Sub-sector Profiles: Index
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The Canadian Snack Food Industry

The Canadian snack food industry, North America Standard Industrial Classification (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.

Introduction

The snack food industry serves primarily the domestic market. In 1992, 2.5% of shipments were exported while imports accounted for 8% of the domestic market. Although the industry continues to hold a substantial portion of the domestic market, since the Canada-US Free Trade Agreement (1989), import penetration has been growing. By 2001, 11.9% of shipments were exported while imports accounted for 11.7% of the domestic market.

In 2001, ACNielsen data reported retail sales of snack foods, including potato chips, tortillas and corn chips, extruded snacks, pretzels, popcorn, and shelled nuts totalling $732.9 million. Potato chips led in this category with about 45.6% of total retail sales, followed by tortillas and corn chips (22%), shelled nuts (10%), extruded snacks (7.1%), pretzels (3.1%), and popcorn (1.1%).

Annual per capita consumption of snack foods is estimated at 6.1 kg. The Peanut Bureau of Canada estimates that the average Canadian consumes about 2.7 kg of peanuts in one year (including peanuts used for baking). U.S. per capita consumption of snack foods in 2001 was 10.58 kg (23.28 pounds). It would appear that there is still potential for growth in the Canadian domestic market, based on the fact that U.S. per capita consumption is approximately twice that consumed in Canada.

A 1999 poll by Angus Reid Group showed that 81% of Canadians snack on a daily basis, with 65% of consumers claiming to consume healthy snacks and 58% who admit that they indulge in less healthy snacks. NPD Group’s SnackTrack showed that, for the first five months ending in June 2000, consumers chose fresh fruit as the snack consumed most often by adults and children, followed by potato chips, cookies, chocolate confections, crackers, yogurt and granola bars

In 2001, Canadian per capita spending on snack food products (not including peanut butter) was about $24. Canadian per capita spending on peanut butter in 2001 amounted to about $4. Retail sales of peanut butter in 2001 totalled $124.5 million, an increase of 2.3% over 2000 when retail sales amounted to $121.7 million. (ACNielsen)

An aging population combined with consumers who are more concerned with health have provided new opportunities for some snack food products. Processed seed snacks, nuts and baked snack products, such as pretzels, offer healthier choices to some consumers and continue to capture a portion of the snack food market in Canada. Recent strong interest in diets low in carbohydrates may have some impact on future growth for this industry. However, fat content and health aspects of snack food products are not important issues of concern for some consumers, and these low-fat products have continued to cater to a smaller segment of the market. By their very nature, snack foods are considered to be an indulgence.

For some time-pressed consumers who lead hectic lifestyles and eat on the run, snack foods have become an occasional convenient meal replacement.

Children are an important market for this industry and influence household snack food purchases. Many companies target their products to the 12-24 age group to capture the interest of this market segment who demand snack foods for taste and variety.

Niche products that offer novelty flavours, shapes, or unique ingredients have also been introduced. Unique flavours, products made from hemp seeds and root vegetables such as parsnips, beets, sweet potatoes and carrots, as well as organic snack food products are recent offerings in the market.

ACNielsen’s MarketTrack for the 52 weeks ending December 2, 2000, showed that several segments within the snack category had double-digit gains over the previous year. Party mixes gained 58%, multi/variety mixes increased 51%, rice and corn cakes increased 41%, and popped popcorn gained 36% during 2000.

Increasing globalization has led to increased competition for this industry, despite the fact that many snacks or flavours are unique to local regions. During the late 1980s, the snack food sector underwent significant ownership change and consolidation. In an effort to compete in a domestic environment which is more open to global trends, 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 the challenges of this century.

Growth in this industry has attracted new entrants into the market and the snack food industry now faces additional strong competition from branded products developed by these new players. Snack crackers and snack cookies also compete for a share of the consumer pocketbook.

Industry Structure

In 2001, 85 establishments¹ employed 7,310 people and shipped $1,504.2 million worth of products.

