Consumers want to know
We have had a lot of requests this week from media and others to understand how to determine the origins of food and beverage products. As all of you in this industry know, this is a complicated industry, and it is not always a simple answer to a simple question. We wanted to share some of the regulatory details, what we see in marketing and how we believe consumers will make the choice.
First, one more update on tariffs (quickly)
On Wednesday I was speaking online to a group from Saint Mary’s University in Halifax about how to price their products. Much better than watching the “liberation day” tariff announcement from Washington. All that to say we do need to understand how this will impact our industry.
It is important to understand the facts as we continue to work in a volatile environment. The announcement from Washington is detailed in the attached link. It is not easy reading, but section 3 d and e are specific to Canada. We will see tariffs on autos, auto parts, steel and aluminum that were announced previously. If you were like me, you were looking at the chart of countries for Canada. We were not there. As of right now…U.S. have decided to continue to abide by the CUSMA trade deal and products under this agreement will enter the U.S. tariff free. Any products outside this agreement will be subject to 10% tariff. Canada’s response could trigger more retaliations from Washington. As we have said we are going to be in this period of volatility.
Back to How Canadian is it?
Regulatory environment
Anyone who has a food or beverage product in Canada should know there are a certain set of regulations to determine what you can and cannot say on your packaging and in your marketing. Many of these regulations were developed to provide information to consumers but also to support initiatives like traceability. Everything we put in italics here are direct quotes from CFIA website.
There are 4 basic claims for product origin and composition:
- Product of Canada
A food product may use the claim "Product of Canada" when all or virtually all major ingredients, processing, and labour used to make the food product are Canadian. This means that all the significant ingredients in a food product are Canadian in origin and that non-Canadian material is negligible.
The following circumstances would not disqualify a food from making a "Product of Canada" claim:
- very low levels of ingredients that are not generally produced in Canada, including spices, food additives, vitamins, minerals, flavouring preparations, or grown in Canada such as oranges, cane sugar and coffee. Generally, the percentage referred to as very little or minor is considered to be less than a total of 2% of the product
- packaging materials that are sourced from outside Canada, as these guidelines apply to the Canadian content and production or manufacturing of the food product and not the packaging itself
- the use of imported agricultural inputs such as seed, fertilizers, animal feed, and medications
For example, a cookie that is manufactured in Canada from oatmeal, enriched flour, butter, honey and milk from Canada, and imported vanilla, may use the claim "Product of Canada" even if the vitamins in the flour and the vanilla are not from Canada.
- Made in Canada from domestic and imported ingredients
A "Made in Canada" claim with a qualifying statement can be used on a food product when the last substantial transformation of the product occurred in Canada, even if some ingredients are from other countries.
Substantial transformation
A substantial transformation occurs when a food product undergoes processing which changes its nature and becomes a new product bearing a new name commonly understood by the consumer.
For example, the processing of cheese, dough, sauce and other ingredients to create a pizza would be considered a substantial transformation.
When a food contains both domestic and imported ingredients, the label would state "Made in Canada from domestic and imported ingredients". This claim may be used on a product that contains a mixture of imported and domestic ingredients, regardless of the level of Canadian content in the product.
For example, a cookie manufactured in Canada using Canadian flour, oatmeal and shortening and imported sugar may be labelled or advertised with the claim "Made in Canada from domestic and imported ingredients".
To provide clarity and consistency for consumers, when a company chooses to use the "Made in Canada" claim, the qualifying statement should be presented in a standard format: "from domestic and imported ingredients". However, it would be considered acceptable if the order were reversed, if there were a higher proportion of imported ingredients than domestic ingredients.
The claim "Made in Canada from domestic and/or imported ingredients" is not permitted as it does not provide meaningful information to the consumer about the Canadian content.
- Made in Canada from imported ingredients
A "Made in Canada" claim with a qualifying statement can be used on a food product when the last substantial transformation of the product occurred in Canada, even if some ingredients are from other countries.
Substantial transformation
A substantial transformation occurs when a food product undergoes processing which changes its nature and becomes a new product bearing a new name commonly understood by the consumer.
For example, the processing of cheese, dough, sauce and other ingredients to create a pizza would be considered a substantial transformation.
When a food is made with ingredients that are all sourced from outside of Canada, the label would state "Made in Canada from imported ingredients".
For example, a cookie manufactured in Canada from imported flour, oatmeal, shortening and sugar may be labelled or advertised with the claim "Made in Canada from imported ingredients".
- 100% Canadian
When the claim "100% Canadian" is used on a label, the food or ingredient to which the claim applies must be entirely Canadian rather than "all or virtually all" Canadian.
For example, if the claim "100% Canadian" was used on a pot pie, all of the ingredients, processing, and labour used to make that product must be Canadian.
This would be the same case for a food with a claim which refers to the origin of a particular ingredient, whether single or multi-component, as being "100% Canadian".
