The Specialty Food Market in North America
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Table of Contents
- Executive Summary
- Specialty Food Industry
- Consumer Market and Trends
- Retail Trends
- Opportunities for Canadian Exporters
- International Access Issues and Competition
- Contact Information
- Key Resources
- Driven by consumer trends for healthy, allergen-free and unique food products, as well as increasing ethnically diverse populations, the Canadian and United States (U.S.) consumer markets provide a wide range of potential opportunities for the specialty food industry.
- It is estimated that North America's ethnic food market is growing at an annual rate of roughly 5%.
- The specialty food industry in Canada grew at a faster rate than overall retail in 2009, with specialty store sales increasing 35% from 2004 to 2009.
- In 2010, over 1,500 new specialty food product launches occurred in the U.S. with the market estimated to be $63 billion.
- The global Halal market is worth roughly $580 billion, with Halal products accounting for roughly 5% of total agri-food trade, and estimates indicate that Halal products could grow to account for 20% of world food trade.
- The North American Halal food market is growing at a rapid rate, with estimates that the market is currently worth $12 billion.
- The North American Kosher food market grew 15% year-over-year in the past 10 years, with roughly $200 billion in Kosher certified food products sold annually and an active consumer base of 15 million.
- According to Euromonitor International, the food intolerance market in North America was worth US$3.6 billion in 2010, fuelled by gluten and lactose-free products.
The definition of specialty food can vary considerably, and as a result, it can be difficult to measure the size of the industry. Mintel defines "specialty food" as "anything that is above average in quality or price", while in a specialty food industry study, the Value Chain Management Centre (VCMC) defines the industry within four categories: ethnic foods, foods that are produced in compliance with religious dietary laws, specialty diets, and gourmet and artisan products. On the other hand, managers within retail and foodservice use different characteristics, such as products that are sold in lower quantities than mainstream products, and often garner higher prices, and are specifically branded (Gooch et al. 8).
Another definition from the National Association for the Specialty Food Trade (NASFT), an international not-for-profit business trade association, defines specialty food as: "Foods and beverages that exemplify quality and innovation, including artisanal, natural, and local products that are often made by small manufacturers, artisans and entrepreneurs from the U.S. and abroad" ("About the NASFT").
Despite varying definitions, this report further examines the rapidly expanding specialty food industry within North America, the various consumer and demographic trends impacting and driving market growth, and potential opportunities for Canadian producers and exporters.
Specialty Food Industry
According to Claudia Schmidt, Consultant of the VCMC, and Chris Crocker, Vice President, Media of the NASFT, Canada and the U.S. provide a wide range of potential opportunities for the specialty food industry. The diverse array of products that are included within specialty food, as well as the numerous consumer trends driving the industry provide a number of future growth opportunities in both retail and foodservice. While definitions vary for the industry and its products, specialty food remains an exciting category due to the higher quality and value of these products and the higher prices that they can command (Hogan "Specialty Food").
Regardless of a slower economy this past decade, the specialty food market in North America appears to still be going strong, growing at a faster rate in Canada than overall retail in 2009, and showing impressive growth in the U.S. despite a struggling consumer market. Evidence of this is the more than 1,500 new launches of specialty food products in the U.S. in 2010 (Hogan "Specialty Food"). According to the NASFT, they currently have over 2,900 members in the U.S. and overseas ("About the NASFT").
It is difficult to determine the actual size of the specialty food market in Canada as Statistics Canada defines specialty food based on the type of retailer selling the food. According to Statistics Canada, 'specialty' retailers include cheese, wine, ethnic, and fruit and vegetable stores, thus, anything that is 'specialized' in nature. By Statistics Canada's definition, specialty store retail sales were $4.5 million in 2009; an increase of 35% from 2004 sales. The share of specialty store retail sales has also been steadily gaining in relation to overall retail sales in Canada: moving from a share of 4.07% in 2004 to 4.49% in 2009.
In the foodservice industry, the definition of specialty food is once again fairly open. Within foodservice, specialty food can be defined with a variety of characteristics, such as geographic origin, product quality, a species or variety, and production methods.
With regard to geography, specialty foods items can include traditional foods that are imported from a distinct geographic location, while from a quality standpoint, specialty foods can include products of superior quality or craftsmanship. Products derived from rare species or varietals can also be considered specialty foods, as can products that are produced on a small-scale, are handmade, or produced by special processes (Gooch et al. 9-11).
As in Canada, the size of the U.S. specialty food market can be difficult to measure. However, NASFT reported that retail specialty food sales increased by 9%, in real terms, from 2007-2009. However, in the specialty food and beverage categories that are tracked by Mintel, new product launches were found to have decreased by 29% from 2008-2009; likely a result of recessionary impacts in the U.S. In 2010, the U.S. specialty food market was estimated to be worth $63 billion.
According to the Economic Research Service (ERS) of the United States Department of Agriculture (USDA), in 2009 at home expenditures of specialty foods that were purchased from specialty food stores comprised 2.8% of total expenditures. This number is notably lower than the 4.5% of total retail sales in Canada that specialty stores accounted for in 2009. While specialty store expenditures of specialty food have also remained relatively flat from 1999 to 2009, these numbers only take into account purchases at specialty food stores, and not gourmet or specialty products purchased at other retailers, who are leading the growth in specialty food. According to NASFT and the VCMC, the variety of specialty food product offerings has been expanding in the U.S., with an estimated 180,000 products available through a variety of retail channels in 2009 (Gooch et al. 13-15).
