The Canadian Soft Drink Industry

Statistics for the Canadian soft drink, bottled water and ice manufacturing industries are aggregated under Statistics Canada's North American Industry Classification System (NAICS) 31211 Soft Drink and Ice Manufacturing.

NAICS 31211 comprises establishments primarily engaged in manufacturing soft drinks, ice or bottled water, including that which is naturally carbonated. Such soft drink establishments make non-alcoholic, carbonated, flavoured beverages, including fruit drinks and iced tea (bottled or canned).

Beverages which contain flavours at a rate of more than one percent by weight (including flavoured bottled water) are classified as soft drinks by Statistics Canada. Similarly, soda water, seltzer water and tonic water are also classified as soft drinks.

Although data for bottled water manufacturing is included in NAICS 31211, this profile does not cover bottled water manufacturing. A separate profile has been written for the Canadian bottled water industry.

Establishments primarily engaged in manufacturing concentrates and syrups for the manufacture of carbonated beverages are included in Statistics Canada NAICS 31193 Flavouring Syrup and Concentrate Manufacturing.

Statistics Canada does not provide separate statistics for the soft drink industry other than export and import statistics and per capita consumption data. Statistics Canada data for NAICS 31211 have been included for reference purposes at the end of this profile as Appendix A. Trade data for soft drinks can be found in Appendix B.

Introduction

The Canadian soft drink manufacturing industry makes and bottles non-alcoholic carbonated beverages, including fruit flavoured beverages, colas, ginger ales, ginger beers, root beers, bottled or canned iced tea and iced coffee, soda waters, tonic waters and other mixers. While the term "soft drinks" sometimes means different things to different people, for the purposes of this profile these soft drink beverages are referred to as carbonated soft drinks (CSDs). The industry also makes other non-alcoholic beverages, including but not limited to, iced tea, iced coffee, dairy-based beverages, fruit juices and fruit drinks, bottled water, sports drinks and energy drinks.

The Canadian carbonated soft drink industry was historically based on a franchise system which characterized the CSD industry worldwide. The system provided a bottler with a defined market area and exclusive manufacturing and distribution rights for certain CSD brands within that area. The bottler was restricted to purchasing the proprietary formula concentrates and/or syrups from a single source - the franchise company (franchisor) which held the registered trademarks of a number of CSD brands. The franchisor established pricing policies and provided overall marketing and brand promotion support. During recent decades, however, the major brand-owning CSD firms have been buying their former franchisee-bottlers, so that few independent bottlers remain today.

The industry serves primarily the domestic market. Although CSD sales account for a major portion of the non-alcoholic beverage market, they have remained relatively flat or decreased over the past few years.

A trend toward healthier beverage choices by Canadian consumers has caused the carbonated soft drinks (CSDs) industry to seek new ways to capitalize on the market.

Soft drink multinational corporations are bringing more alternative drinks to market. Many of these beverages, such as sports drinks, energy drinks, retail PET water, single-serve fruit drinks, juices, sparkling water, premium soda, dairy beverages, and ready-to-drink (RTD) tea and coffee promise more than quenching thirst; they offer extra energy, essential vitamins and more "cachet".

Industry Structure

The Canadian Soft Drink and Ice Manufacturing industry represented 4.8% of the total value of sales of goods manufactured by the food and beverage industry, 4.5% of employment in the sector, and 3.2% of the number of food and beverage plants in 2009.

In 2009, 287 establishments Footnote 1 (plants) in the Soft Drink and Ice Manufacturing Industry shipped $4,032.6 million worth of product and employed 11,162 people. Canadian Soft Drink and Ice Manufacturing Industry exports totalled $127.3 million in 2009 (Figure 1). The Canadian market absorbed the remaining $3,905.3 million in domestic shipments and a volume of imports worth $593.9 million. This industry has become a net importer since 2006.

Figure 1: Soft Drink and Ice Manufacturing Industry Imports, Exports and Sales of Goods Manufactured, 2009

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Description - Figure 1

Figure 1 is a bar graph showing imports, exports and domestic shipments of bottled water in Canada in 2009. Imports totalled $593.9 million, exports totalled $127.3 million, and domestic shipments totalled $3905.3 million in 2009. The Canadian market for bottled water was valued at $4,499.2 million and Sales of Goods Manufactured were valued at $4032.6 million in 2009. The source is Statistics Canada.

