The Canadian Snack Food Manufacturing Industry


The Canadian snack food manufacturing industry, North American Industry Classification System (NAICS) 31191, consists of establishments that are primarily engaged in the manufacture of savoury or salty snacks which include potato chips, tortilla chips, hard pretzels, popped popcorn, processed seed snacks, roasted peanuts and other nuts, and pork rinds.

Establishments that manufacture peanut butter are also included in this category.

Statistics Canada data for the snack food manufacturing industry (NAICS 31191) have been included for reference purposes at the end of this profile.

Introduction

Canadian consumers appear to like snack foods and, in fact, eat them almost every day. Snack foods have been one of the fastest growing product categories in the domestic market in recent years and are widely available in all retail channels across the country, including major chain grocery retailers, large format outlets, corner stores, drug stores, gas stations and vending machines as well as at movie theaters and sporting events.

Fat content and health aspects of snack food products do not seem to be important issues for all consumers, as by their very nature, snack foods are considered to be an indulgence. However, increased consumer interest in weight loss and healthy eating is causing the industry to rethink the production processes of existing products and to consider the development of new products that will respond to consumer interest in low calorie and low-fat snacks. For example, processed seed snacks, nuts and dried fruit and nut mixtures, as well as baked snacks offer healthier choices to some consumers and continue to capture a portion of the snack food market in Canada.

For some time-pressed consumers who lead hectic lifestyles and eat on the run, some snack foods have become an occasional convenient meal replacement or supplement. The snack food manufacturing industry has always faced competition from confectionery products such as chocolate bars and candy, but portable "hand-held" products such as snack crackers, snack cookies, granola bars and other ready-to-eat items now compete with savoury snacks for a share of the consumer's pocketbook.

The snack food manufacturing industry has introduced niche products that offer novelty flavours, shapes, or unique ingredients. Unique flavours, products made from hemp seeds, pulses (e.g., beans, peas, or lentils) and other grains, and root vegetables such as parsnips, beets, sweet potatoes and carrots, as well as organic snack food products are also recent offerings in the market. Some of these products are not captured in the Statistics Canada NAICS data for the snack food manufacturing industry category.

Increasing globalization has resulted in increased competition for this industry, despite the fact that many snacks or flavours are unique to local regions. During the late 1980s and into the 1990s, the snack food manufacturing industry underwent significant ownership change and consolidation. In an effort to compete in a domestic environment which is more open to imports, many multinational and domestic plants have been rationalized and significant equipment upgrades have occurred in order to increase efficiency and productivity. These changes have given rise to a strengthened Canadian industry that has adapted to meet today's challenges.

Industry Structure

Although the snack food manufacturing industry makes up a small portion of the total food and beverage manufacturing sector, it has exhibited almost steady growth over the past ten years. It represented 2.5% of the total value of sales of goods manufactured by the food and beverage manufacturing industry, 3.1% of total employment in the sector, and 1.1% of the total number of food and beverage manufacturing establishments (plants) in 2009.

In 2009, 103 establishmentsFootnote 1 employed 7,635 people and shipped $2,129.0 million worth of product. Snack food exports totalled $166.5 million in 2009. The Canadian market absorbed the remaining $1,962.5 million in domestic shipments and a volume of imports worth $374.6 million. See Figure 1. This industry continues to be a net importer.

Figure 1: Description of this image follows
Description - Figure 1

Figure 1: Snack Food Manufacturing Industry Imports, Exports and Sales of Goods Manufactured, 2009

Imports totalled $374.6 million, domestic shipments (shipments minus exports) were $1,962.5 million, and exports were $166.5 million. Above the bars is the value of the Canadian market (i.e. shipments plus imports minus exports) in 2009 at $2,337.1 million. Also above the bars is a caption for the value of Sales of Goods Manufactured in 2009 at $2,129.0 million. The source is Statistics Canada.

Statistics Canada dataFootnote 2 indicate that in 2009 the majority of snack food manufacturing establishments were located in Ontario (40 establishments) and Quebec (19 establishments), followed by British Columbia (15 establishments), Alberta (13 establishments), Manitoba (8 establishments), Saskatchewan (3 establishments), Nova Scotia (2 establishments), New Brunswick (1 establishment) and Prince Edward Island (1 establishment). Many of the small and medium-sized Canadian-owned firms located across the country serve regional markets. In terms of the value of production, Ontario accounts for the largest share at 38%, followed by Alberta with 23% and Quebec with 21%.

