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Customized report service – Health and wellness trends in Canada

April 2019

Executive summary

Canadian consumers are becoming increasingly educated on foods they consume and are seeking healthier lifestyles. Those trends are driving demand for health and wellness (HW) products, which have shown steady growth from 2013 to 2017, and which are expected to have strong growth from 2018 to 2022.

Overall, the health and wellness product market in terms of retail sales increased by US$1.8 billion from 2013 (US$14.9 billion) to 2017 (US$16.7 billion). The market size is expected to reach US$20.6 billion in 2022 from US$14.9 billion in 2013.

Naturally healthy (NH) products had the largest market size in 2017, and the naturally healthy market is expected to surpass all the sub-segments in the health and wellness sector by the end of 2022. All categories of health and wellness products will grow as consumers increasingly choose the healthiest option available.

In 2013, 84.6% of health and wellness distribution was done through modern grocery retailers such as supermarkets, hypermarkets and discounters. By 2017, modern grocery retailers remained unchanged within the HW distribution at 84.6% in Canada.

With demographic trends and an aging population, health and wellness products will continue to increase their sales volume. In addition, with the new government strategy of advocating a "healthy choice", the demand for health and wellness products is resulting in faster growth.

Note: This report mainly focuses on the naturally healthy and organic products within the health and wellness sector.

Canadian consumers

As the older demographic increases and people start living longer, Canadians will increasingly turn to healthier and more functional products. In addition, the younger millennial generations, Y and Z, are largely adopting new trends in health and wellness. These preferences encourage sustained growth for the health and wellness sector in Canada and over the forecast period. As sales volumes increase, manufacturers and companies are expanding their distribution and forcing down prices due to economies of scale and stronger competition, which make the products more accessible and affordable to a wider consumer base. For example, as a result of Canadians' growing awareness of health products, consumers are increasingly looking for less processed and more natural foods and beverages. This is being reflected in the clean label movement spreading across the packaged food industry. Canadian consumers are paying close attention to and examining labels and nutritional ingredients more than ever, and many are easily discouraged by the difficulty of pronouncing artificial ingredients and their high sugar content. Products promoting the terms ''natural'' and ''100% natural'' are increasingly sought after and are becoming powerful keywords on packaging. Images of fruit, avocado, honey and other natural products rich in nutrients are being used to suggest naturalness and pureness (Euromonitor International, 2018).

Canadian consumers perceive fresh, real and clean food as the foundation of health and well-being more than ever. Canadians believe that a fresh and healthy diet is the first step towards treating and preventing illness and promoting vitality and mental energy. For example, nearly half of all Canadians consider organic foods a healthier, more nutritious choice. However, despite the increasing popularity of health and wellness products, Canadians continue to record alarming results in terms of their physical health.

Many Canadians also consume high amounts of sodium and most of the sodium we eat comes from processed foods (Health Canada, 2016). These sodium-heavy foods, along with higher consumption of these foods, increase the chance of obesity and cardiovascular disease. The government started to advocate for a healthy choice strategy (which is based on reducing artificial ingredients and the excessive consumption of sodium and sugar) by encouraging its preference for foods that are better for consumers and naturally healthy. Many of these dynamics are juxtaposed with local food trends and quality, providing opportunities for businesses and local actors.

Market data

Canadian consumers are increasingly aware of what they consume and are seeking healthier lifestyles. The health and wellness products have shown steady growth from 2013 to 2017, and are expected to have strong growth from 2018 to 2022. Overall, the health and wellness product market in terms of retail sales increased by US$1.8 billion from 2013 (US$14.9 billion) to 2017 (US$16.7 billion). The market size is expected to reach US$20.6 billion in 2022 from US$14.9 billion in 2013.

Health and wellness (HW) in Canada: historical and forecast, retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Health and wellness 14,942.3 16,752.3 2.9 17,283.4 20,612.3 4.5
HW beverages 5,707.7 6,402.0 2.9 6,700.6 8,169.9 5.1
HW packaged foods 9,234.6 10,135.8 2.4 10,582.8 12.415.4 4.1

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Naturally healthy products had the largest market size in 2017 and are expected to surpass all the categories within the health and wellness sector by the end of 2022. All categories of health and wellness products will grow as consumers increasingly choose the healthiest option available. For example, organic and "free from" will show the most steady CAGR for the forecast period with 9.2% and 9.1%, respectively from 2018 to 2022.