Statistics Canada data for sales of goods manufactured for carbonated soft drinks is not available. However, using per capita consumption data and adjusting for trade, it can be estimated that Canadian production was approximately 3.53 billion litres in 2009 Footnote 2.

The Canadian CSD industry is highly concentrated. Three of the four major brand owners are subsidiaries of foreign-based multinationals and account for the overwhelming majority of industry production. A very small number of CSD manufacturers supply niche products.

According to Statistics Canada data Footnote 3a, the majority of Soft Drink and Ice Manufacturing takes place in Ontario (85 establishments), British Columbia (62 establishments), Quebec (53 establishments), followed by Alberta (29 establishments), Manitoba (14 establishments), Saskatchewan (14 establishments), Nova Scotia (12 establishments), New Brunswick (8 establishments), Newfoundland and Labrador (7 establishments), and Prince Edward Island (3 establishments) Footnote 4a. Statistics Canada's Business Patterns Database indicates that in 2009 production facilities ranged in size from small one-or two-person operations to large plants employing up to 500 people.

Production tends to be located close to large urban centres, although there has been a trend to larger plants serving larger markets.

There are numerous CSD bottling and distribution centers across Canada to serve local domestic markets. Manufacturing is located in major cities in Canada, with a large number of distribution warehouses located across the country. Bottling and distribution systems in the bottling component of the industry are highly automated and very efficient.

Product concentrates (flavours, etc; in liquid and powdered forms) are brought into bottling plants where sweeteners are added to make syrups. Then water and carbon dioxide are added and the resulting drinks are bottled. Some syrup is sold to foodservice operators for "fountain" sales.

Key commodity inputs needed to make carbonated soft drinks include concentrates, sugar (cane or beet), glucose/fructose, aspartame, acesulfame-potassium, caramel colour, sodium benzoate, phosphoric and citric acids, caffeine, seasonings, carbon dioxide and specially treated water. (Glucose/fructose is a generic term for high fructose corn syrup or HFCS, now more commonly referred to as "corn sugar".) The industry uses about 20 times as much corn sugar as it does cane/beet sugar as the sweetening agent. Except for water, the bulk of raw inputs for this industry are imported, mostly from the U.S. However a small portion of the corn sugar is supplied domestically.

The industry has faced an array of price increases. The cost of aluminium (for cans) has recently increased substantially thus having a negative impact on profits. The increase in demand for corn for use as fuel ethanol has contributed to increased grain costs both in Canada and the U.S., thus driving up the cost of corn sugar as well.

The majority of carbonated soft drinks are sold in aluminium cans and PET bottles. They are also sold in bulk in the foodservice industry through soda fountains. Only a very small portion of CSDs are still packaged in glass bottles, and these are usually packaged in smaller sizes, due to changing consumer preferences and lifestyles as well as increased costs associated with transporting heavy, low-volume glass containers versus high volume-to-packaging ratio PET bottles and aluminum cans.

Products are sold through retail stores for the "take home" market and through hotels, restaurants and institutions (HRI) and vending machines for the "on-premises" market. Foodservice plays an important role in CSD sales as consumers on-the-go add carbonated soft drinks to their fast-food and restaurant purchases. The "take-home" market is the larger segment, accounting for an estimated two-thirds of sales.

The majority of carbonated soft drink companies have embarked on a diversification strategy to become total beverage companies by offering a range of products (i.e. CSDs, bottled water, juices, fruit flavoured beverages, dairy-based beverages, iced tea, RTD iced coffee, sports drinks and energy drinks).

Performance

Domestic Market

From 1999 to 2009, sales of goods manufactured by the Soft Drink and Ice Manufacturing Industry increased 31.7% from a value of $3,062.3 million to $4,032.6 million Footnote 3b.

From 1999 to 2009, per capita consumption of CSDs declined 14.0% from 121.8 litres to 104.7 litres. Per capita consumption declined by 1.2% between 2008 and 2009 Footnote 5.