Production facilities which make snack food products range in size from very small operations employing one to four people to large plants employing more than 200 people. The largest four firms account for 82% of the value of snack food shipments.

The production and manufacture of potato chips generally takes place close to potential markets for ease of distribution and because potato chips have a limited shelf-life and require re-stocking.

Some of the large establishments (employing more than 100 employees) which make peanut butter also make other food products in the same facility. These large plants are located in Ontario, Quebec and British Columbia.

Sales of goods manufactured from roasted nuts and peanut butter were valued at $533.9 million in 2009 while sales of goods manufactured from other snack food products totalled $1,595.1 million.

The Canadian market for snack food products and peanut butter (which includes sales of goods manufactured and imports but excludes exports) was valued at $2,337.1 million in 2009.

Key commodity inputs needed to make snack food products include potatoes, cornmeal, cereal grains, nuts, seeds, oils, and seasonings. The bulk of raw inputs for this industry, potatoes and oil, are supplied domestically. However, some cornmeal and specialty oils are imported, mostly from the U.S. Nuts and peanuts used to make snack products are also mostly imported. Seeds used to make seed snacks are both supplied domestically and imported.

Except for those establishments which import raw materials, production tends to be located within one or two hours of raw input supplies. During the off-season, potato chip manufacturers in Canada may import chipping potatoes from North Carolina, Oregon, Virginia or Florida.

Large firms in the industry tend to be capital intensive and many plants employ state-of-the-art equipment. Smaller firms may enter the market with specialty products and serve a regional market. However, they are more likely to use older equipment and more labour.

Performance

Domestic Market

From 1999 to 2009, the value of sales of goods manufactured by the snack food manufacturing industry increased 82.8% from $1,164.6 million to $2,129.0 million.

The domestic market is still the industry's most important market, absorbing 84.0% of Canadian production despite an increase in exports. Demand for convenience foods and "eating on the run" have driven snack food sales in both Canada and the U.S., and have generated significant increases in the Canadian domestic market and in exports far in excess of population growth (which has been growing at a rate of about 1.0% annually).

Traditionally the snack food manufacturing industry was domestically oriented, exporting only 8.4% of its domestically made products in 1999, while imports accounted for 11.9% of the domestic market the same year. Ten years later, the Canadian industry still held a substantial portion of the domestic market. However, integration of the North American market, which has occurred since the Canada-U.S. Free Trade Agreement was signed in 1989, has resulted in significant import penetration. This has only been partially offset by an increase in exports.

Penetration by imports in the Canadian snack food market has slowly increased from 11.9% in 1999 to 16.0% in 2009. Canadian-based manufacturers are holding a decreasing percentage of the domestic market. Exports as a percent of production value peaked at around 12.0% in both 2001 and 2002, but their share of production value decreased since then due, in part, to an increasing value of the Canadian dollar.

Competition in the snack food manufacturing industry is fierce, due in part to the impulsive nature of many snack food purchasing decisions. Competition is primarily based on branding, advertising and promotion, effective distribution, product quality, and price. However, because brand loyalty is relatively low, shelf image is an important consideration and promotion plays a significant and ongoing role, especially among the larger firms. Growth in private label products, particularly in potato chips, has also been important.

Manufacturing value-added is a measure of the value of an establishment's outputs minus the cost of inputs. For the snack food manufacturing industry, the average annual growth for manufacturing value-added was 5.5% between 1999 and 2009. In 2009, manufacturing value-added reached its highest level at $1,255.1 million. The proportion of value-added to sales of goods manufactured was 59.0%. This figure is higher 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 2009 was 36.4%Footnote 2.

Employment

EmploymentFootnote 3 in the snack food manufacturing industry increased 4.7% from 7,291 people in 2004 to 7,635 people in 2009 (Figure 2).

Figure 2: Description of this image follows
Description - Figure 2

Figure 2: Snack Food Manufacturing Industry Sales of Goods Manufactured and Employment, 1999-2009

Employment increasaed from 7,139 people in 1999 to 8,516 in 2000, then decreased to 6,765 people in 2001, and increased to 7,547 people in 2003. In 2006, employment decreased to 6,975 people, then increased to 7,635 people in 2009. In 1999 sales of goods manufactured were $1,164.6 million, increasing to $1,820.5 million in 2005. In 2006 sales of goods manufactured decreased to $1,679.5 million and then increased to $2,129.0 million in 2009. The source is Statistics Canada.

