The Canadian Seasoning and Dressing Manufacturing Industry
The Canadian seasoning and dressing manufacturing industry, North American Industry Classification System (NAICS) 31194, consists of establishments that are primarily engaged in the manufacture of dressings and seasonings, including salad dressings and mixes, prepared mustards, mayonnaise, dips (except cheese and sour cream-based), food colourings, malt extract, syrups, flavouring extracts (except meat and coffee), dry gravy mixes, sandwich spreads (except salad dressing-based), soy sauce, vinegar, Worcestershire sauce, and table salt and spice grinding.
Not included in this industry are ketchup and other tomato-based sauces, canning gravy, bouillon and salad dressing mixes made by dehydrating ingredients.
Statistics Canada data for the seasoning and dressing manufacturing industry (NAICS 31194) have been included for reference purposes at the end of this profile.
Consumer willingness to experiment with new flavours and widespread interest in new ethnic tastes has generated a proliferation in product offerings and a growth in the sales of seasonings and dressings. Industry success can be attributed to its response to consumer demand for healthier products, convenience and flavour variety.
The Canadian seasoning and dressing manufacturing industry has evolved over the past twenty-five years in response to changing consumer demand for new and different products and to the evolution of a more open trading environment. Today, the industry continues to adapt to consumer preferences for variety, convenience, wellness attributes, food safety and value, and increasing demands from retail and foodservice distribution customers and the pressures of global competition. The industry has also kept abreast of changing government labelling regulations and guidelines to reduce or recycle packaging waste. As well, there has been a shift from the use of glass to polyethylene terephthalate (PET) plastic containers.
The Canada U.S. Free Trade Agreement (FTA) of 1989 and the North American Free Trade Agreement (NAFTA) of 1994 contributed to a period of significant restructuring into fewer plants to improve competitiveness, and the marketing of an expanded range of products to meet an ever-widening demand. Under the influence of globalization, the industry has changed from serving a protected, domestic-oriented market to one that is more open and competitive. Today, the industry is characterized by both large multinational (MNEs) and small to medium-sized companies (SMEs).
Canadian-based production operations continue to serve primarily the domestic market. Statistics Canada data show that between 2000 and 2010, the share of the domestic market held by imports remained stable, while during the same period the share of Canadian shipments that were exported grew from 26.2% to 27.0%. Ten years later, both exports and imports have increased substantially, but domestic production still holds 62.3% of the domestic market.
The seasoning and dressing manufacturing industry is small, representing 1.3% of the total value of sales of goods manufactured in the food and beverage manufacturing industry, 3.9% of employment in the sector, and 1.8% of the total number of food and beverage plants in 2010.
Despite the industry's small size, salad dressings, condiments, spices and sauces of various kinds are consumed daily by Canadian consumers.
In 2010, 161 establishmentsFootnote 1 (plants) across Canada employed 3,370 people and shipped $1,056.8 million worth of product of which $285.8 million was exported in 2010. The Canadian market absorbed the remaining $771.0 million plus $466.0 million in imported product. This industry continues to be a net importer. See Figure 1 and the statistical page at the end of this profile.
Figure 1: Seasoning and Dressing Manufacturing Industry Imports, Exports and Sales of Goods Manufactured, 2010
Many SMEs have rationalized their operations to remain competitive. These strategies involved the development of specialty products for market niches. In some cases, SMEs now co-pack brand name products for MNEs or produce private-label products.
Statistics Canada dataFootnote 2 indicate that in 2010 the majority of seasoning and dressing manufacturing took place in Ontario (61 establishments) and Quebec (47 establishments), with the remaining facilities located in British Columbia (28 establishments), Alberta (11 establishments), Nova Scotia (5 establishments), Manitoba (2 establishments), Saskatchewan (3 establishments), New Brunswick (2 establishments), and Newfoundland (2 establishments). Companies range in size from large diversified multinationals employing hundreds of people to small and medium-sized Canadian-owned firms located across the country serving regional markets.
Products are sold through retail stores and mass merchandise chains. Competition is based on brand name, advertising and promotion, product quality and cost. Shelf image is an important consideration and market promotion plays a significant role, especially among the larger firms. Products are also sold to other food manufacturers and to the foodservice industry. Seasoning and spice manufacturers have benefited from the success and growth of other food and beverage industries which use their products.
Seasoning and spice manufacturers develop and provide products for consumers for use in home meal preparation, as well as flavourings and industrial formulations for other food and beverage manufacturers (i.e., savoury snack foods, seasoned meat products, frozen food preparations, etc.).