According to Beverage Marketing Corporation, carbonated soft drinks (CSDs) continued to account for the largest beverage category both in volume and in per capita consumption in spite of losing ground to healthier and more popular non-alcoholic beverages, such as tea. Measured by volume, sales of CSDs made up about 16.3% of all non-alcoholic beverage sales in 2009 (Figure 2).

Figure 2: Share of Canadian Non-Alcoholic Beverage Market by Volume, 2009

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Description - Figure 2

Figure 2 is a pie chart showing the percentage share of sales of non-alcoholic beverages in Canada in 2009. Coffee sales accounted for 16.6% of total sales, while carbonated soft drinks accounted for 16.3%, sales of milk accounted for 12.7%, sales of tea accounted for 12.9%, sales of bottled water accounted for 10.6%, sales of fruit beverages accounted for 8.7%, sales of sports beverages accounted for 1.2%, sales of energy drinks accounted for 0.2%, and sales of other beverages (which includes tap water, vegetable juices, powders and miscellaneous others) accounted for 21%. The source is Beverage Marketing Corporation.

From 2008 to 2009, total CSD sales volume remained relatively stable at 3.53 billion litres (Table 1).

Table 1: Canada's Non-Alcoholic Footnote 6 Beverage Market, Share of Volume
Billions of Litres Share of Volume % Change
* CSDs: Carbonated soft drinks.
** Assumes 48 grams of coffee per litre.
*** Includes tap water, vegetable juices, sports drinks and miscellaneous others.
Source: Beverage Marketing Corporation
  2008 2009 2008 2009 2008/09
CSDs* 3.5 3.5 16.5% 16.3% 0.0%
Coffee** 3.4 3.6 16.0% 16.6% 5.0%
Milk 2.7 2.8 12.8% 12.7% 0.4%
Tea 2.6 2.8 12.2% 12.9% 7.3%
Bottled Water 2.4 2.3 11.1% 10.6% -3.4%
Fruit Beverages 2.0 1.9 9.4% 8.7% -6.0%
Subtotal 16.7 16.8 77.9% 77.6% 1.0%
All Others*** 4.7 4.9 22.1% 22.4% 2.8%
Total 21.4 21.7 100% 100% 1.4%

The domestic market continues to be the most important for this industry. Domestic market demand has grown to the point where there are now more than 30 different brands and a multitude of flavours distributed throughout Canada.

Based on data from The Nielsen Company, the value of Canadian domestic retail sales for "flavoured soft drinks" in 2009 grew 7.7% to $1.4 billion from a value of $1.3 billion in 2007. Statistics Canada data show that the Canadian market for the Soft Drink and Ice Manufacturing Industry totalled $4.5 billion in 2009.

The industry has experienced intense price competition with the expansion of private label sales and decreasing consumer demand for CSDs. Price reductions have been an important element to enable the industry to maintain its dominant market share in a beverage market where the choice of products is increasing. During the recent difficult economic climate, price reductions are still occurring, especially in the retail grocery sector where chains have reduced prices to encourage consumers to visit their establishments. However, with increasing aluminium, corn, and transportation costs, the industry may be under pressure to reverse this trend.

Euromonitor forecasts that the Canadian CSD market will continue to decrease as consumer preferences for healthy lifestyles increases. However, with 60% of sales of carbonated soft drinks coming from consumers aged 50 and over Footnote 7, an older Canadian demographic could fuel a resurgence in CSD sales.

CSD sales tend to be seasonal, with higher consumption occurring during the hotter summer months. Unusually cold or rainy weather during the summer months can have a negative impact on sales.

Strong competition by industry firms for market share has brought about industry consolidation and cost cutting by major industry players. In order to reduce marketing and transportation expenses, to utilize existing capacities more efficiently, and to increase share in the marketplace, industry players have employed strategies such as mergers and acquisitions to acquire brands in multiple beverage categories, including CSDs, bottled water, flavoured drinks, juices, dairy beverages, and sport drinks.

Due in part to the impulse nature of many purchasing decisions, 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.