Investment

Data from Statistics Canada on investment in the Canadian snack food manufacturing industry is not available. However, the significant increase in production and exports could only be made possible by substantial outlays in new buildings, production equipment, and delivery vehicles.

During the past few years, investments in Ontario and New Brunswick were announced by snack food companies. One major snack food manufacturer also recently invested in electric delivery vehicles at several of its plants across Canada.

Profitability

Profitability is affected by the prices firms have to pay for inputs to production. For the snack food manufacturing industry, increased prices for potatoes, corn and 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 to make snack foods. 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 snack food manufacturing industry, profitability has improved, especially since 2006 (Figure 3).

Figure 3: Description of this image follows
Description - Figure 3

Figure 3: Snack Food Manufacturing Industry Value-Added Per Production Worker, 2004-2009

Value-added per production worker increased from $218.4 thousand in 2004 to $238.6 thousand in 2005, then decreased to $221.0 thousand in 2006, then increased to $248.0 thousand in 2009. The source is Statistics Canada.

Trade Performance Footnote 4

The Canadian snack food manufacturing industry serves mostly the domestic market.

From 2000 to 2010, Canada's exports of snack food products have increased 4.6% from a value of $150.8 million to $157.8 million. See Figure 4. The bulk of exports in 2010 ($142.6 million or 90.4%) were destined to the U.S. The low value of the Canadian dollar relative to the U.S. dollar contributed to a significantly positive export performance until 2002 with exports increasing 25.1% between 2000 and 2002. However, exports have decreased since their peak in that year due, in part, to the increasing value of the Canadian dollar.

Exports of potato chips in 2010 accounted for the largest portion of total snack food exports at 47.4% ($73.9 million), followed by corn chips, pretzels and extruded snacks which accounted for 23.5% ($36.6 million) of exports. Exports of nuts and seeds were valued at $14.3 million and accounted for 9.2% of exports. Peanut butter exports accounted for 19.8% of exports and were valued at $30.9 million in 2010. Exports of peanuts made up the smallest portion of total snack food exports at 0.08% ($0.1 million) in 2010.

Figure 4: Description of this image follows
Description - Figure 4

Figure 4: Snack Food Manufacturing Industry Exports and Imports, 2000-2010

In 2000 snack food exports were valued at $150.8 million, increasing to $188.7 million in 2002, then decreasing to $161.0 million in 2003. Exports decreased to $132.1 million in 2005, then increased to $166.5 million in 2009, then decreased to $157.8 million in 2010. In 2000, the value of snack food imports was $154.7 million, increasing to $214.7 million in 2002. Imports decreased to $184.2 million in 2003, then increased to $380.4 million in 2008, then decreased to $374.6 million in 2009, reaching a value of $384.7 million in 2010. The source is Statistics Canada.

From 2000 to 2010, imports of snack foods have increased 148.7% from a value of $154.7 million to $384.7 million, with the bulk of these imports in 2010 ($329.5 million or 85.7%) coming from the U.S.

Potato chips accounted for 16.4% of total snack food imports ($62.9 million) in 2010. Consumer interest in healthier products has influenced imports of snack foods such that since 2005 imports of nuts, including peanuts, greatly surpassed imports of potato chips and continued their growth to account for 35.9% (or $138.1 million) of total snack food imports in 2010. Imports of corn chips also increased 282.6% between 2000 and 2010 to reach a value of $114.0 million. During the same period, imports of pretzels increased 45.6% to reach a value of $26.2 million, while imports of extruded snacks such as cheesies decreased 42.2% and were valued at $0.6 million in 2010.

Imports of peanuts totalled $18.7 million in 2010, an increase of 133.8% since 2000 when they were valued at $8.0 million. Canada is the largest importer of peanuts from the U.S. with over 75% of peanuts consumed in Canada coming from the U.S.

From 2000 to 2010, Canada's trade deficit in snack food products has been increasing and amounted to $227.0 million in 2010.