Consumer Market and Trends
According to the Statistics Canada Population Clock, Canada is estimated to have a population of 34.6 million. The VCMC also reports that 23% of Canadians are of French origin, 15% of other European origin, 6% are Arab, and 2% are Amerindian, while 26% have a mixed background. With regard to religion, more than 40% of Canadians are Roman Catholic, while 23% are Protestants, and nearly 2% are Muslim. Canada's Muslim population is currently estimated at 1.25 million and is the fastest growing segment; expected to account for half of Canada's visible minority population by 2031 (Gooch et al. 16,19).
Canada's visible minority groups currently account for approximately 16.2% of the population. Of Canada's major cities, Toronto has the largest visible minority proportion, with 42.9% of the city's population comprised of visible minorities, followed by Vancouver with 41.7% and Montreal with a visible minority population of 16.5% (17).
According to Statistics Canada, the Canadian population is expected to become increasingly ethnically diverse, fuelled by immigration. Roughly half of new immigrants to Canada come from Asia and the Pacific, while 20% come from Africa and the Middle East, and 16% are from Europe and the United Kingdom. This growing immigrant population is expected to increase Canada's visible minority population, which could surpass 11.4 million in 2031. This would mean that roughly three in 10 Canadians, 30% of the population, would be of a visible minority, a noticeable growth from 2006 when only five million Canadians (16% of the population) were of a visible minority (16).
The South Asian and Chinese population could expand dramatically in the coming 20 years, possibly by more than twice the current size, with population growth over 2.4 million by 2031. This group is also expected to remain the largest visible minority group in Canada. The Black and Filipino populations in Canada are also expected to double in size, with this growth taking place over the next 25 years and reaching roughly 1.6 million and 1 million respectively. However, due to the larger expected growth of other visible minority groups, the Black and Filipino populations are actually expected to decline slightly in proportion. The Arab minority group is one population segment that is supposed to increase in proportion, possibly more than tripling in size by 2031 (16).
An interest toward healthier food products among specialty consumers is also occurring in Canada, with increasingly healthier and 'lite' product offerings appearing in the market. This health trend is occurring across a wide variety of products, resulting in consumer demand for "free-from" or "reduced" products, as well as organic and "natural" products, and simplified ingredient lists.
An increasingly ethnically diverse society is also fuelling the expansion of the specialty food industry in the U.S. According to Euromonitor International, visible minority groups are predicted to continue to grow, while the white population segment, which represented 65% of the population in 2009, is actually expected to decline slightly and decrease in proportion. Euromonitor International predicts that Hispanic, Black and Asian consumer groups in the U.S., which all experienced growth from 2005 to 2009 to reach a combined population of 99.5 million in 2009, will continue to grow to a combined population of roughly 121.3 million in 2020 (Consumer Lifestyles US 17).
While overall food expenditures in the U.S. decreased by just over 1% in 2009, at home food expenditures actually experienced slight growth, which may be a beneficial trend for the specialty food industry. As consumers continue to eat in and express interest in ethnic foods, different cultures and healthier lifestyles, this may provide growing opportunities in retail for ethnic foods and ingredients, as well as pre-prepared, healthy food products.
According to the VCMC, increasing ethnic diversity and wealth among consumers is resulting in a growing demand from Americans for imported gourmet products. Consumers are looking not only for more diversity in their cuisines and diets, but also for healthier food options. Allergen-free products have also been experiencing notable growth. Aside from the growing consumption of religious foods (such as Halal products), gluten-free products are experiencing the most growth. According to the VCMC, the U.S. gluten-free market was approximately US$2.6 billion in 2010, which represents nearly three times the 2006 value of US$935 million (Gooch et al. 15).
According to Mintel, specialty food consumers have also been found to have some distinct behaviours that vary from other shoppers, which benefit the industry:
- Consumers of specialty food tend to be more interested in fresh and perishable items, and as a result, shop approximately two times more than average consumers.
- Of specialty food consumers, the older segments (those 55-64 years of age) are the greatest spenders on specialty food, while the younger generation (under 25) spends the least.
- The majority of specialty food consumers are also most likely to purchase products that are all-natural and organic, followed by products that are eco-friendly and sourced locally.
- Many specialty food consumers consider weight control and health reasons when making their food choices: products with "no fat, reduced sugar and low fat" are more popular among specialty food consumers (15).
The VCMC divides ethnic food consumers into two segments: "unrestricted" and "restricted". Unrestricted consumers look for ingredients, forms, tastes and flavours that are familiar and genuine, while restricted consumers have the need to consume certain food products, such as meat, that have been processed or slaughtered according to religious laws. Halal and Kosher certified foods cater to this consumer category (Gooch et al. 18).
It is estimated that North America's ethnic food market is growing at an annual rate of roughly 5%. The already prominent ethnic food consumers in the U.S., combined with the high growth projections of visible minority populations, are expected to further increase both the market and industry. The U.S. ethnic food market experienced a growth of 69% from 1997-2002, and is projected to increase another 50% by 2015. This rapid growth is providing an array of opportunities for ethnic food producers in both the Canadian and U.S. markets (28).
While an expanding ethnically diverse population will fuel growth in the specialty food industry, other segments of the population (not just ethnic minorities) are also consuming ethnic foods and increasing demand for these products. Consumers that come from an immigrant background are also more likely to try new foods from other ethnic groups.