Value-added is a measure of the value of an establishment's outputs minus the cost of inputs. Value-added in the Soft Drink and Ice Manufacturing Industry fluctuated between 1999 and 2009, from a low of $1,037.1 million in 1999 to a peak of $1,886.8 million in 2009 Footnote 3c. The proportion of value-added to sales of goods manufactured was 46.8% in 2009. This figure is higher than the Canadian food and beverage 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 4b.

Employment

From 2004 to 2009, employment in the Soft Drink and Ice Manufacturing Industry increased 11.3% from 10,033 employees to 11,162 employees Footnote 8 (Figure 3). Between 2005 and 2007, employment increased, but then declined again due to a tightening economy.

Figure 3: Soft Drink and Ice Manufacturing Industry Sales of Goods Manufactured and Employment, 1999-2009

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Description - Figure 3

Figure 3 is a line graph showing employment and the value of Sales of Goods Manufactured in Canada from 1999 to 2009. Employment totalled 13,217 people in 1999, decreased to 9,323 people in 2003, increased to 11,641 people in 2007, and totalled 11,162 people in 2009. Sales of Goods Manufactured were valued at $3062.3 million in 1999, increased to $3210.6 million in 2002, increased to $3757.7 million in 2004, decreased to $3557.1 in 2005, increased to $3991.0 in 2007 and was valued at $4032.6 million in 2009. The source is Statistics Canada.

The overall decline in employment was accompanied by an improvement in labour productivity for the Soft Drink and Ice Manufacturing Industry from 2005 onward as measured in output per production worker. A reduction in the number of employees and a streamlining of operations along with other cost-cutting measures has improved industry productivity. In making these improvements, the industry better positioned itself to compete in the domestic market against other beverages and in foreign markets such as the U.S.

Data from Statistics Canada on employment specific to the soft drink manufacturing industry is not available. According to the Canadian Beverage Association, the non-alcoholic refreshment beverage industry employs 12,000 people across Canada in manufacturing, bottling and distribution centers.

Investment

Data from Statistics Canada on investment in the CSD industry is not available. This industry is very capital intensive and because bottling facilities are highly automated, capital investments are estimated to be valued in the hundreds of millions of dollars.

Profitability

Profitability is affected by the prices firms have to pay for inputs to production. In order to maintain profits, manufacturers are under increased pressure to improve productivity and cut costs. For the CSD manufacturing industry, increasing costs for sweeteners derived from corn, increased energy and transportation costs and increased packaging costs have affected the cost of production. The value-added per production worker provides some indication of profitability. Since 2005, the value-added per production worker in the Canadian Soft Drink and Ice Manufacturing industry increased from $321,000 thousand to $369,000 thousand in 2009 Footnote 3d. Profitability for the Soft Drink and Ice Manufacturing industry has improved, especially since 2005 (Figure 4).

Figure 4: Soft Drink and Ice Manufacturing Industry Value-Added Per Production Worker, 2004-2009

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Description - Figure 4

Figure 4 is a line graph showing the valued-added per production worker from 2004 to 2009. The value-added per production worker was $337,500 in 2004, decreased to $321,400 in 2005, and then increased to $361,400 in 2006. In 2007 the value-added per production worker decreased to $332,300 and increased to $374,200 in 2008. In 2009, the value-added per production worker was $369,400. The source is Statistics Canada.

Trade Performance

The Canadian CSD industry serves mostly the Canadian market.

Between 2000 and 2010, Canadian exports of carbonated soft drinks declined 40.6% from a value of $168.4 million (191.0 million litres) to a value of $100.0 million (150.4 million litres) Footnote 9 (Figure 5). This decline was mainly due to the rising value of the Canadian dollar which has made domestic product more expensive relative to products from other countries. A difficult economic climate has also recently contributed to lost sales.

Canada's main export destination for carbonated soft drinks has been the U.S. with 2010 exports valued at $97.0 million representing 97.0% of total soft drink exports. This was a sharp decline of 45.7% from 2005 when exports to the U.S. peaked at $178.8 million. The decline in exports to the U.S. can also be attributed to the strengthening Canadian dollar.