From 2000 to 2010, the value of sales of goods manufactured for the seasoning and dressing manufacturing industry increased 41.4% from $747.3 million to $1,056.8 million. See Figure 2.
Value-added is a measure of the value of an establishment's outputs minus the cost of inputs. According to Statistics Canada, the definition of a value-added industry is an industry that adds value to its inputs (such as food ingredients, packaging, utility costs, etc.). Primarily this includes the value of the labour component plus profits. Value-added for this industry fluctuated between 2000 and 2010, from a low of $331.1 million in 2000 to a peak of $460.5 million in 2005, and was valued at $376.7 million in 2010. The proportion of value-added to sales of goods manufactured for the seasoning and dressing manufacturing industry was 35.6% in 2010. This figure is lower than the Canadian food and beverage manufacturing industry as a whole for which the proportion of value-added to the total value of sales of goods manufactured in 2010 was 36.0%.
Consumer trends have affected growth patterns of industry products differently. In the salad dressing category, new product offerings such as ethnically-influenced multi-purpose dressings, which double as marinades, have satisfied consumer demand for flavour and convenience. In the 1990s, salad dressings were a mature product category, but, more recently, a multitude of new flavour blends have revived sales in the category including those of more traditional flavours and brands as well.
Current consumer interest in healthier foods like salads, including the introduction of salads onto fast food industry menus has driven foodservice demand for salad dressings. At retail, the innovation of packaged salads has driven salad dressing demand and has also fostered the success of new salad dressings (for example "low carb" products).
Current interest in eating healthy foods like salads, including the introduction of salads onto fast food industry menus has driven food service demand for salad dressings. At retail, the comparatively recent innovation of packaged salads is driving salad dressing demand and has also fostered the success of new salad dressings (for example "low carb" products).
The trend toward fusion cuisine, which occurs when ingredients and techniques from one culture are merged with those of another, has been a factor in the increased use of spices and seasonings in home-prepared meals.
A widespread interest in ethnic flavours has influenced sales of Mexican seasonings and salsas as well as Southeast Asian dips, garnishes and marinades. However, familiar products such as mayonnaise and prepared mustard are still popular. Continued strong interest in these traditional products could be a direct result of the baby boomer influence in the marketplace.
Not only are spices used as a flavour enhancer, but they have also long been known to have antimicrobial effectiveness because of phenolic and other properties which are present. Garlic, clove, sage, oregano and others, for example, have been found to be effective in controlling certain strains of E. coli in meat, while other spices such as cinnamon can inhibit E. coli growth in juices. The phenolic compounds in some spices can also function as antioxidants in products such as beverages and meats. Seasonings also hold functional properties such as thickening, emulsifying, preserving, tenderizing and colouring foods or beverages.
Opportunities also exist in health conscious or special health-related diets in which spices can be used to replace salt (i.e., in snack and other foods).
The spice industry also offers extractives of spices in which the essences are concentrated from the raw products and these are available in various forms (such as essential oils, oleoresins, etc.) to meet specific flavouring needs.
The versatility of products such as soya sauce, which can be used in combination with other flavours to vary the ethnic profile of a food, makes them desirable to consumers. Combinations of chili, brown sugar and sesame added to soya sauce bring about a Korean flavour, while the addition of coconut and ground peanuts to chili creates an Indonesian flavour.
From 2005 to 2010, employment in the seasoning and dressing manufacturing industry increased 13.3% from 2,975 people to 3,370 people.
During this period, although employment increased, output per production worker remained stable.
Data from Statistics Canada on investment in the seasoning and dressing manufacturing industry is not available. This industry is very capital intensive and highly automated. It appears that the industry has been successful in attracting new investment needed to supply the new production capacity needed to generate the growth in output that has occurred.
Profitability is affected by the prices firms have to pay for inputs to production. For the seasoning and dressing manufacturing industry, increased prices for oil as well as other ingredients have impacted upon profitability. The higher value of the Canadian dollar has helped to decrease the cost of imported ingredients used in seasoning and dressing products. However, increased transportation and energy costs have also been a factor in profitability. The value-added per production worker provides some indication of profitability. For the seasoning and dressing manufacturing industry, the value-added per production worker peaked in 2006 at $241,400, but has since declined to a value of $173,995 in 2010. Profitability for this industry has decreased, especially since 2006 (Figure 3).
The Canadian seasoning and dressing manufacturing industry serves mostly the Canadian market.
Between 2001 and 2011, Canadian exports of seasonings and dressings increased 29.5% from a value of $236.6 million to $306.5 million. The value of exports peaked in 2008 at $335.0 million, but exports have since declined. See Figure 4.