According to Mintel, Italian, Hispanic and Asian products are the most often purchased ethnic foods in the U.S. However, of ethnic cuisines in the U.S. market, Kosher cuisine experienced the highest Common Average Growth Rate (CAGR) from 2004 to 2009 (6%) to account for 20% of total ethnic food sales in 2009. This was followed by Mexican cuisine with growth of 3.3% and market share of 42%, Asian cuisine (not including Chinese) with 2.1% growth and 18% share, and Chinese cuisine increasing 1.1% and accounting for 10% of the market. "Other" cuisines grew by 5% and accounted for 10% of ethnic food sales. Overall, ethnic food sales had a CAGR of 3.5% from 2004-2009 (15, 28). The chart below further illustrates this growth.
|2009 Ethnic Food Market Share by Sales||42.0%||10.0%||18.0%||20.0%||10.0%||100.0%|
Source: Gooch et al. 28
Italian foods have become so popular and common among consumers that they no longer consider them ethnic food; southern Italian, Greek and Spanish cuisines are still characterized under the "Mediterranean foods" label. Two consumer trends – growing interest in ethnic food and healthy/nutritious eating – helped to grow popularity of these Mediterranean foods which became notably popular in 2007 and continue to be a significant emerging ethnic cuisine in North America. Popular products within this category include fruits and vegetables, vegetable oils, fish, cereals, legumes and milk.
According to Statistics Canada, there are more than 1.4 million Canadians of Italian origin, with 60% residing in Ontario, 21% in Québec, 10% in British Columbia, and 6% in Alberta (Gooch et al. 29). According to the National Italian American Foundation (NIAF), the Italian American population in the U.S. is roughly 15.7 million, based on the 2000 U.S. Census. The states with the largest populations include: New York (2.7 million), New Jersey and California (1.5 million each), Pennsylvania (1.4 million), and Florida (1 million). The states with the highest proportion of Italian Americans are represented by: Rhode Island (19% of the population), Connecticut (18.6%), New Jersey (17.9%), New York (14.4%), and Massachusetts (13.5%).
South Asian Cuisine
According to Statistics Canada there are roughly 2.5 million Canadians of East and South Asian origin, with 1.3 million Canadians being of South Asian origin. This population has seen notable growth, increasing 27% from 2001 to 2006, and is comprised of a variety of different ethnic and cultural origins, including: East Indian, Pakistani, Sri Lankan, Punjabi, and Tamil (Gooch et al. 28, 30).
According to the VCMC, these consumers are also distinct in their shopping behaviour, as they spend significantly more (23%) on groceries than average Toronto and Vancouver households. This above-average expenditure, coupled with a growing population, presents growing opportunities for South Asian food and beverages. Within Canada, consumers of South Asian origin are largely located in Ontario (63% of the population) and British Columbia (20%) (30).
Within the U.S. the Asian-origin population segment is also increasing in size. From 2004 to 2009 this segment experienced growth of 10.9% to reach a population of 13.6 million. By 2020, the Asian population is expected to experience the 2nd fastest growth of minority groups, after the Hispanic population, of 22% which would result in a population of almost 17 million (Euromonitor International, Consumer Lifestyles US 17).
There is particular emphasis on addressing the needs of this expanding population in the U.S. According to the United States Department of Labour, Asian-Americans possess the highest median household income of US$73,107, and as one of the fastest-growing population segments, their buying power is rapidly increasing. Asian cuisine, particularly Chinese, Japanese and Thai food, has long been enjoyed by mainstream American consumers, while other varieties, such as Vietnamese and Korean, are increasing in popularity. Traditional Asian dishes are also influencing the flavour profiles of many mainstream products, with Asian-inspired sauces, snacks, and ready-meals widespread in the American marketplace.
Chinese and Chinese-inspired cuisine is common throughout Canada, due to Chinese-Canadians representing one of Canada's largest ethnic groups and the fact that Chinese food is also popular among many Canadians of different ethnic origins. Chinese food products can be found prominently in both the foodservice and retail grocery industries in Canada. According to Statistics Canada, there are over 1.3 million Canadians of Chinese origin, with 48% residing in Ontario, 32% in British Columbia, 10% in Alberta and 7% in Québec.
Over the next two decades, the Chinese-Canadian ethnic population is also expected to increase at a faster rate than the national average, which will likely only provide more opportunities and expansion for Chinese cuisine in the future. Chinese-Canadian consumers are also a lucrative market segment, as they spend 9% more on weekly groceries on average, than typical consumers in Toronto and Vancouver (Gooch et al. 28-29).
Canadians of Mexican origin account for roughly 0.25% of Canada's population, with Mexican cuisine popular with consumers of both non-Mexican and Mexican origin. However, the popularity of Mexican cuisine within Canada pales in comparison to the size of the market in the U.S.; fuelled by the significantly larger population of Mexican origin consumers in the U.S.
According to Euromonitor International, the U.S. Hispanic population is the largest minority group in the country and continues to grow, increasingly being driven by live births instead of immigration. From 2005 to 2009, the Hispanic population increased by almost 14% to reach 48.4 million in 2009, or 16% of the total country population. The Hispanic population is also expected to grow nearly another 28% by 2020 to reach 63.6 million (Consumer Lifestyles US 17).
Within the U.S. market, Mexican cuisine is the most popular ethnic food, and has been for the past decade, accounting for just under half of all ethnic food sales. However, Kosher products are expected to grow at a faster rate in the future and become the largest ethnic food segment in the U.S. The 2009 market value of Mexican cuisine in the U.S. was US$20.7 million (Gooch et al. 29).
Canadian consumers of Caribbean origin have seen substantial growth in the past, increasing 11% from 1996-2001, to reach roughly 0.5 million in 2006. This population represents a heterogeneous group with origins possibly coming from 27 Caribbean countries and territories, and is expected to continue to increase in the future. Within Canada these consumers largely reside in Ontario (67% of the population) and Québec (23%), and represent approximately 6% of Toronto's total population and 3% of Montreal's. Caribbean culture continues to grow in presence and awareness among Canadians along with Caribbean cuisine, presenting increasing opportunities for this market (Gooch et al. 28, 30).