The majority of snack food manufacturing takes place in Ontario and Quebec. However, large plants are also located in western Canada and the Maritimes. There are also many small and medium-sized Canadian-owned firms located across the country serving regional markets.

Production facilities which make snack food products range in size from small, one- or two-person, operations, to large plants employing up to 550 people. Two of the three major manufacturers (sales over $100 million) are foreign-owned. Major manufacturers operate processing facilities in Ontario, Quebec, Manitoba, Alberta, New Brunswick and Nova Scotia. Additionally, medium-sized firms, which operate in their own local markets, are active in Ontario, Quebec, and British Columbia. Many smaller firms which have developed niche products are also active throughout Canada.

Many of the large establishments (up to 500 employees) which make peanut butter also make other food products in the same facility. These larger plants are mostly located in Ontario and Quebec. A few smaller production facilities manufacture peanut butter in eastern Canada (Nova Scotia, Newfoundland) and western Canada (Winnipeg).

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 mostly imported. Seeds used to make seed snacks are both supplied domestically and imported.

The cost of ingredients for snack food manufacturers varies depending upon the type of snack produced. The cost of ingredients and packaging materials, combined, can be as high as 56% of total costs. Labour costs for the industry make up about 24.3% of total costs, while fuel and electricity make up about 3.4% of total costs.

Except for those plants 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.

Competition in the snack food industry is fierce, due in part to the impulse nature of many snack 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.

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

Significance

Although the snack food industry makes up a small portion of the total food and beverage sector, it has exhibited steady growth in recent years. It represented 2.1% of the total value of food and beverage shipments, 2.8% of total employment in the food and beverage sector, and 1.4% of the total number of food and beverage establishments (plants) in 2001.

Shipments of snack food products and peanut butter amounted to $1,504.2 million in 2001 with potato chips estimated to represent about 40% of this amount.

The Canadian market for snack food products and peanut butter (which includes manufacturing shipments and imports but excludes exports) totalled $1.5 million in 2001.

In 2001, value-added in the snack food industry was 62.7% of the total value of shipments, significantly higher than the average for the food and beverage sector of 35.5% for that period.

Performance

Between 1992 and 2001, average annual growth for shipments of own manufacture for this industry was 4.8%. Shipments of own manufacture in 1992 totaled $908.6 million and in 2001 shipments of own manufacture totaled $1,504.2 million. See figure 1.

Domestic penetration has been decreasing since 1994 when this industry held almost 93% of the domestic market. In 2001 domestic penetration was 88.3%.

Manufacturing value-added is a measure of the value of an establishment’s outputs minus the cost of inputs. For the snack food industry, the average annual growth for manufacturing value-added was 5.3% between 1992 and 2001. In 2001, manufacturing value-added reached a level of $942.6 million.

Figure 1: Imports, Exports and Domestic Shipments, 2001

Employment

In 2001, 7,310 people were employed by the snack food industry. In 1992, total employment in this industry was 6,152 people. Note that this increase in employment is not growth. Because of major conceptual and methodological changes (http://strategis.ic.gc.ca/sc_ecnmy/sio/cis_definitions_eng.html) made to Statistics Canada’s Annual Survey of Manufacturers in the year 2000, readers should exercise caution when interpreting data and subsequent rates of change between the year 2000 and previous years. The results of these changes have added nearly 24,000 units to incorporated establishments with employees and sales of manufactured goods equal to or greater than $30,000 (old methodology) to the manufacturing sector. The magnitude of the effect from these changes will vary by industry.

Figure 2: Shipments of Own Manufacture and Employment, 1992-2001

Employment in the snack food industry was at its lowest point in 1991 at 5,434 people. Between 1992 and 1999, even with consolidation in the industry, employment levels remained above 6,000 people. See figure 2. Value-added per employee has also increased by 18% from 1990 to 1999.

In 2000, the snack food industry employed 8,516 people in 79 plants. In 2001, although the number of establishments increased to 85 plants, employment decreased by 14% to 7,310 people.