Canada's main export destination for seasoning and dressing products has been the U.S. with 2011 exports to that market valued at $255.1 million, representing 83.2% of total seasoning and dressing product exports.
The volume of exports of high value-added products such as pectic substances, pectinates and pectates, food preparations nes (not elsewhere stated), and sauces and preparations and mixed condiments and mixed seasonings increased between 2001 and 2011 by 88.2%, 67.0%, and 5.1%, respectivelyFootnote 4.
Other high value-added products such as vinegar and substitutes for vinegar obtained from acetic acid, mustard flour and meal and prepared mustard, and soya sauce saw their volume of exports decline between 2001 and 2011 by 86.4%, 33.3% and 9.3%, respectivelyFootnote 5.
In the spice category, Canada exported 4.6 million kilograms of coriander seeds and 1.4 million kilograms of spices (not elsewhere stated) in 2011Footnote 6.
From 2001 to 2011, imports of seasoning and dressing products increased 39.1% from a value of $348.3 million to $484.6 million. Canada's largest supplier of imported seasoning and dressing products has been the U.S. with imports valued at $311.2 million in 2011, representing 64.2% of total seasoning and dressing product imports.
The volume of imports of high value-added products such as mayonnaise, sauces based on fish products, and malt extract all increased significantly between 2001 and 2011 by 248.2%, 183.4% and 160.1%, respectively. The volume of imports of salad dressings also increased during this period by 87.3%Footnote 7.
The volume of imports of flavouring extracts and essences and vegetable preparations for use as flavouring decreased between 2001 and 2011 by 76.0% and 48.4%, respectivelyFootnote 8.
The extent to which exports of an industry exceed its imports can be considered as a rough measure of an industry's international competitiveness. As Figure 4 below demonstrates, this industry has had a global trade deficit (imports greater than exports) during the last 10 years which was greatest in 2010 at $180.2 million. In 2011, the global trade deficit for the Canadian seasoning and dressing industry was $178.1 million. Although Canada does not have the climate to grow spices, it has lost some market share to imported value-added products in the sauces and dressings category.
This global trade deficit had been decreasing between 2000 and 2006, but has since been on the rise. The increasing trade deficit value since 2006 would suggest that the international competitiveness of this industry relative to its competition, in particular the U.S., has deteriorated. The higher value of the Canadian dollar relative to the U.S. dollar during the 2003 to 2009 period was likely an important factor in widening the gap between exports and imports. Where spices are concerned, many of these must be imported for climatic reasons and this makes it difficult to fully eliminate the global trade deficit.
Linkages To Agriculture - The Oilseed Value Chain
For products such as salad dressings or mayonnaise, vegetable oils are a critical ingredient and Canada is an important producer and exporter of vegetable oils. As a result, vegetable oils, in particular canola oil, are available to Canadian manufacturers at internationally competitive prices. Canadian oilseed producers and crushers have benefitted from the increased demand for their inputs due to the popularity of salad dressings in the North American marketplace.
Canadian oilseed production in 2010/2011 was 17.5 million tonnes, of which canola accounted for roughly 73.1% of the total, soybeans accounted for 24.6%, and flaxseed made up 2.4%.Footnote 9 Canola is grown mostly in the Prairie Provinces of western Canada (Saskatchewan, Alberta and Manitoba) as well as in Northern British Columbia, with smaller acreages also planted in Ontario.
Canadian production of canola oil in 2010/11 was 2.8 million tonnes, while production of soybean oil was 0.3 million tonnes.
Food and Drugs Act
Seasonings and dressings are regulated under the Food and Drugs Act and Regulations as food products.
Health Canada is responsible for establishing policies, regulations and standards for the safety and nutritional quality of all foods sold in Canada. The department exercises this mandate under the authority of the Food and Drugs Act and pursues its regulatory mandate under the Food and Drug Regulations.
All health and safety standards under the Food and Drug Regulations are enforced by the Canadian Food Inspection Agency (CFIA) (www.inspection.gc.ca). The CFIA is also responsible for the administration of non-health and safety regulations concerning food packaging, labelling and advertising.
The Food and Drug Regulations set out conditions regarding health, quality, and composition and labelling requirements that would apply to seasoning and dressing manufacturers just as they would to other food manufacturers so that consumers will have confidence in the safety of the products they purchase.
Consumer Packaging and Labelling Act
The Consumer Packaging and Labelling Act, also enforced by the CFIA, requires that pre-packaged foods either imported or made in Canada, must not bear any false or misleading information regarding its origin, quality, performance, net weight or quantity.