Figure 5: Exports and Imports of Soft Drinks Footnote 10, 2000-2010

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Description - Figure 5

Figure 5 is a line graph showing the value of exports and imports of bottled water from 2000 to 2010. In 2000, exports of bottled water totalled $206.5 million, increased to $284.3 million in 2002, decreased to $106.3 million in 2005, and decreased to a value of $38.9 million in 2008. Exports were valued at $22.5 million in 2010. Imports of bottled water totalled $44.0 million in 2000, increased to $61.0 million in 2006, increased to $84.4 million in 2008, and were valued at $89.3 million in 2010. The source is Statistics Canada.

From 2000 to 2010, imports of soft drinks more than tripled from $82.1 million (86.6 million litres) to a value of $275.4 million (259.3 million litres) Footnote 11. In 2010, Canada's largest supplier of imported carbonated soft drinks was the U.S. with imports valued at $248.6 million (or 90.3% of total carbonated soft drink imports). The second largest supplier was France which accounted for 3.3% of total carbonated soft drink imports, followed by Italy with 3.0%.

Canada's exports of syrups and concentrates used in the production of carbonated soft drinks increased 94.6% from a value of $36.8 million in 2000 to a value of $71.6 million in 2010. Imports of syrups and concentrates were valued at $33.1 million in 2010, an increase of 69.7% over 2000 when imports were valued at $19.5 million Footnote 12.

Although there are no customs duties and sales taxes on finished products under the Canada-U.S. Free Trade Agreement, the largest CSD companies tend not to ship finished product across the Canada-U.S. border because of differences in ingredient and labelling regulations. In the U.S., some types of non-colas contain caffeine, which until just recently was not allowed in such drinks in Canada. Another ingredient, saccharin, is allowed in the U.S. but is currently banned in Canada for most food/beverage products. As well, Canada has metric and bilingual labelling requirements.

Regulatory Framework

Food and Drugs Act

Health Canada is responsible for establishing 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, composition and labelling requirements that would apply to non-alcoholic beverage manufacturers just as they would to other food manufacturers so that consumers will have confidence in the safety of the products they purchase.

Caffeine

Division 16, Table VIII, Item C.1 of the Food and Drug Regulations provides for the addition of caffeine to foods. Health Canada has recently granted clearance for the use of caffeine in all carbonated, flavoured soft drinks, not just for use in cola-drinks, as was previously the case. Beverage manufacturers are now permitted to add up to 150 parts per million (ppm) of caffeine to non-cola carbonated flavoured soft drinks while a maximum of 200 ppm continues to be permitted for cola-type carbonated soft drinks. Health Canada states that allowing the use of added caffeine at up to 150 ppm in these additional non-cola carbonated flavoured soft drinks does not pose a health risk to consumers. However, Health Canada has urged manufacturers to voluntarily list and display total caffeine content on all non-cola products that did not previously contain caffeine but where it has now been added. At present, there have not been any non-cola CSDs introduced into the Canadian market that have been so augmented with added caffeine.

Energy Drinks

In the fall of 2011, Health Canada released a Proposed Approach to Managing Caffeinated Energy Drinks. Comments from stakeholders on the proposed approach were required by November 15, 2011. Health Canada also published General Guidance for Temporary Marketing Authorization for Foods and Category Specific Guidance for Temporary Marketing Authorization - Caffeinated Energy Drinks. Energy drinks were previously regulated under Health Canada's Natural Health Products Regulations as natural health products.

Health Claims

A health claim is any representation in labelling or advertising that states, suggests, or implies that a relationship exists between consumption of a food, or an ingredient in the food, and health.

All health claims are subject to subsection 5 (1) of the Food and Drugs Act which prohibits false, misleading or deceptive product representations. In Canada, specific health claims are permitted for foods (including beverages). The term "food" is defined in the Food and Drugs Act.

Foods (including beverages) are permitted to make a function claim when used under the specific conditions set out in Table 8-2 of the CFIA's Guide to Food Labelling and Advertising (GFLA). Function claims are claims about the specific beneficial effects that the consumption of the food or a constituent of the food (i.e. nutrient or other component) has on normal functions or biological activities of the body. Permitted variations on function claims can be found in Table 8-2 of the GFLA. Manufacturers of foods/beverages may wish to make a new function claim but must have scientific evidence to validate the claim prior to its use on food labels or in advertisements.