For example, if the claim "Made with 100% Canadian wheat" is used on a bag of dry pasta, all of the wheat, and its derivatives, used in that product must be Canadian.
The regulations are much more detailed than we have included here. All brand owners should ensure their label and other communication is correct and clear. If you need to make changes now is the time.
Marketing environment
Regulations are one thing; what brands say to consumers are another. We see a lot of messages out there on packages, on shelf and online. Reality is the regulators will never be able to police it all. More than ever brands should think carefully about the messages they communicate to consumers. It is true consumers want to know but if you are not honest or push the envelope it could hurt more than it will help.
On packages we see some efforts made to reference Canada. One example that has received a lot of attention is Campbell’s Soup. A number of their SKUS include a statement “Designed in Canada” when the product is clearly made in U.S. It is true Campbells used to make soup in Canada and perhaps the recipe was formulated here before they closed their production facility. Prior to the trade war this was probably not an issue. They were not the first and not the only company to move production to another country to save money or access ingredients. Now it is an issue. We do not believe it was malicious on the part of Campbells but if they asked we would say-change it.
We also see signage on the shelf from brands. Hostess which is part of Pespi with headquarters in New York are using their direct store delivery model to put up a lot of signage. You can see this shelf sing at a Lawtons store in Halifax. Yes the chips are made in N.S., probably from Canadian potatoes by Canadian employees. But is it really right to wrap themselves in the maple leaf? Again, 5 months ago we would have said “great made close to home”. Now we question is it really right?
Retailers are also putting up signage. We have heard they are telling suppliers not to put up their own signage unless it is approved. It is a challenge for retailers to know exactly where every product is produced. Consumers want to know so they are trying to inform them. Some people see it as misleading when a sign says “Made in Canada” on orange juice. Technically it was made in Canada but that means they mixed the orange concentrate with water here. The oranges definitely did not come from here.
Consumers
We believe there are three (maybe four) things consumers are thinking about:
- Where was it made?
People want products produced in Canada.
- Where are the ingredients from?
Consumers are looking for products made with Canadian ingredients. Some will be more committed than others. If you are all in on this one then orange juice is not in your future.
- Where is the ownership of the business?
This can be a challenge to figure out for consumers. Canadian owned brands should be talking about this as much as they can. If we go back to the salty snacks category, we shared the Hostess signage and message. Old Dutch, Hardbite, Covered Bridge and Humble Chips are all Canadian owned, use Canadian potatoes and are manufactured in Canada by Canadians. If they asked us we would suggest they need to reinforce it all to make people think.
- Economic impact
This is probably even more of a challenge for consumers. This can also be a counter argument to #3. A company like Pepsi employs a lot of people in Canada. They make soft drinks, salty snacks granola bars and other products here. They probably employ more people than the Canadian owned salty snack and granola bar companies. The Pepsi profits go to the U.S. but they employ a lot of people here and probably pay taxes.
Will consumers go through all of this every time they pick up a product in the grocery store? Some are definitely all over this right now. In my time I have never seen as drastic and swift change in consumer behaviour. As long as we continue to have our sovereignty challenged and live under the threat of more tariffs this will continue.
There has never been a better time for Canadian brands to talk to consumers. This is an opportunity to get them to pick up your product and break the habit of buying a large U.S. based product with very deep pockets. Do a great job telling them and when they do buy figure out how to build a relationship and get them to buy again next time.
No doubt we use AI applications to enable us to do what we do. We also review what we do and give it the critical thinking test to ensure it is right, from our perspective, for the industry today.
Peter
SKUFood Recipes for Success Podcast
In this episode we are joined by Cheryl Donnelly, Senior Market Development Officer at Agriculture and Agri-Food Canada (AAFC). With 14 years of experience in international affairs at AAFC, Cheryl has been instrumental in driving market development strategies and initiatives in regions such as the EU and the Middle East. Her expertise extends to leading the modernization of AAFC's Canada Brand Program, aimed at promoting Canadian agri-food and seafood products on the global stage.
Cheryl has a proven track record of success, having led e-commerce and digital marketing campaigns in Japan and Vietnam as part of launching the Canada Brand internationally. Currently, she's focused on the Indo-Pacific region, devising strategic approaches to help companies capitalize on export opportunities.
Join us as Cheryl shares her insights into export trade, market
development strategies, and the importance of the Canada Brand in promoting Canadian products globally. Whether you're a seasoned exporter or new to international trade, this episode offers valuable lessons and strategies for success in the ever-expanding global market.
FCC releases 2025 Food and Beverage Report
It is great to have access to Canadian numbers you can use to benchmark your business. FCC have release their annual Food and Beverage Report which is a terrific resource you can use in your business.
Lot of information broken into several categories. Definitely a great read and something we look forward to every year.
I do have travel coming up to Toronto and Guelph so if you want to connect or have an event in any of these locations give me a call or send me an email.