Pest Control Products Act
Under the Pest Control Products Act and regulations pursuant to this Act, Health Canada determines which pesticide sprays are approved for use and how they are to be used. Firms check pesticide residue levels in their products to ensure that they are within regulation levels. Consumer awareness of pesticide residues and their impacts on human health and the environment is increasing.
With respect to environmental issues, manufacturers must meet all laws (e.g. the Canadian Environmental Protection Act, the Canadian Environmental Assessment Act, (Act and legislation of each province) and regulations.
One environmental issue that food and beverage manufacturers have faced is waste remaining from packaging after it has fulfilled its intended purpose. Reduced package weight results in a reduction in container weight and thus reduced fuel used by large trucks when hauling products to market, with the added environmental benefits of reducing the amounts of wasted materials as well as emissions of greenhouse gases and other air pollutants.
Solid waste reduction is important everywhere and particularly for large urban centres that are rapidly using their landfill capacity and are experiencing difficulty and expense in finding, developing and ultimately being able to use acceptable new landfill sites. Reduction of materials in packing cartons can potentially provide both financial and environmental benefits.
Similarly, reductions in waste go hand-in-hand with cost savings as manufacturers make increasing use of plastic rather than wooden pallets. Although more expensive to buy, plastic pallets, which can be made from recycled plastic, can be used many more times than wooden pallets which tend to become damaged fairly quickly by fork lifts and then must be handled by waste diversion programs.
Prior to plant construction, manufacturers must meet municipal zoning requirements. A proposal to build a new state-of-the-art plant or to substantially enlarge an existing facility could result in hearings to assess environmental impacts before construction may proceed. For example, wash water (effluent) from processing plants must be adequately cleaned so that it does not pollute streams and water tables with organic material that would cause unacceptable levels of biological oxygen demand (BOD). Provinces and municipalities have to be satisfied that systems will be put in place for waste water treatment. Some manufacturers take a pro-active approach by developing Abest practices@ with respect to the environment, for example by reducing their energy and water usage as well as reducing both solid and water waste.
Organic seasonings and dressings represent an emerging market that is showing potential for growth. Capitalizing on Canadian consumers' growing desire for organic foods and beverages that are environmentally friendly, some Canadian seasoning and dressing manufacturers have extended the organic food movement to products which are marketed as high-quality products produced in a way that encourages sustainable agriculture.
As producers and retailers continue to raise awareness about organic food to gain market share, the coming years may see more seasoning and dressing manufacturers tap into this niche market as the trend toward organic and green products continues to expand in Canada and abroad.
The Organic Products Regulations came into force on June 30, 2009. These regulations aim to protect consumers against false or misleading organic claims and to support the continued growth of the Canadian organic industry. Certification to the Organic Production System standards is mandatory for organic products in interprovincial and international trade and for products bearing the "Canada Organic" logo. Interprovincially and internationally-traded products represented as organic must be certified by a Canadian Food Inspection Agency (CFIA)-accredited certification body and must bear the name of the certification body.
The Organic Products Regulations allow for the following organic claims:
- Only products with organic content that is greater than or equal to 95% may be labelled as "Organic" or bear the organic logo shown below;
- Multi-ingredient products with 70-95% organic content may have the declaration: "contains x% organic ingredients." These products may not use the organic logo and/or the claim "Organic".
- Multi-ingredient products with less than 70% organic content may only contain organic claims in the product's ingredient list. These products may not use the organic logo.
The following web sites provide additional information:
- Organic Products Regulations
- CFIA accredited certification bodies
- Organic Production Standards
- Agriculture and Agri-Food Canada Organic website
Current Food Policy and Regulatory Issues
The following web links will provide information on current food policy and regulatory issues of interest to the Canadian snack food industry:
- Certification and Quality Standards
- Food Additives
- Food Allergen Labelling
- International Food Regulatory Environment
- Novel Foods
- Nutritional Labelling
- Trans Fats
Challenges and Opportunities
In a rapidly changing business climate, the seasoning and dressing manufacturing industry, along with other food manufacturers, must address a number of challenges if it is to continue to grow and prosper.
The concentration of major retail chains has continued to be a challenge for the seasoning and dressing manufacturing industry and has resulted in fierce competition for shelf space. The domestic market will likely continue to be the most important market for the foreseeable future. The Canadian market is small, but sophisticated, and extremely well served which means that competition will continue to be strong. Many companies in this industry sell their products to other food and beverage manufacturers as well as to the foodservice and hospitality industry, so as these manufacturers and foodservice companies succeed in their markets, their suppliers also benefit.