Value Chain Management Issues

Potato Production and Quality

Special varieties of potatoes, referred to as "chipping potatoes", are the varieties used by manufacturers to make potato chips. The Canadian climate is conducive to potato production and the availability of competitively priced good quality potatoes has been a key consideration for manufacturers in the establishment of potato chip plants in the country. The main chipping varieties which originated from U.S. breeding programs are Superior (released in 1961), Norchip (released in 1968), Atlantic (released in 1976), and Snowden (released in 1990). Another chipping cultivar with golden nematode resistance called Andover was released in 1996 from Cornell. Several new cultivars released from Agriculture and Agri-Food Canada in the last ten years may find a place in production over time. Varieties from private plant breeding programs have become quite important in recent years.

Chipping potatoes are grown in several regions in Canada (i.e., PEI, Nova Scotia, New Brunswick, Quebec, Ontario, Manitoba, and Alberta). Potatoes used to make snack foods and dehydrated potato products are estimated to account for 10-15% of total potato crop production in Canada.

Most provinces have influential potato marketing boards to negotiate, on behalf of growers, prices and conditions of sale to processors. The systems of negotiation and arbitration vary by province and by board.

Chipping potatoes are harvested during late summer or in early fall. They are susceptible to bruising and other injury during harvesting, trucking and processing, especially if they are cold.

If not used immediately after harvesting, potatoes are stored in climatically controlled facilities which maintain optimal quality until they are used. Chipping potatoes in storage require continuous ventilation and an ideal temperature (9-10° C) for optimal quality. These conditions help maintain high specific gravity and low sugar levels which are desired to produce light-coloured chips. Breeding for cold sweetening resistanceFootnote 5 is an objective of many programs and will permit processing directly from cool storage. Storage at cool temperatures reduces shrinkage and the propensity to sprout. This aspect is covered further below.

Potato chip quality is dependent upon the yield from fresh potatoes, the colour of the chip, the oil content of the chip, and the chip flavour. Manufacturers require potatoes which are uniform and medium-sized (to reduce breakage in the package), smooth (for reduced peeling losses), free of defects and damage, with high dry matter, and low reducing sugars. A high specific gravity (more solids) is also important, resulting in a greater yield of chips from fresh potatoes and less absorption of oil.

Specific gravity has a direct affect on the amount of oil absorbed during frying. Too much oil absorption results in greasy chips and higher production costs because more oil is used in the frying process which increases the cost of production. Potato varieties with low reducing sugar levels are desired because the colour of the chip is determined by the sugar content of the potato. Potatoes with high sugar levels make less desirable dark chips. Because potato chips are cooked at higher temperatures than boiled, baked or mashed potatoes, their flavour is more complex. Absorbed oil from frying also contributes to the overall flavour profile of the chip.

Research is ongoing in Canada to develop new cultivars with increased resistance to disease and pests, and to reduce dependence on pesticides for crop production. Increasingly, resistance to environmental stresses such as drought or heat is being investigated.

Quality research is addressing resistance to low temperature sweetening - the ability to store at low temperatures without the accumulation of the reducing sugars that result in dark chips. The benefits of lower temperatures include reduced shrinkage (water loss) because of slower tuber respiration, reduced sprouting, longer storability, and reduced need for reconditioning - raising storage temperature so that reducing sugars will be removed.

Corn Production and Quality

Special varieties of corn such as popping corn and white corn for corn chips are required by snack food manufacturers. Due to climatic reasons, Ontario, followed by southwestern Quebec, is the largest corn producing province. The majority of corn varieties grown in Canada are used for animal feed. As a result, snack food manufacturers have to rely on corn imports to a large degree. Ontario imports an estimated 3 million bushels of corn for food production.

Cornmeal used in snack food products, such as corn chips and extruded and puffed products, is made by dry milling and screening for a particular size and intensity of grind. Both yellow and white corn varieties are used.

Grain quality in food grade corn is determined by clarity of kernel colour, kernel hardness, cob colour, and kernel size. The best dry milling corn has larger-sized kernels, low kernel size variability, harder kernel texture, and higher protein content. Insect and disease resistance in corn varieties are also important to end users. In Canada, it is also essential that food grade corn hybrids have maturities adapted to the intended growing region and yields that are competitive with adapted commercial yellow dent corn hybrids. Opportunities exist in Ontario to expand production of food grade corn (both yellow and white).

Dry millers have very stringent quality requirements and insist upon low-heat or low-temperature dried corn that is free of stress cracks and heat-damaged kernels. If managed properly, ambient and low-temperature drying techniques can result in excellent corn quality and can also have significant energy cost savings.