Investment

Investment in capital machinery and equipment totalled $89.6 million in 1999, an increase of 42.7% over 1998 when it was $62.8 million.

During the late 1990s and into the new millennium, a number of significant investments in Alberta, Ontario and Quebec were announced by a major snack food company.

Trade Performance

This profile includes products under the following Harmonized System (HS) Codes:

19059090 - corn chips
19059040 - pretzels
20052000 - potato chips
20081110 - peanut butter
20081190 - ground nuts
20081900 - nuts and seeds

Exports of Canadian snack food products have risen 330% from 1993 to 2003 with a resulting $160.2 million of product exported in 2003. See Figure 3. In 2003, the bulk of snack food exports ($155.5 million) were destined to the U.S..

In 2001, exports accounted for almost 12% of domestic manufacturing shipments.

A significant increase in snack foods exports occurred between 1998 and 1999 (42%), followed by an additional significant increase of almost 53% in 2000 and a further increase of almost 22% in 2001. These increases can be attributed to exports of potato chips to the US which almost tripled from 1998 to 1999, then increased 182% from 1999 to 2000, and rose 22% from 2000 to 2001. Potato chips accounted for almost 40% of total snack food exports in 2001 ($71.5 million). In that year, about $71 million worth of potato chips was exported to the US.

Figure 3: Trade Performance, 1993-2003

In 2002, exports of snack food products increased only 4.3% over 2001 to a value of $187.3 million in 2002. However, in 2003, exports of snack food products decreased 14.5% over 2002 to a value of $160.2 million.

Combined exports of corn chips, pretzels and extruded snacks to the U.S. almost doubled from 1998 to 1999, then increased by almost 53% from 1999 to 2000, and by almost 28% from 2000 to 2001. Between 2001 and 2002, a modest increase of 3.4% occurred. But exports fell 17.5% in 2003. These products, combined, accounted for 31% of total snack food exports in 2003.

Peanut butter exports accounted for about 19% of total snack food exports with a total of $30.8 million worth of product exported in 2003. Although peanut butter exports to the U.S. are restricted, in 2003, 93.2% of peanut butter exports (valued at $28.7 million) was destined to that market.

Exports of processed nuts and seeds, including peanuts, totaled about $9.5 million in 2003. A significant portion of that amount ($9.0 million) was exported to the US. Canada is the largest importer of peanuts from the US with over 80% of peanuts consumed in Canada coming from the US.

From 1993 to 2003, imports of snack foods have more than doubled. In 1993, imports totaled $79.8 million and have grown to reach $183.4 million in 2003. Again, the bulk of these imports in 2003 ($152.2 million) are from the United States.

Imports of potato chips, which totaled $56.9 million in 2003, accounted for the greatest share of snack food imports. Imports of corn chips totaled $33.1 million, while imports of pretzels totaled $14.5 million in 2003.

Imports of peanuts, nuts and seeds totaled $69.4 million in 2003.

Peanut butter imports totaled $4.7 million in 2003.

From 1992 to 2000, Canada has had a global trade deficit which was greatest in 1998 at $74.3 million. In 2001, Canada’s global trade balance reached a positive balance of $3.4 million. Canada’s global trade balance was in deficit again in 2002 and in 2003 Canada’s global trade deficit amounted to $23.2 million.

Potato Quality in Canada

The potato is the most important vegetable crop in Canada with 4.3 million tonnes produced in 2000. Also in 2000, Canada was the 13th largest potato producer in the world. Potato production occurs in all provinces in Canada, while the makeup and importance of the industry varies widely in each province. Snowden, Atlantic, Norchip, and Superior are the main chipping varieties. Chipping potatoes are grown in several regions in Canada (PEI, Nova Scotia, New Brunswick, Quebec, Ontario, Manitoba, Alberta). Potatoes used to make snack foods and dehydrated potato products are estimated to account for 10-15% of total potato production in Canada.