Similarly to other minority groups in the U.S., the Black (not Hispanic or Latino) population has experienced growth and is expected to continue to expand in the future. From 2004 to 2009 the U.S. Black population increased 4% to reach 37.5 million in 2009, which is expected to grow another 7.5% by 2020 to total 40.7 million (Euromonitor International, Consumer Lifestyles US 17). The growing presence of this consumer group should lead to increasing market opportunities and demand for traditional Caribbean food products and cuisine, not only among these consumers but other consumer groups in the U.S. who are increasingly exposed to Caribbean culture and cuisine.
Foods Produced in Compliance with Religious Dietary Law
With regard to business opportunities, foods produced to target restricted ethnic diets are seen as less risky, according to the VCMC. Two key, growing markets within this category are Halal and Kosher foods. The VCMC and Ipsos Forward estimate that the Halal meat market in Canada in 2010 was worth over $338 million, while the Kosher food market was estimated to have a retail value of $575 million in 2008. Canada's Kosher market is not only supported by Jewish consumers, but also Muslim and other consumers looking for specific dietary needs or preferences (Gooch et al. 19).
The growing Muslim and Jewish populations are fuelling growth for Halal and Kosher food products. However, these products are also gaining popularity among a variety of consumers for a range of different reasons, such as increasing health consciousness fuelling the popularity of Halal and Kosher foods among consumers not affiliated with either of these religions. Due to strict slaughtering and processing standards for meat and other food products, Halal and Kosher foods can also appeal to consumer concerns and perceptions for: humane animal treatment, vegetarian and lactose or gluten-free products, or the desire for products seen as healthier and safer (AAFC Retail Grocery Market 17).
Halal products are those that are "lawful" or "permitted" (Halal) according to Islamic laws. This excludes certain products and by-products that are unlawful/prohibited (Haram), such as swine/pork, those that have gone through improper slaughtering processes or been contaminated from Haram products/ingredients. The market for these food products has already seen notable growth and is expected to further grow in demand (Gooch et al. 23-24).
The North American Halal food market is growing at a rapid rate, with estimates from NuWorld Dynamics Consulting that the global market is $580 billion, and that global Halal trade is roughly worth $80 billion, or 5% of total agri-food product trade. It has been estimated that in the future, Halal trade might grow to account for 20% of the world's food trade. The North American market is currently estimated to be approximately $12 billion (Hogan "Halal 101"). A VCMC study on the Halal meat industry in North America, estimated that the Halal fresh meat market in 2010 was between $370-520 million (Gooch et al. 24).
With a notable and expanding Muslim population, Canada's Halal market is currently estimated at $1 billion (Hogan "Halal 101"). Growing at roughly a 13% annual growth rate, Canada's Muslim population is projected to represent 7% of Canada's total population by 2031. According to the VCMC, the majority of the Muslim population in Canada resides in Ontario (61%), followed by Quebec (19%), and British Columbia (10%). With regards to cities, the majority of Muslims live in Toronto (47%), Mississauga (12%) and Ottawa (9%): all located within Ontario. The Canadian Muslim population also represents an opportunistic consumer group whose characteristics include being well educated, larger households (4.4 people per household, as opposed to 2.5 per household on average), and commonly include meat as a part of their diet, spending more money on meat than the average consumer (Gooch et al. 19-20).
A number of large Halal brands are present in the Canadian market, including Al Safa, Maple Lodge – Zabiha Halal, Crescent Premium Foods Inc., Madina, and Spring Lamb/Opal Valley. These brands produce a variety of fresh and frozen, value-added processed, and deli/wiener products, with a range of options that include chicken, lamb, beef, turkey and vegetarian products, and several pizza products (25).
According to the VCMC, outside of Canada, export opportunities are available for a variety of products that cater to Muslim consumers. The majority of Islamic countries are also net food importers with significant young and growing populations, strong economic growth and rising incomes. These factors are particularly increasing demand for a wide range of Halal certified products in the Middle East, which already has a Muslim population of 475 million and imports over 80% of food requirements. It is estimated that the worldwide Muslim population may reach 2.2 billion by 2030; 35% of the world's population (Hogan "Halal 101").
Within the U.S., there is the Islamic Food and Nutrition Council of America (IFANCA), which is a not-for-profit Islamic organization dedicated to supervising and certifying the production of Halal food products. Similarly to Canada, the growing Muslim and Jewish consumer populations in the U.S. are fuelling opportunities for Canadian Halal and Kosher food manufacturers who are looking to enter the market. With a Muslim population of over eight million, the U.S. can offer a growing and lucrative market to exporters ("Halal 101").
According to the VCMC, Kosher products are foods that are prepared according to compliance with Jewish dietary regulations. Regulations relate to meat, fish and dairy products that are permissible, as well as certain mammals, while shellfish are prohibited, and strict laws apply to the slaughtering of animals and preparation of meat (Gooch et al. 26).
Kosher products in the marketplace continue to rise along with demand, and with an increasing number of companies looking for Kosher certification, the demand for Kosher ingredients for these products is also rising. According to the Kashruth Council of Canada, Canada's largest Kosher certification agency, over 45,000 products carry its certification symbol "COR" surrounded by a circle. The VCMC estimates that sales of Kosher foods in Canada are more than $500 million. Internationally, the Orthodox Union (OU) is the world's largest and most widely recognized Kosher certification agency, whose certification symbol can be found on almost a million products, located in 80 countries around the world. With cutting edge technology, the OU offers networking and marketing resources, which can aid companies in enhancing their market share, particularly when exporting to the U.S. (Hogan, "Kosher 101").