Health and wellness in Canada: historical and forecast retail sales by category, in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Health and wellness 14,942.3 16,752.3 2.9 17,283.4 20,612.3 4.5
Fortified/functional (FF) 2,881.7 3,108.9 1.9 3,164.4 3,608.1 3.3
Naturally healthy (NH) 6,734.7 6,879.3 0.5 7,873.8 9,344.9 4.4
Better for you (BFY) 3,619.6 3,744.9 0.9 3,787.0 4,172.8 2.3
Free from 698.7 937.1 7.6 1,008.6 1,431.9 9.2
Organic 1,007.6 1,333.1 7.3 1,449.6 2,054.7 9.1

Source for all: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Naturally healthy

Due to growing health consciousness in Canada, consumers are increasingly seeking less processed and more natural foods and beverages. This is being reflected in the clean label movement spreading across the packaged food industry, such as high-fibre food and cereal bars. Those categories enjoyed steady growth in the 2013-2017 period and are forecast to continue growing in the 2018-2022 period.

For naturally healthy food products, the largest and fastest growing category was cereal bars and honey with a CAGR of 8.9% and 7.8% from 2013 to 2017. Fruit and nut bars are also doing well thanks to a flourishing snacking trend and rising demand for healthy and natural snacks.

Health Canada announced a number of regulatory amendments to the labelling of food (including beverages) in late 2016. The main purpose of these new regulations is to make it easier for consumers to determine the nutritional value of similar products and to allow comparisons between products. One of the main changes is to include the daily percentage value of total sugars in the Nutrition Facts table and to disclose and group sugar-based ingredients. As a result, this new regulation will increase the incentive for companies and manufacturers to adopt more ingredient lists and place greater emphasis on natural and less processed products, which will further encourage sales of naturally healthy packaged foods. "Natural," "all natural" and "100% natural" are increasingly powerful keywords on packaging labels, offering assurance and therefore appeal for naturally healthy products. Images of fruit, honey and other nutrient-rich natural products are used to enhance naturalness and pureness.

Naturally healthy food in Canada: historical and forecast retail sales, in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Health and wellness packaged food 9,234.6 10,350.3 2.9 10,582.8 12,415.4 4.1
High-fibre food 2,124.6 2,265.6 1.6 2,277.5 2,487.9 2.2
Cereal bars 398.7 560.4 8.9 570.5 633.8 2.7

Nuts, seeds and trail mixes

417.0 498.4 4.6 525.6 668.9 6.2
Fruit snacks 166.3 189.5 3.3 193.0 220.2 3.4
Olive oil 124.9 136.7 2.3 142.4 176.5 5.5
Honey 93.9 127.1 7.8 135.6 179.2 7.2

Source: Euromonitor international, 2018

*CAGR: Compound annual growth rate

Naturally healthy food in Canada: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
General Mills Inc 28.3 27.4 26.3 25.1 25.0 −3.1
Private Label 27.8 26.7 25.0 23.8 23.9 −3.7
Others 2.3 8.2 17.0 22.7 22.9 77.6
PepsiCo Inc 32.6 28.3 22.0 18.8 18.6 −13.1
Kellogg Co 9.0 9.4 9.6 9.7 9.6 1.6

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Naturally healthy fruit/herbal tea and naturally healthy Ready to Drink (RTD) tea remain the two fastest growing categories in 2017 at a CAGR of 40.8% and 23.4% respectively for naturally healthy beverages. Consumers are shifting away from extra sweet and calorific drinks, preferring teas and water instead. naturally healthy fruit/vegetable juice experienced negative growth that is forecast to change from 2018 to 2022 with a slow growth of 1.9%. Naturally healthy fruit/vegetable juice companies are expecting to have trouble appealing to younger generations, because plant-based waters are acquiring a bigger share of the market. Although RTD tea dominated in sales growth within the overall category, carbonated RTD tea, chiefly kombucha, experienced strong growth over the review period.

PepsiCo Beverages Canada, Nestlé Waters of Canada and A Lassonde Inc. continued to lead naturally healthy beverages in 2017. Nestlé Waters of Canada has a significant presence in naturally healthy bottled water. The company's offerings cover the full spectrum of consumer needs, as it offers key brands in both the value and premium ends of bottled water. This resulted in growth in demand from 2013 to 2017, and will contribute to continued growth from 2018 to 2022.

