilateral agricultural trade success of the last thirty years (U.S. agricultural exports to Canada have increased nearly 10-fold since 1989) can be attributed, in part, to the strong business relationships between Canadian buyers and U.S. suppliers. As similar as the United States and Canada are, understanding the Canadian marketplace is critical to long-term success and consistent sales. Table 1: Canadian Market Overview Summary Advantages Disadvantages Canadian consumers enjoy high disposable income, Bilingual (English and French) labeling is required coupled with growing interests in premium, high-quality for retail products. products, and global cuisine. Canada's ethnically diverse population provides Canada's population is smaller than California and opportunities for specialty products. Canadians are more dispersed, making marketing and distribution exposed to increasingly diverse flavors and cuisines. costs generally higher than in the United States. 1 All values are reported in U.S. dollars unless otherwise noted. Advantages Disadvantages Per-capita produce consumption is higher than in the Retailers are continually looking to reduce prices, United States. Foodservice operators rely on imported improve product quality, and extend their product fruits and vegetables year-round. range with new items. Duty-free, tariff-free treatment for >98 percent of U.S. Tariff rate quotas apply for supply-managed products under USMCA (entered into force July 1, 2020). commodities, dairy, poultry, and eggs. U.S. food products are generally aligned with Canadian Different chemical approvals/tolerances, as well as tastes and are familiar to Canadian consumers. food standards, may require special production runs. Established vendors are currently entrenched in the Canadian consumers rate U.S. quality and safety highly. market. Key Demographic Trends Canada's population is approximately 38 million with a median age of 41. Ninety percent of Canadians live within 100 miles of the U.S. border and most consumers are concentrated in urban centers. Canada’s two largest cities – Toronto and Montreal – are in the provinces of Ontario and Quebec, respectively, accounting for 60 percent of national economic activity and population. Quebec, Canada's French-speaking province, holds a large untapped potential and represents an excellent market for U.S. exporters looking to enter the Canadian market. As U.S. consumer-oriented products can comprise 25 percent of the products on a grocery shelf in the rest of Canada, U.S. products are underrepresented in Quebec, accounting for only 9 percent. Households: Single-person households were the largest household type in 2019, accounting for 29 percent of total households.
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