Chipping potatoes are harvested during late summer months 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 facilities in which an ideal environment maintains quality until potatoes are used. Chipping potatoes in storage require continuous ventilation and an ideal temperature (9-10o C) for optimum quality. These conditions help maintain high specific gravity and low sugar levels which are desired to produce light-coloured chips.

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. Processors require potatoes which are uniform and medium-sized, 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. Specific gravity also 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. Potato varieties with low 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 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, to reduce dependence on pesticides for crop production.

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.

Research is also in progress to enhance the nutritional value of the potato. This includes increasing levels of antioxidants, natural compounds associated with lower incidence of cardiovascular disease, certain cancers and eye diseases. In potatoes high antioxidant levels are associated, in part, with blue and red fleshed tubers. These pigments, in combination with low reducing sugars, can produce attractively coloured chips. While such varieties are still some years from the market place, they offer potential niche market opportunities.

Corn Quality in Canada

Ontario is the largest corn producing province in Canada with about 4.48 Mt produced in 2000, followed by Quebec with an estimated 2.04 Mt produced. In Ontario, corn for industrial and food uses accounted for about 1.5 Mt. in 2000. Small volumes of corn are also produced in Nova Scotia, Manitoba and Alberta.

About 60% of corn in Ontario is used for livestock feed. Overall, about 40% of total corn production is used for industrial and food products.

Ontario imports an estimated 3 million bushels of corn for food production.

Corn meal 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 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.

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 Fusaria that produce mycotoxins. Screening methods are being developed in Canada to keep susceptible varieties out of the system. In addition, drying and storage conditions are being evaluated to minimize the risk of mycotoxins and to improve energy conservation resulting in an efficiently produced corn of consistent high quality.

In the US, major white corn producing areas are located considerably south of Ontario and are annually plagued by the development of aflatoxin and other carcinogenic mycotoxins produced by molds in high humidity conditions. Because Ontario has cooler climatic conditions, it is not affected by aflatoxin and therefore has a significant quality advantage for production of food grade white corn².

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

In Ontario, research and development has been ongoing for several years to improve varieties of yellow and white corn for use in corn chips and other snack foods. The Ontario Corn Producers’ Association (OCPA) and the University of Guelph are involved in a number of research projects with funding from industry (seed companies, processors, brokers) and government (Ontario, AAFC) to develop improved corn varieties better suited to Ontario growing conditions, and to recommend hybrid selection, agronomic practices and drying and storage techniques to optimize food quality corn. The challenge is to develop a hybrid that consistently meets very strict quality standards regardless of the growing season.

Issues, Challenges and Opportunities

ISSUES

Regulatory Issues

Nutrition Labelling

Health Canada, the regulatory agency responsible for the development of food labelling policy, has published new regulations on January 1, 2003 which make nutrition labelling mandatory on most food labels, which update requirements for nutrient content claims, and which permit, for the first time in Canada, diet-related health claims for foods. Details on the new nutrition labelling rules can be found at Health Canada’s website at http://www.hc-sc.gc.ca.

These regulations will be enforced by the Canadian Food Inspection Agency (CFIA) which is responsible for the enforcement of the food provisions of the Food and Drugs Act and Regulations. Health Canada will respond to industry and consumer enquiries related to the new regulations. CFIA will respond to enquiries related to compliance and enforcement activities. Health Canada and CFIA will provide industry with a CD-ROM and other tools to help them with compliance.

Fortification of Foods

In January 1998, Health Canada initiated a comprehensive policy review on the addition of vitamins and minerals to foods. This policy review was conducted to take into account the public health role of nutrient additions to foods, consumer needs and industry concerns.

One of the questions under review is whether to exclude foods that do not fit into traditional food groups as suitable candidates for fortification, such as snack foods high in fat or salt, confections, soft drinks, etc.