Naturally healthy beverages in Canada: historical and forecast retail sales, in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Naturally healthy beverages 3,318.9 3,726.9 2.9 3,896.6 4,795.9 5.3
Fruit/vegetable juice 1,846.4 1,841.8 −0.3 1,871.2 2,018.5 1.9
100% Juice superfruit 1,721.8 1,701.7 −0.3 1,724.2 1,842.3 1.7
Nectars (25-99% Juice) 87.4 93.2 1.6 96.9 111.7 3.6
Bottled water 1,263.3 1456.6 3.6 1,531.1 1,883.0 5.3
Spring water 1,049.1 1205.1 3.5 1,264.5 1,547.3 5.1
Carbonated natural mineral bottled water 110.1 146.5 7.4 158.5 213.1 7.7
Still spring bottled water 1,018.8 1,162.0 3.3 1,217.9 1,484.2 5.1
Tea 192.9 278.0 9.6 452.2 829.8 16.4
Fruit/herbal tea 70.3 276.1 40.8 292.6 633.6 21.3
Green tea 99.1 55.9 −13.3 119.6 138.2 3.7
Ready to drink tea 16.2 37.6 23.4 42.1 64.6 11.3
Ready to drink green tea 15.5 34.6 22.2 38.0 53.9 9.1
Other tea 23.6 36.4 11.4 40.1 58.1 9.7

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Naturally healthy beverages in Canada: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Nestlé SA 12.6 13.0 13.0 13.1 13.2 1.2
PepsiCo Inc. 11.1 11.3 11.4 11.6 11.9 1.8
Lassonde Industries Inc. 12.7 12.1 12.0 11.8 11.5 −2.5
Private Label 8.8 8.9 8.8 8.7 8.6 −0.6
Others 19.9 20.6 21.8 22.4 22.7 3.4

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Organic

Overall, organic products showed strong growth from 2013 to 2017 (6.5% CAGR) and are expected to continue to demonstrate steady growth (9.3% CAGR) from 2018 to 2022. Various consumer surveys have shown that organic products are increasingly becoming an integral part of daily life for many Canadians. While the category's consumer base is expanding, consumers' spending on organic products is also increasing, according to various industry sources, with this being particularly the case among younger demographics, including millennials, who are enjoying increasing purchasing power. In addition, households with children are more likely to buy organic than households without children (Canada Organic Trade Association).

Organic dairy remained by far the largest category in organic packaged food in 2017, with organic milk and butter driving growth. This is largely due to the unique supply management system in the dairy industry that governs the production and processing of organic milk, with organic dairy products accounting for nearly one-third of the retail value of packaged organic food sales.

Agropur Co-operative Agro-Alimentaire held a large share of the organic food market between 2013 and 2017 (7.5%) and will increase its shares in the 2018 to 2022 forecast period. The Agropur Co-operative Agro-Food Cooperative's share is mainly explained by the numerous acquisitions and expansions among the various suppliers. Other companies are actively competing for market share, including smaller brands that are thriving in the packaged organic food sector. Attracted by the category's growth potential, more and more brand manufacturers are embracing the organic trend by actively launching new and innovative products (Euromonitor International, 2018).

Organic packaged food in Canada: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Organic packaged food 695.1 893.9 6.5 965.1 1,374.8 9.3
Dairy 197.9 271.0 8.9 296.8 444.9 10.7
Milk 141.7 198.3 8.8 218.8 335.0 11.2
Yoghurt 36.6 46.2 6.0 48.8 64.0 7.0
Ready meals 121.8 148.3 5.0 156.2 202.4 6.7
Bread 112.6 142.5 6.1 155.5 232.1 10.5
Baby food 38.0 54.0 9.2 59.6 85.7 9.5
Prepared baby food 16.2 25.6 12.1 29.3 44.2 10.8
Other baby food 17.1 22.5 7.1 23.8 31.9 7.6
Rice, pasta and noodles 31.2 36.8 4.2 38.7 49.9 6.6
Rice 27.4 32.3 4.2 34.1 44.1 6.6
Pasta 3.8 4.5 4.3 4.6 5.8 6.0
Savoury snacks 28.3 36.1 6.3 38.9 56.3 9.7
Savoury snacks excluding nuts, seeds and trail mixes 25.8 33.4 6.7 36.0 52.4 9.8
Sweet biscuits, snack bars and fruit snacks 16.7 23.7 9.2 26.4 41.7 12.11
Cereal bars 6.1 9.6 12.0 11.1 18.8 14.1
Fruit snacks 5.0 7.1 9.2 7.9 12.6 12.4

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Organic food companies in Canada: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Agropur Co-operative Agro-Alimentaire 5.0 5.2 5.5 6.1 7.5 10.7
Private Label 13.1 12.8 12.5 12.2 12.2 −1.8
Artisanal 8.4 8.5 8.6 8.6 8.4 0.0
Nature's Path Foods Inc 5.9 6.0 5.9 6.4 7.0 4.4
Others 21.6 21.8 21.6 21.4 20.3 −1.5

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Apart from organic concentrates, which declined in retail sales from 2013 to 2017, all other organic beverage categories experienced strong growth in the health and wellness beverages sector in Canada in 2017. Organic coffee leads the sector, followed by organic tea supported by new product launches and quality trends. Organic tea also benefited from its presence in mainstream grocery stores with the major conventional tea players embracing the trend.