An evolving consumer base is also helping to grow the Kosher food market in North America, which is an opportunity market for exporters, currently consisting of nearly 15 million active Kosher consumers. The North American Kosher food market has experienced growth of 15% year-over-year, in the past 10 years. Roughly $200 billion in Kosher certified food products are sold in North American annually (Hogan "Kosher 101"). An increasingly broad range of non-Jewish consumers are also purchasing Kosher products for a variety of reasons, with estimates that only 15% of Kosher consumers are Jewish. One example is consumers with religions that have similar or overlapping dietary restrictions, such as Muslims, Hindus and Seventh-day Adventists. Consumers who find it difficult to locate products that match their exact religious dietary needs may substitute with close Kosher food alternatives.
Consumers with food-allergen specific needs, such as shellfish allergies, are also increasingly finding benefits in Kosher food products, due to the fact that shellfish is not Kosher and thus Kosher products do not contain shellfish. However, Kosher foods also have labelling for products that are meat- and dairy-free, labelled 'pareve', as well as for products without gluten ("Kosher for Passover" foods), as wheat and other grains are restricted during Passover (Gooch et al. 27). Thus, U.S. Kosher food industry benefits not only from a Jewish consumer base of roughly 6.15 million, but also vegetarians, vegans, those looking for healthier and safer food products, and consumers with dietary restrictions or intolerances. It is these non-Jewish consumer groups that represent the fastest growing market for Kosher products.
According to the VCMC, a study by Mintel further supports this trend, as the top reason for U.S. consumers to purchase Kosher foods was quality (62% of consumers), followed by healthfulness (51%), and food safety (34%). In fact, only 14% of consumers purchased Kosher food products because they adhered to Jewish dietary laws, and 10% purchased these products because they followed similar dietary rules to their own religion (Gooch et al. 27). An estimate from Mintel puts the U.S. Kosher food market at US$12.5 billion in 2008, which represented at notable 64% increase over the market size from five years earlier. Mintel also estimates that the market will grow to US$13 billion by 2013 (Sampson).
However, the Kosher food market has yet to become mainstream, and remains a niche category. Limited supply of Halal and Kosher products in retail outlets also provides notable opportunity for ingredient suppliers and manufacturers of Halal and Kosher products to enter the U.S. market. Within North America, Kosher products are becoming increasingly available, and currently represent more than one-third of all products offered in supermarkets, and more than one million certified Kosher products are currently available to consumers (AAFC Retail Grocery Market 17, Hogan "Kosher 101"). Kosher products appear to be a lucrative market opportunity, particularly as Kosher consumers spend significantly more (almost 50%) than average consumers (Gooch et al. 27).
Gourmet and Artisan Foods
Evolutions of a more sophisticated consumer are leading to continued growth in demand for gourmet and artisanal foods as consumers become more affluent, interested and informed about what they're eating. These trends combine to result in growing demand for unique and new eating experiences, as well as exotic or genuine flavours.
While gourmet and artisan foods can be difficult to define, they are often produced on a small scale, according to a specific process, or infrequently, with limited distribution channels, and the perceived quality of the product is often tied to the impression or reputation of the manufacturer. Products often also involve exotic flavour combinations, and include cheese, cooked and cured meats, chocolate and confections, dried fruits and nuts, oil and vinegar, spreads, etc. (Gooch et al. 32).
Foods Produced According to Special Dietary Needs
The Canadian Food Inspection Agency (CFIA) defines special dietary food as "a food that has been specially processed or formulated to meet the particular requirements of a person in whom a physical or physiological condition exists as a result of a disease, disorder or injury; or for whom a particular effect, including but not limited to weight loss, is to be obtained by a controlled intake of foods" (Gooch et al. 30).
The VCMC divides specialty diet foods into two categories which each cater to different consumer groups based on their needs/desires: "free from" and "low in" products. "Free from" foods can include gluten-, peanut-, wheat-, dairy- and soya-free products: as in not containing these ingredients and catering to consumers with intolerances. On the other hand, "low in" products cater to consumers looking for health benefits as these products contain reduced amounts of fat, sugar, salt, etc. These products are also called "Better-For-You" (BFY) and are often positioned as premium products that also maintain taste and texture despite being "healthier". Within BFY products, low-in-sodium and low-in-fat are thought to be the highest performers, particularly low-in-sodium soups and low-in-fat snacks. With many individuals consuming higher than recommended levels of sodium, fat and sugar, and increasing obesity levels and growing health consciousness, the BFY segment appears ready for more market opportunities and growth in the future (31-32).
Growing food allergies and increased awareness of special dietary needs have led to an increasing presence of food intolerance products on store shelves. According to Euromonitor International, the food intolerance market in North America was worth US$3.6 billion in 2010, or $167.6 million in the Canadian market and US$3.4 billion in the U.S. market. Within Canada, food intolerance products grew by 4% value in 2010, while the U.S. market saw sales grow at half the Canadian rate (2%) (Food Intolerance Canada and US 1). According to the VCMC, Health Canada has estimated that food allergies affect as high as 6% of young children and 3-4% of adults (Gooch et al. 22). It is believed that "free from" foods could possibly capture at least a 5% share of Canada's overall food market (31).
Within Canada, steps have also been taken to further support and regulate the food intolerance market, with enhanced labelling requirements for allergens, including gluten sources and added sulphites, coming into effect in February of 2011. Further information on these labelling requirements can be found on Health Canada's website, as well as the Consumer Report: Proposed Regulatory Changes to Food Allergen Labelling in Canada, on the Agri-Food Trade Service website.