Kernel red streak (KRS) is a physiological disorder that is characterized by the development of red to purple pigmented streaks that bleed through and discolour the endosperm during the milling process and affect the colour of the finished product. This disorder occurs more frequently in northern areas, such as Ontario, where food grade corn is grown. The risk of KRS can be minimized and managed in the short-term by cultural practices and over the long term by genetics.

For white corn, the most desirable class of colour is "pearly white" which is assessed visually using a set of industry standards.

Stress cracking in the kernel endosperm, which occurs because of rapid moisture loss in the endosperm, both in the field and during the drying process, results in smaller grit sizes for dry milling. Stress cracked kernels also cook at different rates than undamaged kernels, yielding an inconsistent end-product. Some genotypes are more susceptible to cracking than others.

Mycotoxins are a significant food safety issue. Some corn varieties are very susceptible to the ear moulds that produce mycotoxins; however, often these genetics interact significantly with weather conditions. There is no comprehensive system in Canada for screening susceptible varieties out of the system. Seed companies do a certain amount of screening based on their own evaluations or on feedback from other industry stakeholders. Weather conditions are the single biggest factor influencing the level of mycotoxins in field corn in Ontario.

Drying and storage conditions in Canada have been evaluated to improve energy conservation and to examine the impacts on the consistency of grain corn quality.

Regulatory Framework

Food and Drugs Act

Snack foods are regulated under the Food and Drugs Act and Regulations as a food product.

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). 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 snack food 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.

Canada Agricultural Products Act

The Canada Food Inspection Agency (CFIA) administers the Fresh Fruit and Vegetable Regulations established under the Canada Agricultural Products Act which requires that fresh fruits and vegetables that are shipped inter-provincially or internationally must be labelled and packaged in standard-sized containers.

Under the provisions of the Fresh Fruit and Vegetable Regulations, the inter-provincial shipment or import of bulk potatoes, including chipping potatoes, are subject to the Ministerial Exemptions process. If the supply of suitable chipping potatoes in a particular province is exhausted, a processing facility in that province must request a Ministerial Exemption in order to move bulk potatoes into the province for processing.

While producers (growers) feel these requirements are essential to the orderly marketing of produce, food processors have been critical of the costs and potential delays associated with the paper work and approval process associated with these Exemptions.

Environment

With respect to environmental issues, manufacturers must meet all laws (e.g. the Canadian Environmental Protection Act, the Canadian Environmental Assessment 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 secondary packaging (e.g. 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 "best 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 Products

Organic snack foods 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 snack food companies have extended the organic food movement to snack food 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 snack food 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 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;

Canada Organic Logo

  • 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 web Site

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 manufacturing industry:

Challenges and Opportunities

Challenges

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. Recent health studies have shown that even though Canadian calorie intake has been decreasing, inactivity has increased among adults and children. The influence of computers, electronic games, television and other elements of modern lifestyle has resulted in less physical activity. The snack food manufacturing industry maintains that moderate consumption of snack foods, a diet that includes a variety of foods, and physical exercise are important to a healthy lifestyle.

Health Canada develops and promotes guidelines for healthy eating through the Canada Food Guide and guidelines on body weight. The Public Health Agency of Canada provides guidelines on physical activity.

Acrylamide is a chemical that naturally forms in certain foods during processing or cooking at high temperatures, particularly plant-based foods that are rich in carbohydrates and low in protein. The highest concentrations of acrylamide have been detected in potato chips and french fries, although it has also been found in other foods. Research showed that acrylamide develops in foods cooked at temperatures above 120° C. Further research is ongoing to determine how acrylamide is formed during the cooking process, what percentage of overall acrylamide present in the human body comes from food sources, and the risks posed by intake levels through foods. See Health Canada's web site for further details.

The concentration of major retail chains has continued to be a challenge for the snack food 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. Although retail concentration has increased over the years, snack food manufacturers benefit from a wider variety of distribution channels than some processed food products. The snack food manufacturing industry distributes its products through supermarkets and grocery stores, drug stores, convenience stores, discount stores, mass merchandisers and warehouse outlets, and gas stations. The foodservice and hospitality industry is another distribution channel for snack food products. Strategically placed vending machines also provide a distribution channel for snack food products.

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 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. Although making goods for private label leaves retailers in control of the "brand equity" resulting from consumer loyalty and leaves lower margins for manufacturers, it has provided real growth opportunities for some small- and medium-sized manufacturers without requiring the expenditures needed to launch their own brands.