Before 2017, Kicking Horse Coffee Co. Ltd. in British Columbia led in the organic beverage category. In 2017, the major share of the company was acquired by the Lavazza Group, one of the largest coffee makers in the world, as part of the latter's strategy to strengthen its premium segment, particularly in artisan and organic coffee.

Organic beverages in Canada: historical and forecast retail sales, in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Organic beverages 312.5 439.2 8.9 484.4 679.9 8.9
Coffee 178.9 258.1 9.6 285.9 403.9 9.0
Fruit/vegetable juice 89.9 113.6 6.0 124.3 171.9 8.4
Green tea 43.1 66.9 11.6 73.8 103.5 8.8
Concentrates 0.5 0.4 −5.4 0.4 0.4 0.0

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Top organic beverage companies in Canada: historical shares in %
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Lavazza SpA, Luigi N/A N/A N/A N/A 21.1 N/A
Keurig Green Mountain Inc N/A 11.0 10.7 10.3 9.9 N/A
Private Label 9.1 8.9 8.8 8.6 8.4 −2.0
Others 39.9 39.0 38.4 38.9 39.1 −0.5

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

N/A: Not available

Distribution channels

The distribution channels of health and wellness products in Canada remained the same from 2013 to 2017. In 2013, 84.6% of health and wellness distribution was done through modern grocery retailers such as supermarkets, hypermarkets and discounters. By 2017, modern grocery retailers still had the same share of health and wellness distribution at 84.6%. The second most common channel of distribution is the traditional grocery retailer (11.6%). Canadian channels of distribution are balanced by smaller players who offered growth opportunities in a number of categories that have otherwise been stagnating over the years.

Canadian distribution channels will benefit from the development of e-commerce in this market. Technology plays a pivotal role in consumer decision-making and manufacturers and retailers in health and wellness will be better able to meet the needs of Canadian consumers. Constant technological innovation and ever faster technological processes are driving consumer megatrends for the health and wellness sector.

Local and small companies are able to reach a wide audience without competing for shelf space with larger companies. The provision of local food is often linked to health and nutrition benefits, largely because of the association between local food and fresh produce. Along with fuelling consumer support for local food, the potential health benefits of local food have motivated governments and non-governmental organizations to promote these local and small companies (particularly in those focused on health and food security).

Health and wellness in Canada: distribution channels in % share
Channels 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Modern grocery retailers 84.6 84.8 84.8 84.8 84.6 0.0
Convenience stores 2.0 1.9 1.9 1.8 1.8 −2.6
Discounters 10.2 10.2 10.2 10.2 10.2 0.0
Forecourt retailers 1.5 1.4 1.3 1.3 1.3 −3.5
Hypermarkets 17.5 17.9 18.3 18.6 18.7 1.7
Supermarkets 53.4 53.4 53.1 52.9 52.7 −0.3
Traditional grocery retailers 11.6 11.5 11.4 11.4 11.6 0.0
Independent small grocers 9.4 9.3 9.2 9.1 9.1 −0.8
Other grocery retailers 2.2 2.2 2.2 2.3 2.4 2.2
Non-grocery specialists 2.7 2.6 2.6 2.6 2.6 −0.9
Other grocery retailers 2.2 2.2 2.2 2.3 2.4 2.2
Non-grocery specialists 2.7 2.6 2.6 2.6 2.6 −0.9
Non-store retailing 0.1 0.1 0.1 0.1 0.1 0.0

Source: Euromonitor International, 2018

*CAGR: Compound annual growth rate

Conclusion

As a result of demographic trends and an aging population, health and wellness products will continue to increase their sales volume. In addition, with the new government strategy of advocating a "healthy choice," the demand for health and wellness products is increasing. From 2013 to 2017, health and wellness products experienced steady growth, with organic and naturally healthy products leading market development. In the forecast period, those categories are expected to continue to grow strongly over the other sub-categories in the health and wellness sector.

Producers that focus on children's products are likely to have an advantage, as parents are willing to spend extra for their children's wellbeing. Highlighting the healthy benefits of the products on labels or in advertising/promotions is also becoming an increasing necessity to differentiate from highly competitive companies.

Resources

Customized report service – Health and wellness trends in Canada
Global Analysis Report

Prepared by: Nesrine Benmoussa, Market Analyst

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2019).

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