Two of the prominent consumer issues fuelling the food intolerance market are celiac disease and lactose intolerance. According to the VCMC, celiac disease is "an autoimmune disorder, where an individual's intestinal lining can be damaged by a substance called gluten…a protein that can be found in rye, wheat, and barley". The only treatment for this disease is to follow a gluten-free diet (Gooch et al. 22-23).
The increasing presence of gluten-free products and marketing is easily visible in the marketplace, with 'no gluten' marked products tripling in number from 2005-2008 and strong growth occurring in the North American market. Within Canada, gluten-free foods experienced notable retail value growth of 10% and a market that totalled $27 million in 2010. In the U.S., gluten-free food sales grew at a slightly lower rate of 8% in 2010, totalling US$1.2 billion (Euromonitor International, Food Intolerance Canada and US 1).
Within Canada, gluten-free foods are believed to be the market leader in the "free from" category. The Canadian Celiac Association estimates that one in 133 Canadians is affected by the disease. However, it is not only celiac disease sufferers who are purchasing gluten-free products, but also a growing number of consumers who claim they feel better when on a gluten-free diet (Gooch et al. 22-23).
According to the VCMC people that are lactose intolerant "lack the enzyme lactase, which is required to digest lactose into simple sugars". Similarly to celiac disease the seriousness of intolerance varies according to each individual, however, certain consumer groups are affected more commonly by lactose intolerance than others. According to the VCMC, Bhatnagar and Aggarwal state that lactose intolerance is particularly prevalent among those of Asian and American Indian ethnicity; where nearly 100% of people in these consumer groups are affected by lactose intolerance. Approximately 50-80% of people from Hispanic, South Indian, Black, and Ashkenazi Jewish ethnic origin are also lactose intolerant. However, this prevalence is much lower in those of European origin, where only 25% of people are affected by lactose intolerance (Gooch et al. 23).
Consumer Health Trends Impacting the Specialty Food Industry
Organic food appears to remain a significant consumer trend, being fuelled by growing social awareness, fair trade and health concerns. Organic products can now be found widely available at grocery stores and supermarkets, with the majority of purchases of organic products occurring in supermarket chains. Consumers are particularly interested in organic bakery products, sweet and savoury snacks, ready-to-eat meals, milk, and frozen processes foods. While organic beverages have not been as popular as organic food products in the past, they are expected to continue to rise in demand among consumers. With organic products facing increased competition from other health and wellness products, prices have decreased which has helped the organic consumer market evolve to include not only higher income consumers, but also lower income consumers (Gooch et al. 20-21).
Over the past five years, the organic retail sector in North America has grown dramatically, expanding by 56%. According to Packaged Facts, organic food and beverage sales in the U.S. in 2010 grew more quickly than conventional grocery sales and experienced retail sales of US$23.2 billion. Organic packaged food saw notable growth of 3% in 2010 to reach US$11.2 billion, while organic baby food is the fastest growing organic food category (AAFC Retail Grocery Market 12).
Within Canada, certified organic farms account for roughly 1.7% of all farms, with more than 1,200 certified organic food processors and handlers. Canada's Organic Standards are updated by the Committee on Organic Agriculture and maintained by the Canadian General Standards Board. The Canadian Food Inspection Agency (CFIA) regulates organic products by giving accreditation to certification bodies which then certify products as organic, and there are currently 21 certification bodies in Canada and 43 located outside of Canada covering over 70 countries. In order to display the organic logo, which is voluntary, products must be made with 95% or more organic ingredients. Canada's equivalency agreement for organic regulation with the U.S. is a great benefit to Canadian producers looking to export their products to this market (Hogan "Organics").
Demand for natural food and beverages has also been growing, with Packaged Facts estimating that the U.S. market in 2010 grew at a faster rate (10%) than organics and totalled US$15.4 billion (AAFC Retail Grocery Market 12). Vegetarianism is yet another trend impacting the specialty food category, and can fit into different specialty food sub-sectors depending on the purpose for a vegetarian diet. This can be for religious purposes, such as in Hinduism, or for many vegetarian consumers in North America other reasons such as health, animal welfare, or family beliefs. Increasing availability of meat-free products has further supported growth of the vegetarian consumer population (Gooch et al. 21).
Within the U.S., the majority of specialty food consumers purchase their groceries at supermarkets. Mintel estimates that retail channels account for 80% of specialty food sales in the U.S., with foodservice accounting for the remaining 20% (Gooch et al. 15). However, despite growth in the specialty food industry, it isn't supermarkets that are seeing the benefit of this growth. In fact, supermarket share of the industry is actually shrinking, and it is specialty and natural food stores that are driving sales growth in the market. This trend may also benefit small producers and exporters, as these store formats may provide easier market entry than trying to supply to large supermarkets (Hogan, "Specialty Food").
Research from the VCMC also supports this trend, stating that natural food stores and farmer's markets are becoming increasingly popular retail formats among consumers, and it is the younger population segment and consumers with higher incomes, who are the most likely to visit these different types of retail outlets. However, there is also the impact of cost-conscious consumers who are altering shopping habits and increasingly moving away from supermarkets towards more value-oriented stores such as supercentres and warehouse clubs. This focus on value-oriented products, as opposed to product selection, may pose a challenge to the industry (Gooch et al. 15).
With regard to organic food in the U.S., the majority of sales (72%) still occur through supermarkets and hypermarkets, with Wal-Mart and Whole Foods being the two largest retailers of organic food products in 2010 (AAFC Retail Grocery Market 12).