Changing consumer demographics has resulted in changing consumer tastes and increased demand for products with reduced fat and higher nutritive value. Consumers of snack food products have seen an expansion in added flavour offerings over the past ten years, including spicy combinations and ethnic flavours. Intense textures and thicker chips have also been introduced with much success. Some firms have developed new snack products which are baked instead of fried to address consumer preferences for reduced fat. Others have invested in new fryer technology with "strippers" to remove excess oil. For low fat snack food products, the industry challenge is to replicate the flavour without the fat or increased sodium.

The domestic market for snack products appears to hold great growth potential, especially if the demand for niche market products can be met. There has been an emergence in snack food products made from non-traditional ingredients, such as pulses (e.g.,beans, lentils or peas), rice and other grains, dried fruits and vegetables. Kettle-style potato chips have also found a successful niche in the snack food market. Increased pressure from imports will be an ongoing factor that must be addressed by both large and small companies as they compete for market share. The introduction of branded cross-over products which have similarities to snack foods, as well as the proliferation of snack cookies, snack crackers, and other baked goods will continue to squeeze this industry for market share.

The increasing value of the Canadian dollar, which has strengthened to levels not seen since the 1970sFootnote 6, could threaten continued export growth and encourage increased imports of snack food products. The industry will need to focus on manufacturing efficiencies and offer value and variety to consumers looking for great taste and convenience.

Snack food manufacturers are aware of public perception of biotechnology and genetically modified organisms (GMOs). There is concern that the industry could be affected if their products are negatively associated with these issues. Currently, chipping potatoes, white corn, and popping corn and food grade yellow corn are non-GMO.

Opportunities

The cost of packaging for snack food products relative to the cost of the contents of the package is considerable. For the snack food manufacturing industry, improved packaging can prevent the arrival of damaged products in domestic and export markets. Films which provide improved oxygen and moisture barrier properties are increasingly in demand. Better packaging will mean high quality snack food products can be exported successfully farther afield. Companies have introduced products in eye-catching metallic re-sealable packaging to differentiate their brands, and spill-proof packaging allows consumers to eat on-the-go. Packaging formats also include jars, fibre tins, trays and canisters. Some companies have also introduced products in environmentally-friendly packaging.

Package size is also important to the industry. Single serve packaging sizes are the most costly. If consumers are offered larger package sizes, it could mean higher dollar sales and larger profits per sale. Package sizes in Canada vary widely. The popularity of snacks for children results in small package sizes while the growth of club stores supports large package sizes.

Supply Chain Management

Like other food and beverage manufacturers, the snack food 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 be able to trace batches back to their origin.

Association

Ms. Ileana Lima
Executive Vice President
Canadian Snack Food Association
P.O. Box 42252
128 Queen Street South
Mississauga, Ontario L5M 4Z4
Tel: 289-997-1379
Email: Ileanal@4Reflections.com
Website: http://canadiansnack.com

Departmental Contact

Anne Woo
Senior Market Development Officer
Food Industry Division
Sector Development and Analysis Directorate
Agriculture and Agri-Food Canada
Ottawa, Ontario K1A 0C5
Tel: 613-773-0191
Fax: 613-773-0300
Email: Anne.Woo@agr.gc.ca

Footnotes

Footnote 1

Statistics Canada changed its survey methodology in 2000 and again in 2004 such that the number of establishments is not directly comparable to previous years.

Return to footnote 1 referrer

Footnote 2

Statistics Canada Annual Survey of Manufactures and Logging.

Return to footnote 2referrer

Footnote 3

Statistics Canada changed its survey methodology in 2000 and again in 2004 such that the number of establishments and employees is not directly comparable to previous years.

Return to footnote 3 referrer

Footnote 4

Statistics Canada data is based on products included in the following Harmonized System (HS) Codes: 19059090 - corn chips; 19059040 - pretzels; 20052000 - potato chips; 20081110 - peanut butter; 20081190 - groundnuts; and 20081900 - nuts and seeds.

Return to footnote 4 referrer

Footnote 5

Cold sweetening resistance is the ability to store potatoes at low temperatures without the accumulation of the reducing sugars that result in dark chips.

Return to footnote 5 referrer

Footnote 6

A History of the Canadian Dollar since 1950; http://www.cbc.ca/news/interactives/map-history-dollar/

Return to footnote 6 referrer