Canadian consumers are no longer purchasing beverages for thirst alone. Many other factors come into play, each with their own challenges. Trends driving purchasing decisions in the beverage category include health and wellness, people on the move/convenience, and cultural and demographic shifts. Consumers are also demanding flavor and genuine tasteand for many, they are also willing to pay more to get what they want.
Soft Drinks: In the quest for health, carbonated beverages are taking a hit. Per capita consumption of soft drinks in Canada has steadily declined the past decade and is expected to continue this trend through 2019. The amount of pop being purchased in Canada is decreasing by about 4 percent annually as consumers try to minimize their sugar intake and/or avoid artificial sweeteners (Global News, October 2014). A similar situation exists in the United States, where carbonated soft drink sales have been declining for the last 10 years due to consumers looking for healthier options. However, despite the decline in sales, carbonated soft drinks are still the most popular beverage in the United States.
Artificial Sweeteners: The primary artificial sweeteners used in beverages in Canada and the United States include aspartame, sucralose and acesulfame potassium. Though don’t be fooled; regulations pertaining to their permitted uses and levels of use differ between Canada and the United States, and not just for soft drinks.
Energy Beverages: While soft drink consumption is declining, the energy-beverage category is booming despite sometimes controversial media attention. In the United States alone, energy-drink sales were up 6.7 percent in 2013 over 2012 (CSP Beverage Report, 2014). Energy drinks are functional beverages typically marketed for enhanced mental and/or physical performance over a limited period of time. The vast majority contain caffeine, usually in combination with vitamins, amino acids and/or carbohydrates.
Food or Natural Health Product: Although regulated as foods in the United States, depending upon the format (beverage or “shot"), energy beverages can be foods or natural health products (NHPs) in Canada, each with quite a different regulatory framework. Permitted ingredients and claims as well as market authorization vary significantly depending upon the classification.
Bottled Waters: Flavored, carbonated, still waters and fortified waters all line store shelves. According to Euromonitor International (March 2015), retail volume sales of bottled water in Canada increased by 3 percent in 2014 to reach 2.4 billion liters. Rising sales are being driven by consumer demand for healthy and portable hydrating drinks without artificial ingredients, such as sweeteners and preservatives. Depending on what you call your product, e.g., spring water or mineral water, there may be specific regulatory standards that must be adhered to.
Vitamins and Minerals: The addition of vitamins, minerals and amino acids to foods is tightly regulated in Canada. It has only been fairly recently that companies have been able to fortify bottled water products, and this is only allowed under a Temporary Marketing Authorization Letter (TMAL). Obtaining a TMAL is a regulatory process that allows a company to sell a product that is safe, but not 100-percent compliant with the regulations. A company is allowed to sell an agreed upon amount of the identified product within a specified geographical area, for a limited period of time.
Iced Tea: According to a report (Canadian Food Trends to 2020) commissioned by Agriculture and Agri-Food Canada, tea consumption is expected to grow 40 percent by 2020. Driving this trend is consumer interest in health and wellness, and increased awareness of tea’s functional benefits. Next to water, tea is the world’s most consumed beverage. Canadians alone drink almost 10 billion cups of tea each year, and tea consumers have an average of eight types of tea in their cupboard. (Tea Association of Canada, 2014)
Added Extras: “Tea" (black, green and decaffeinated) is a standardized commodity and must meet regulated compositional standards when sold in Canada. Herbal teas may be foods or natural health products, depending upon the main ingredients and the claims being made. Rememberdifferent classification equals different regulatory requirements. Beware of “natural" sweeteners such as stevia and monkfruit extract; although they may be allowed for general use in the United States, Canadian regulations differ widely in this area.
Beer and Wine: Here again we see the effects of health and wellness on consumer purchasing preferences, as wine (including low-calorie wine) takes the front seat to beer and other alcoholic beverages. An aging, educated and discriminating Canadian population drove wine sales up 3 percent in volume and 3 percent in value to 531 million liters and C$11.2 billion in 2014, respectively. This same rate of growth for wine sales is predicted to continue into 2019. Unlike beer with an already high per capita consumption, wine still has room for growth, as current per capita consumption of wine in Canada is less than a quarter of that in France or Italy (Euromonitor International, June 2015). Beer volumes are flat or declining in most developed countries including Canada and the United States, but premium craft and specialty beer sales are on the rise. Craft beers now make up 11 percent of U.S. beer sales, up from 5 percent in 2011, and from virtually nowhere a decade earlier. Comparable figures are not available for Canada, but if restaurant sales are any indication, the same situation exists in Canada. While overall sales of beer at restaurants fell 6 percent last year, craft beer sales rose 7 percent (Globe & Mail, Oct. 18, 2015).
Standardized Commodities and Container Sizes: “Beer" and “wine" are standardized commodities and have specific compositional and labelling requirements that must be met. In addition, the container sizes for wine are prescribed by law. Adding ingredients not included in the standards will result in a change to the common name of the product.
Other Considerations: Innovation is key in the quest for healthy beverages; however, country-specific laws often stand in the way of innovation. New technologies and new ingredients may be considered to be “novel" in Canada, and as such, require premarket notification and approval by Health Canada before being used in products sold in Canada.
With a growing population of more than 35 million health-conscious consumers, Canada is a market well worth exploring. However, before a beverage brand does, it needs to be sure to seek knowledgeable and experienced industry experts who can help navigate the legal challenges presented by any new market.
Anne Wilkie ([email protected]) is the senior government relations and regulatory strategy specialist at Source Nutraceutical Inc. (sourcenutra.com), a regulatory compliance company based in Winnipeg, Manitoba. Wilkie has more than 30 years of experience in regulatory affairs and government relations specializing in the food, natural health products and organic sectors. Wilkie has worked with Health Canada, the Canadian Food Inspection Agency and most recently as the vice president and head of regulatory affairs for the Canadian Health Food Association (CHFA), Canada's largest trade association for the natural products sector.