Please visit Food Policy and Regulatory Issues for more information.

Mandatory Nutrition Labelling

On December 12, 2007, nutrition labelling became mandatory on most pre-packaged products. Exemptions can be found in section [B.01.401 (2)] of the Food and Drug Regulations. Products lose their exemption status if a health claim or nutrient content claim is made.

Please visit Food Policy and Regulatory Issues for more information.

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.

Environment

With respect to the environment, food and beverage manufacturers must meet all federal laws (e.g. the Canadian Environmental Protection Act, the Canadian Environmental Assessment Act) and each province's legislation and regulations.

One environmental issue that food and beverage manufacturers in general have faced is waste remaining from packaging after it has fulfilled its intended purpose. Reductions in container weight can result in reductions in fuel used by large trucks as well as wear and tear on tractor trailers when hauling product to market, with the added environmental benefits of reducing the amount of used materials as well as reducing emissions of greenhouse gases and other air pollutants

Waste reduction is important everywhere and particularly for large urban centres that are rapidly using up 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. There are some difficulties with reducing bulky packaging. Plastics and cardboard can help protect foods during transportation. There is a trade-off between the volume of packaging materials (complete with graphics, etc.) needed to identify brands and increase the attractiveness of a product on the one hand, while minimizing packaging requirements from an environmental and cost control point of view, on the other hand.

Beverage manufacturers have been at the forefront of post-consumer recycling of used beverage containers in all Canadian jurisdictions for many years. On average over 70% of used beverage containers are captured for recycling (one of the highest rates for any food product).

Similarly, reductions in waste go hand-in-hand with cost savings as food and beverage 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 get mangled fairly quickly by fork lifts and then must be handled by waste diversion programs.

Prior to plant construction, food and beverage 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. Provinces and municipalities have to be satisfied that systems will be put in place for waste water treatment. Major beverage manufacturers already take a pro-active approach by developing "best practices" with respect to the environment, for example reducing their energy and water usage as well as their creation of both solid and water waste.

International context

Overall, there is a trend to internationalize regulations through general trade treaties, and the industry will face the challenge of looking at regulations that could be harmonized, either bilaterally with the U.S. or multilaterally through the World Trade Organization and Codex Alimentarius Footnote 13.

Organic Products

Organic CSDs 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 CSD companies have extended the organic food movement to CSD 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 beverages to gain market share, the coming years may see more CSD 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 that are being used in interprovincial and international trade, and for products bearing the "Canada Organic" logo. Such interprovincially/internationally-traded products 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 - Biologique Canada

  • 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

Challenges and Opportunities

Challenges

In a rapidly changing business climate, the carbonated soft drink manufacturing industry, as well as other food and beverage manufacturing industries, 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 to the CSD industry and has resulted in a higher degree of competition for shelf space. For CSD manufacturers, 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.

During the past decade, the growth of warehouse club stores that emphasize value, as well as the increasing 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. These market forces will continue to be a challenge in the future.

Although retail concentration has increased over the years, CSD manufacturers enjoy a wider variety of distribution channels than many other manufactured food products, channels that they must continue to exploit. The industry distributes its products through supermarkets and grocery stores, drug stores, convenience stores, gas stations, mass merchandisers and warehouse outlets. Restaurants and fast-food chains are also major purchasing points for CSDs. Vending is another distribution channel for CSDs, making it available to consumers at strategic locations.

Increased competition from other non-alcoholic beverages, in particular bottled water, but also beverages such as fruit/vegetable-based drinks, energy drinks, sports drinks and relaxation drinks, has given consumers more beverage choices. Changing consumer preferences and demographics, with a larger segment of older consumers who are increasingly concerned about their own health, and concerns about obesity have resulted in an increased demand for new products. The industry has responded to this challenge by offering consumers of CSD products a greater assortment of diet soft drinks and flavours and also by expanding their line of beverages outside of the CSD segment and into other beverages such as juices and bottled water, as well as functional beverages such as sports and energy drinks. The industry has also reduced prices, cut costs and improved efficiencies to remain competitive in the marketplace.