During the past decade, the growth of warehouse club stores that emphasize value, as well as the increased concentration of the distribution sector in general, have increased pressure on food manufacturers to reduce prices and focus on efficiencies. Furthermore, the introduction and increasing prevalence of private or own-label products by retailers have further pressured manufacturer margins and increased retailer leverage.
The rising value of the Canadian dollar is placing pressure on Canadian exporter competitiveness which could have an impact on future export sales and add to the potential of increased competition from imports in the future.
In a move to create product extensions and greater consumer interest, the concentration of retail and foodservice sectors will force manufacturers not only to develop new products but also to absorb the risk of failure for new product introductions which do not sell.
The oil and dressing manufacturing component of this industry is aware of public perception of biotechnology and biotechnology-derived food products. The industry may be affected if their products are negatively associated with this issue.
Like other sectors of the value-added food industry, firms in the Canadian seasoning and dressing manufacturing industry closely monitor policy and regulatory issues which influence product development and business opportunities.
Overall, there is a trend to internationalize regulations through general trade treaties, and the industry may face the challenge of working within regulations that could be harmonized, either bilaterally with the U.S. or multilaterally through the World Trade Organization (WTO) and Codex AlimentariusFootnote 10.
An increasing incidence of obesity at all age levels of the Canadian population has resulted in targeting certain food industries as contributors to this condition. Larger serving sizes, increased offerings of highly processed carbohydrate foods, and intense advertising are viewed as negatively affecting eating patterns. As consumers reassess what they eat, and look to salads and home cooked meals as a healthier solution, product developers can respond with dressings, sauces and seasonings to make meal preparation easier and more flavourful.
Supply Chain Management
Like other food and beverage manufacturers, the seasoning and dressing manufacturing industry is using GS1 Canada. GS1 Canada is a member organization of GS1, a global organization with 100 members whose goal is to develop standards and solutions to improve supply chain management.
Canada's previous electronic product registry/catalogue known as ECCnet, developed by the Electronic Council of Canada, has merged with and is now administered by GS1 Canada. The registry facilitates e-commerce by ensuring the integrity of product data using international standards of data exchange. As part of its e-commerce development, food manufacturers are developing the capability to track and trace their products throughout the food chain to specific batches at processing plants and will eventually by able to trace batches back to their origin.
Opportunities for new product introductions are taking shape in four separate segments across the North American market where this industry is concerned. Consumers are responding to products which offer health and wellness, packaging for convenience, premium quality/flavour and organic production methods.
Increased world travel and exposure to different cultures and a changing population profile, as well as an increased availability of ethnic ingredients have resulted in a shift to exotic flavour combinations. Restaurants lead the way in introducing and experimenting with ethnic cuisines which are later offered by food manufacturers who follow suit. There has been an emergence in dressings and sauces made from non-traditional ingredients, such as fruit-based flavours.
Although making goods for private label strengthens retailer control over "brand equity," it also provides opportunities for some small- and medium-sized manufacturers to distribute products without the need for expenditures to launch their own brands.
Increased awareness of health issues and concerns about health and obesity offer an opportunity for the seasoning industry to replace fat and salt with seasonings to enhance flavours of low sodium and low fat foods. As long as there are concerns about healthy eating, salads and salad dressings have promise for continued growth. Manufacturers will continue to respond with a variety of new product introductions to fill this demand. The addition of fat-soluble nutrients (such as vitamins A, D, E, and K) and herbs that carry omega-3 fatty acids could increase the interest of health-conscious consumers in these products and continue to provide new product opportunities in this sector.
The domestic market for seasoning and dressing products appears to hold great growth potential, especially if the demand for niche market products can be met. Time-starved consumers will continue to find value in the convenience and flexibility offered by products in this industry such as sauces, seasonings, dressings, marinades or pre-mixed seasoning blends. As the trend to more home-prepared meals continues, especially in a difficult economic climate, these types of products lessen the labour of meal preparation. Bagged salads are an example of a popular convenience concept which will continue to drive demand for salad dressings in the foreseeable future.
Saskatchewan Herb and Spice Association
P.O. Box 7568, Station Main
Saskatoon, Saskatchewan S7K 4L4
Tel: 306-694-4622 or
Internet Site: http://www.saskherbspice.org/
Agriculture and Agri-Food Canada Contact
Senior Market Development Officer
Sector Development and Analysis Directorate
Agriculture and Agri-Food Canada
Ottawa, Ontario K1A 0C5
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