With regard to foods that comply with religious dietary laws, while Halal verification can vary between traditional and ethnic retailers, the presence of Halal meat and other products has been growing in the retail market. Fresh Halal meat is now available in over 8,000 outlets within Canada. Of Halal outlets, roughly 6,700 are mainstream retail stores, while 700 are ethnic (Halal) stores, and approximately 960 are Halal restaurants or take-away (Gooch et al. 24).
Opportunities for Canadian Exporters
Overall market opportunities for specialty food are expected to increase, many being driven by long-term trends that could result in sustainable markets for the Canadian specialty food industry (42). As mentioned previously, some major consumer trends are driving this growth in the specialty food industry, including: an ageing population and increasing health consciousness, issues and intolerances; increasingly ethnically diverse populations; and growing consumer awareness of different cuisines and interest in new food experiences.
Within the Canadian market, products catering to specialty diets, such as lactose- and gluten-free, are thought to particularly offer opportunities. Buckwheat and pulses may also present opportunities for new specialty food products, and can target consumers looking for alternatives to products that contain gluten. Within the U.S. market, increasing consumption of specialty foods is expected to lead to opportunities for menu differentiation as well as foods that are local, sustainable and eco-conscious (Hogan, "Specialty Food"). Outlined below are further market opportunities for specialty food ingredients and products .
Opportunities for Canadian Exporters
The greatest market opportunities for buckwheat within specialty food are believed to be in claims of "healthier" foods, sustainability, "natural" foods, and local food.
Canadian Positioning and Reasoning
- Consumers are increasingly health conscious and experiencing chronic health problems. Growing interest for different culinary experiences is also expected to drive these opportunities.
- Agriculture and Agri-Food Canada (AAFC) has focused buckwheat research on improving crop functionality, and on adding value in the food sector. A well-established crop on the eastern prairies of Canada for decades, it is largely exported with nearly $1.2 million in exports in 2010.
Claims of "healthier foods", sustainability, local, "natural" and organic are expected to provide the greatest specialty food opportunities, as well as foods targeted toward specific health conditions.
Canadian Positioning and Reasoning
- Increasing health consciousness, supported by an ageing population, along with increasing concern for chronic diseases are providing market opportunities in the pulses sub-sector.
- Canada is one of the largest pulse exporters, with roughly 75% of production being exported to more than 150 markets. Canada is the top producer in the world of dry peas, second for lentils, and in the top ten for chickpeas and dry beans.
Canada's domestic market is expected to provide notable market opportunities. Herring roe is believed to be particularly opportunistic, especially within the Japanese market.
Canadian Positioning and Reasoning
- An ageing population as well as increasing concern and interest in healthy eating, are two large consumer trends fuelling opportunities for seafood.
- Young consumers may also help to fuel growing interest in roe, particularly those of Japanese origin.
- Canada's seafood industry is already involved in health-food, producing a variety of dietary supplements that are made with omega-3 concentrates.
- Canadian fish and seafood products are also known internationally for their variety, quality and value, with the industry committed to careful stewardship of the ocean and freshwater environments.
Within the domestic market, Ontario is expected to provide the greatest market opportunities, as well as products associated with health claims.
Canadian Positioning and Reasoning
- The growing Muslim population is expanding opportunities for goat products. In Canada, the Muslim population is particularly concentrated within Ontario.
- Overall increasing diversity among consumers, as well as chefs promoting local products are expected to further grow demand.
- Canada's red meat industry had shipments worth $24.2 billion in 2010, making it the largest food manufacturing industry.
Lamb is a product traditionally consumed in many Muslim countries, and with the expected growth in the Muslim population, demand for lamb is also expected to grow.
The domestic market presents notable market opportunities due to new immigrants to the country and Canadians with middle-higher incomes. Ontario is thought to be particularly opportunistic.
Canadian Positioning and Reasoning
- Canada's domestic sheep industry is currently not able to satisfy the demand for lamb products, resulting in a missed market opportunity. However, lamb consumption has been rising over the past decade, providing opportunities for industry members that can boost production, as lamb imports into Canada have been increasing.
- In 2011, there were more than 800,000 sheep and lambs on roughly 12,000 farms, with 73% production located in Ontario, Québec and Alberta. Farm cash receipts in 2010 were $142 million.
- Demand for lamb is expected to increase among Canadians due to more immigration from Middle Eastern and European countries as well as increased exposure to lamb for Canadians when travelling abroad. Similar assumptions can likely also be made for the U.S. market.
Source: Gooch et al. 42, AAFC
Trade shows can also present unique marketing opportunities and the generation of qualified trade leads, particularly those geared toward the specialty food industry. NASFT's Fancy Food Shows can provide opportunities for entering the U.S. market, with both a Winter and Summer Fancy Food Show being held annually in the U.S., and attracting international exhibitors and buyers. Below are some opportunities for further developing and leveraging products as "specialty foods" and achieving the premium prices and quality perceptions associated with these products in the market place. More information on trade events in the U.S. can be found on the Agri-Food Trade Service website of AAFC. The Agri-Food Trade Service blog also provides greater detail on AAFC's Canada Pavilion presence at the Summer Fancy Food Show 2011.