A set of guiding principles for fortification was developed with the involvement of many stakeholders and with the assistance of an External Advisory Panel. A report on the Policy Recommendations was published in October 1999 and sent nationwide to over 2000 representatives of all interested sectors for review and comment as part of the public consultation process. Feedback was received and stakeholders comments were published, with further consultations in 2002 on final policy and implementation plans. Proposed regulations were scheduled to be published in the Canada Gazette I in October 2003 and the final regulation is scheduled for publication in the Canada Gazette II in October 2004. Further details on the Policy Recommendations are contained in Health Canada’s Consultation Document entitled, “The Addition to Foods of Vitamins and Minerals Policy Review and Implementation, October 2002" located at Health Canada’s website at http://www.hc-sc.gc.ca.

Environment

With respect to environmental issues, processing firms must meet all 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 processors in general have faced is waste remaining from packaging. Reduced weight from packaging 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.

Waste reduction is important everywhere and particularly for large urban centers that are rapidly using their landfill capacity and are experiencing difficulty and expense in finding and using 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 food processors and other 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 be mangled fairly quickly by fork lifts and then sent to landfill.

Prior to plant construction, processors 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 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. Provinces and municipalities have to be satisfied that systems will be put in place for waste water treatment. Some processors 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.

Health and Food Safety Issues

Allergies

A variety of foods contain ingredients that can cause allergic reactions in sensitive individuals. Most adverse reactions are caused by the following foods and their derivatives: peanuts, tree nuts, sesame seeds, milk, eggs, fish and crustaceans, soy, wheat and sulphites. If these foods, or their derivatives, are not labelled or are incorrectly labelled, or if an inadvertent carry-over occurs during manufacture, the results can be serious and sometimes fatal.

The CFIA is working with the food industry to ensure that these foods are always declared in the list of ingredients on the food label, and that they develop allergen prevention strategies to manage the allergy risk.

In consultation with the food industry and allergy groups, the federal government has developed a precautionary labelling policy, e.g. “may contain peanuts”. This policy allows the food industry to voluntarily label products that may inadvertently contain substances capable of causing severe adverse reactions. Precautionary labelling must be truthful and must not take the place of good manufacturing practices. Further information on Canada’s food safety standards and labelling requirements is available from CFIA’s website at http://www.cfia-acia.agr.ca.

Acrylamide in Food

In 2002, research in Sweden revealed that higher than expected levels of acrylamide, a carcinogen, were found in baked and fried foods, including potato chips, french fries, cereals and bread. 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.

Obesity

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 industry maintains that moderate consumption of snack foods, a diet that includes a variety of foods, and physical exercise are key to a healthy lifestyle.

Health Canada develops and promotes guidelines for healthy eating, physical activity, and healthy weights. These guidelines include Canada’s Food Guide to Healthy Eating and Canada’s Physical Activity Guide to Healthy Active Living.

Challenges

In a rapidly changing climate, the snack food industry as with other food processing industries must address a number of challenges if it is to continue to grow and prosper. Some of these include the following:

• concentration of major retail chains, resulting in a higher degree of competition for shelf space;
• private label products;
• changing consumer demographics resulting in changing consumer tastes and increased demand for reduced fat products and higher nutrition;
• increasing competition from imports and from similar products;

Although retail concentration has increased over the years, snack food manufacturers can take advantage of a wider variety of distribution channels than some processed food products. The snack food industry distributes its products through supermarkets and grocery stores, drug stores, convenience stores, mass merchandisers and warehouse outlets, and gas stations. The foodservice and hospitality industry is another method of distribution for snack food products. Strategically placed vending machines also provide a distribution channel for snack food products.

During the past decade, the introduction of warehouse club stores that emphasize value, as well as the increasing concentration of the distribution sector in general, have increased pressure on processors to reduce prices and focus on efficiencies. Furthermore, the introduction and increasing prevalence of private or own-label products by retailers have further pressured processor 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 processors, it has provided real growth opportunities for some small- and medium-sized processors without requiring the expenditures needed to launch their own brands.