Higher oil prices have resulted in increased packaging costs (PET plastic) and higher transportation costs and distributions costs. Escalating costs for corn have impacted upon ingredient costs (corn sugar) for the CSD industry. The cost of aluminium, which had increased in earlier years, declined in 2008 due to the downturn in the U.S. economy. In response to these input cost fluctuations, the industry's bottling and distribution systems have become highly automated and very efficient. CSD companies enter into contracts with suppliers to stabilize costs in a volatile market.

Concerns about childhood obesity have recently focussed attention on the CSD industry, including suggestions that the overconsumption of sugar-sweetened beverages (which include CSDs) can contribute to childhood obesity Footnote 14 . However, the scientific consensus is that obesity is the result of energy imbalance over a period of time and that many factors, such as individual behaviours, environmental factors, and genetics may lead to this imbalance Footnote 15. A recent peer-reviewed scientific consensus statement Footnote 16 on weight management noted that "all components of energy balance, including energy intake and expenditure, interact with each other to impact body weight." Footnote 17a The statement continued with a notation that "energy balance itself is very complex and this complexity also strongly refutes the popular belief that the obesity epidemic is a result of a few 'bad foods'." Footnote 17b It is interesting to note that a 2006 Statistics Canada analysis of Canadians' food and beverage intake in 2004 Footnote 18 shows that CSDs represent only 2.5% Footnote 19 of the total caloric intake of Canadians and 2.8% of calories for adolescents aged 14 to 18 years.

The beverage industry supports healthy eating habits and an active lifestyle. In 2004, in advance of any provincial/local school nutrition policies, the Canadian Beverage Association adopted voluntary guidelines for its members on the sale of beverages in elementary schools and expanded the guidance in 2006 to also include middle and secondary (high)schools. These guidelines restrict the sale of beverages to elementary and middle schools to bottled water, low-fat milk, and 100% juices, and restrict the sale of beverages in high schools to a slightly expanded list of offerings beyond those allowed in the lower school levels, but capping such low or calorie free beverages to a maximum of 50% of the beverage offerings. These additional beverage offerings are also restricted in their size (maximum 355 ml containers) and calorie content (maximum 70 calories/250 ml). Many Canadian Beverage Association members also promote physical activity and an active lifestyle through partnerships with organizations such as kaBOOM and ParticipACTION, as well as through a variety of member-led initiatives.

Supply Chain Management

Like other food and beverage manufacturers, the CSD industry is using GS1 Canada. GS1 Canada is a member organization of GS1, a global organization with over 100 members with the goal to develop standards and solutions to improve supply chain management.

Canada's previous national 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 and beverage manufacturers are developing the capability to track and trace their products throughout the food chain to specific batches at manufacturing plants and will eventually be able to trace batches back to their origin.

Environmental Challenges

Since 1979, the CSD industry has reduced the amount of plastic used in its two-litre PET bottles by 31% and reduced the weight of its aluminum cans by 27% Footnote 20. Packaging materials used by the industry, including cardboard, plastics, and aluminium, are either recyclable or re-usable. Bottle deposit laws and other regulations to ensure recycling and re-use of packaging are a significant regulatory concern to the CSD industry. The industry has been actively involved in provincial recycling efforts throughout the country since the mid-1970s and is an active participant in environmental stewardship organizations across Canada.

Recycling regulations on containers vary from province to province. In virtually all Canadian provinces and territories, aluminum cans and PET containers used for carbonated soft drinks and other beverages are collected for recycling. In some jurisdictions, e.g. Manitoba, Saskatchewan, Alberta, British Columbia and the Atlantic provinces, consumers pay levies on beverage containers at the point of sale to cover costs of their respective container recovery system. In some provinces/territories, a deposit is charged and a potential refund of 5 to 30 cents provides an incentive to consumers to return the container to a collection center. All packaged beverages (except those consumed "on-premise", for example at a restaurant or other such away-from-home location) are included in such programs. In other jurisdictions, CSD containers are collected in a Multi-material Collection system (e.g. curbside blue box programs). According to the Canadian Bottled Water Association (CBWA), 97% of the population in Canada has access to recycling facilities.