Certifications that can be used to Identify Foods as "Specialty"
- Organic (Ecocert)
- Gluten-free (based on CFIA standard)
- Hazard Analysis Critical Control Point (HACCP)
- Good Manufacturing Practices (GMP)
- Gluten-free (based on CFIA standard)
- Marine Stewardship Council (MSC)
- 100% Sulphite-free
- Omega 3-value added program
- Best Aquatic Practices (BAP)
- Lactose-free goat milk
- Informal declarations on drug and antibiotic-free
- European Certification (CFI)
- Branding: pasture fed and the Ontario Lamb Logo
Specialty Food Products by Sub-Sector
- Whole buckwheat
- Buckwheat flours
- Cleaned buckwheat ingredient in bulk
- Zero trans-fats
- Cranberry beans
- White beans
- Kidney beans · Split peas
- Pea Fibre
- Gluten-free bread, buns, waffles, cookies, mixes, pizza crusts, bagels
- Zero trans-fats
- Pre-cooked cereals
- Toasted soy ingredients and spread
- Value added mussels
- Marinated herring in jars
- Shrimp & salmon pizza
- Seafood shell
- Sea urchin
- Roe and Lobster pieces
- Herring roe
- Sea cucumber
- Hot smoked black cod
- Hot smoked salmon
- Salmon & steelhead fillets
- Salmon portions
- Bucks for breeding and live animals to consumers
- Lactose-free milk
- Regular and Halal goat meat
- Regular, Halal and Kosher lamb and pasture fed (for added Omega 3)
Source: Gooch et al. 40-41
With regards to Kosher certification, Phyllis Koegel, Marketing Director of the OU, has highlighted the added value that Kosher certification can bring, and that a surge in consumers' "Kosher consciousness" has contributed to the ever-growing Kosher industry. Having proper Kosher certification can thus give a company a competitive edge in the marketplace. According to Koegel, the cost of Kosher certification is minimal when compared to the return on investment it can bring, and many companies who have undergone the certification process have reported an increase in sales: some as high as 65% (Hogan "Kosher 101").
According to Richard Rabkin, Director of Marketing and Business Development for the Kashruth Council of Canada, the Kosher certification process consists of five key steps, as outlined below ("Kosher 101"):
According to Haider Khattak, Director of IFANCA, and Ashraf Ahmad, President of NuWorld Dynamics Consulting, the following factors are important in achieving success in the Halal food market:
- Be aware of sensitivities involved in establishing credibility and in marketing Halal products.
- Establish trust and share your commitment to diversity.
- Word of mouth is still a key component for advertising and sponsorship.
- Multilingual promotion is important.
- Halal certification from a credible organization is essential.
Certifying products as Halal can be key in alleviating doubt with consumers of the legitimacy of Halal food products, giving them peace of mind in knowing that a Halal product meets all requirements, and can also save consumers time in reading food labels. The below chart, outlined by Khattack, explains the Halal food approval process (Hogan "Halal 101").
International Access Issues and Competition
Challenges facing Canadian companies in exporting specialty food products can include the U.S. exchange rate, competition from lower cost countries, such as those with cheaper labour, government subsidies and regulations that are less strict. For example, Canada's specialty seafood industry is largely export driven; however, the industry is also facing competition from low cost competitors such as China and Chile, while Alaska and Russia are also notable competitors in the herring roe market.
Canadian companies can also benefit from the Canada Brand program: an AAFC branding initiative designed to leverage Canada's international image to increase the sales of Canadian food and agricultural products and services. Qualified exporters can take advantage of free branding tools and market research. International perceptions of the quality and safety of Canada's food products as well as the vast natural environment of Canada can particularly align well to support similar attributes of specialty food products.
Canadian exporters are also encouraged to register with the Virtual Trade Commissioner Service to gain easy access to Canada's embassies and posts abroad, who can aid companies in better understanding international market opportunities and challenges, and finding qualified leads in a particular market. Canadian exporters are also encouraged to use the services of Export Development Canada and Foreign Affairs and International Trade Canada (DFAIT): both of which offer trade information, and financial and risk management services to Canadian exporters.
United States Market
The U.S. remains a destination of constant trade and investment interest for foreign investors, and holds strong potential for Canadian companies wanting to enter the export market. To facilitate successful market entry, Canadian exporters are encouraged to develop market entry strategies that include working with local brokers, importers and distributors to develop a presence, gain valuable market advice, and position products to meet local tastes, laws and pricing.
Canadian exporters should contact the Canadian Consulate General offices in the different regions of the U.S. to obtain market information, identify new markets, find qualified trade contacts, and obtain assistance in successfully exporting abroad. Detailed information on customs procedures, documentation, tariffs and labelling requirements can also be found on the Canadian Trade Commissioner Service of DFAIT.
The Canadian Trade Commissioner Service can help companies succeed in global markets and lower the costs of doing business. Their four key services aid companies in preparing for international markets, assessing market potential, finding qualified contacts, and resolving problems.
The Trade Commissioner Service currently has trade offices in 22 U.S. cities, where Canadian companies can find a variety of services that meet their specific export needs, including: assessing market potential, finding qualified contacts, resolving business problems and arranging meetings.
Due to the varying nature and definition of specialty food products, and generally being in a premium priced category, it is recommended that Canadian companies contact the AAFC regional office closest to them; offices are located throughout Canada. These officers can then work closely with Canadian companies to better prepare for and understand their export process and target markets.
While definitions of specialty food products and market size estimates may vary, it is apparent that the market for specialty food products continues to grow and will likely remain in demand for the future. A variety of consumer trends and health issues, combined with strong growth in various demographic populations, are providing a wide range of opportunities in the specialty food market both domestically and in the U.S. With such a far reaching category, a variety of specialty foods may see increased demand in the future, from ethnic foods to organic and health-related products, to foods produced according to specific dietary guidelines or religious dietary laws. An interesting aspect of this industry is the overarching trends impacting its growth, such as the presence of organic products in this category, as well as the trend toward healthier products which is also driving demand for other types of specialty foods and beverages. The evolution of these encompassing trends will likely have a significant impact on the development of this market over time.
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