Consumers of snack food products now have a great assortment of flavours from which to choose, 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 some 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.

Olestra is a fat substitute made from vegetable oil and sugar which is not digested because of its larger molecular size. Although olestra has been approved for use in the manufacture of snack food products in the U.S., Health Canada has not allowed its use in Canada. In the United States, products that contained olestra have recently been removed from the market indicating a lack of interest in these products by consumers.

The domestic market for snack products appears to hold great growth potential, especially if the demand for niche market products can be met. 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 and snack crackers will continue to squeeze this industry for market share.

Snack food processors are aware of the public’s 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.

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 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. Recently, companies have introduced products in eye-catching metallized re-sealable packaging to differentiate their brands, and new spill-proof packaging allows consumers to eat on-the-go.

Package size is also a consideration for the industry. Snack foods are rapidly consumed. 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.

The concurrent emphasis on Efficient Consumer Response has meant that processors have introduced extensive technological and business model developments such as electronic data interchange, bar coding, direct store delivery, and continuous product replenishment (just-in-time shipments) into their operations, all of which improve efficiencies and reduce supply chain costs. As well, processors use strategic approaches such as category management to increase profits in product categories.

Like all food and beverage processors, the snack food industry is rapidly moving with the rest of the retail packaged goods industry to using Canada’s new national electronic product registry/catalogue. The registry facilitates e-commerce by ensuring the integrity of product data using international standards of data exchange. By January 2003, the registry is to be the only source of product data for selling to Canada’s major food retailers. As part of its e-commerce development, the industry is 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 particular farms.

Association

Canadian Snack Food Association
885 Don Mills Road, Suite 301
Don Mills, Ontario M3C 1V9
Tel: (416)-510-8036
Fax: (416)-510-8044
Courriel : Ileanal@4Reflections.com

The Canadian Snack Food Industry

Departmental Contact

Anne Woo
Senior Market Development Officer
Food Value Chain Bureau
Agriculture and Agri-Food Canada
Ottawa, Ontario K1A 0C5
Tel: (613) 759-7857
Fax: (613) 759-7480
Email: wooa@agr.gc.ca

Monica Treidlinger (author)
Food Value Chain Bureau
Agriculture and Agri-Food Canada
Ottawa, Ontario K1A 0C5

The following analysis reports are available from the Food Value Chain Bureau, Agriculture and Agri-Food Canada:

Food and Beverage Processing Sector Analysis

• The Canadian Food and Beverage Processing Sector - An Overview of Opportunities and Challenges at the Turn of the Century
• Historical Perspective of the Canadian Food and Beverage Processing Sector
• Analysis of the Structure of the Canadian Agri-Food Industry

Sub-Sector Profiles

• The Canadian Bottled Water Industry
• The Canadian Bread and Bakery Industry
• The Canadian Brewery Industry
• The Canadian Cane and Beet Sugar Industry
• The Canadian Confectionery Industry
• The Canadian Distillery Industry
• The Canadian Dairy Processing Industry
• The Canadian Fish and Seafood Industry*
• The Canadian Flour and Related Products Industry
• The Canadian Frozen Food Product Industry
• The Canadian Fruit and Vegetable Canning, Pickling, and Drying Industry
• The Canadian Pasta Industry*

The Canadian Poultry Processing Industry

• The Canadian Snack Food Industry
• The Canadian Soft Drink Industry
• The Canadian Tea and Coffee Industry
• The Canadian Wine Industry

Readers can obtain data updates by accessing the electronic version of these reports at http://www.agr.gc.ca.

We would be pleased to receive your views, and any comments or suggestions that would improve the substance of these reports. For additional information, and/or to provide your comments, please contact:

Food Value Chain Bureau
Agriculture and Agri-Food Canada
Room 501, Sir John Carling Building
930 Carling Avenue
Ottawa, Ontario
Canada K1A 0C5

(613) 759-7556.

Les documents sont disponibles en français

Date Modified: 2004-06-02		Important Notices
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