Opportunities

As a whole, the beverage industry is encountering new opportunities and challenges. Changing consumer demands and preferences require new ways of maintaining current consumers and customers and attracting new ones. Amid ever-increasing competition, beverage companies must intensely court customers, offer high quality products, efficiently distribute them, ensure safety, and keep prices low - all while staying nimble enough to exploit new markets by launching new products.

Industry Association

Mr. Jim Goetz
President
Canadian Beverage Association
20 Bay Street
WaterPark Place, 11th Floor
Toronto, Ontario M5J 2N8
Tel: (416) 362-2424
Fax: (416) 362-3229
Email: info@canadianbeverage.ca
Website: www.canadianbeverage.ca

Agriculture and Agri-Food Canada Contact

Monica Treidlinger (author)
Food Value Chain Bureau
Market and Industry Services Branch
Agriculture and Agri-Food Canada
1341 Baseline Road, Tower 5, 2nd Floor
Ottawa, Canada K1A 0C5
Tel: 613-258-1933
Fax: 613-258-6768
E-mail: monica.treidlinger@agr.gc.ca

Footnotes

Footnote 1

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

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Footnote 2

The domestic market for soft drinks is calculated using per capita consumption multiplied by the population, minus exports, plus imports. Production is calculated using the value of the domestic market plus exports, minus imports.

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Footnote 3

Statistics Canada Annual Survey of Manufacturing and Logging.

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Footnote 4

Ibid

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Footnote 5

Food Statistics, Statistics Canada Publication No. 21-020-XWE.

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Footnote 6

Includes both foodservice and retail.

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Footnote 7

Terry O'Reilly, Ageism in Advertising, The Age of Persuasion, CBC, May 28, 2011.

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Footnote 8

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.

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Footnote 9

Statistics Canada, H.S. code 22021000 - waters, including mineral and aerated, containing sugar or sweetening matter, nes (not elsewhere stated) or flavour.

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Footnote 10

H.S. Codes.

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Footnote 11

Statistics Canada, H.S. codes 2202100011 - Carbonated soft drinks, containing high-intensity sweeteners, 2202100019 - Carbonated soft drinks, nes (not elsewhere stated); 2202100090 - Waters including mineral and aerated; containing sugar or sweetening matter, nes (not elsewhere stated) or flavour.

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Footnote 12

The H.S. code for exported syrups and concentrates is 21069030. The H.S. codes for imported syrups and concentrates are 2106902100, 2106902919 and 2106902990.

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Footnote 13

The Codex Alimentarius Commission was created in 1963 by the FAO and WHO to develop food standards, guidelines and related texts such as codes of practice under the Joint FAO/WHO Food Standards Programme. The main purposes of this Programme are to protect the health of consumers and ensure fair trade practices in the food trade, and to promote the coordination of all food standards work undertaken by international governmental and non-governmental organizations.

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Footnote 14

See Healthy Canadians - Childhood Obesity.

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Footnote 15

See Etiology - The causes of overweight and obesity

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Footnote 16

See Energy balance and its components: implications for body weight regulation (external PDF)

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Footnote 17

See ASN Consensus Statement Considers Complexities of Energy Balance and Body Weight Regulation (external PDF)

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Footnote 18

Statistics Canada, Nutrition: Findings from the Canadian Community Health Survey (Cycle 2.2): Overview of Canadians' Eating Habits, Catalogue No. 82-620-MIE, No. 2.

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Footnote 19

Table 4 of the 2006 Statistics Canada study shows that soft drinks accounted for 11.3% of calories sourced from "other foods". Chart 2 of the 2006 Statistics Canada study shows that "other foods" accounted for 22% of the total calories consumed by Canadians and 25% of the total calories consumed by adolescents aged 14 to 18 years. Calculating 11.3% of 22% gives 2.5% total calories from soft drinks for all Canadians and calculating 11.3% of 25% gives 2.8% total calories from soft drinks for adolescents. The category "other foods" includes fats and oils such as butter and cooking oils, foods that are mostly sugar such as jam, honey, syrup and candies, high-fat and/or high-salt foods such as chips (potato, corn, etc.), beverages such as soft drinks, tea, coffee and alcohol, and herbs and condiments such as pickles, mustard and ketchup.

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Footnote 20

Canadian Beverage Association web site.

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