Get a Little Help from Up North

When Americans think of Canada, they usually think of a few specific things: a maple leaf (and by extension, maple syrup), hockey and poutine, a French-Canadian concoction made of french fries, gravy and cheese curds. But the question begs to be asked: When U.S. retailers think of Canada, do they think of private label suppliers?

It would make sense if they do, considering the United States is the top market for Canadian exports of agricultural products, says an August 2015 Global Agricultural Information Network report by the USDA Foreign Agricultural Service. In fact, the United States imports $24 billion — or more than 50 percent — of Canadas agricultural exports (based on 2014 data). For comparison, Canadas next largest market for exports is China, with $4.3 billion and a little more than a 9 percent share of the market.

But the term “agricultural exports” is pretty general and comprises many items that U.S. retailers probably aren’t interested in selling as a private label product at their stores. However, a large percentage of agricultural exports (45 percent) sent to the United States in 2014 fell within the prepared foodstuffs category. Included within that category are products such as bread, pastries, cakes, oilcake, chocolate and cocoa-containing products, prepared or preserved vegetables, and sugar confectionery without chocolate, notes the August 2015 Global Agricultural Information Network report. Of course, these examples are just a few of the types of products Canada exports to the United States.

Obviously, the supply chain between Canada and the United States is wide open and widely used by many U.S. and Canadian companies. U.S. retailers, therefore, might want to consider the advantages of working with Canadian suppliers.

Clear advantages

Sometimes Canadian suppliers offer U.S. retailers very different product options than what is available to them within the states.

“You wouldn’t think that there would be striking differences between what is on the shelf in a grocery store in Canada and what is on the shelf in the United States, but the influences and history are, of course, very different,” says Andrea Leiser, president of RSVP Solutions Group, a Mystic, Conn.-based broker that helps supply U.S. retailers with products, including store brand items, from Canadian manufacturers. “These factors, however, make for an interesting neighbor with unique products, packaging, flavors, cooking styles, climate, regional specialties and very independent culinary points of view across the provinces.”

Al Brezina, program director for Food and Beverage Ontario, Guelph, Ontario, agrees.

“Canadian manufacturers offer more ethnically diverse products, and these can create unique offerings for the U.S. consumer and for U.S. retailers [looking] to differentiate themselves in their local marketplace,” he says.

For example, a trip to Québec is as close to being in France as one could be, outside of France, Leiser says. Québec typically exports products such as artisanal pastries, breads, desserts and gourmet products in “every category.”

One thing France is famous for is its cheese. And, perhaps not surprisingly, so is Québec.

According to the Québec Ministry of Agriculture, Fisheries and Food (MAPAQ), Québec is home to the first dairy school and first blue cheese in North America. It goes on to say that Québec’s cheese is often even better than France’s.

“[Québec’s] cheese-making expertise has been recognized through hundreds of awards at competitions around the globe,” MAPAQ says. “The art of cheese-making has undergone an extraordinary development over the past few years, with artisanal offerings often supplanting the reputation of French cheeses.”

Of course, Québec is only one of 10 provinces in Canada — all of which have equally interesting and unique products to offer U.S. retailers. For example, products from Atlantic Canada include fresh seafood and unique fruit and vegetable products, including new varieties and value-added products. Meanwhile, Western Canada offers pork and beef and many different grains, and Niagara Valley in Ontario offers a wide range of wines and ice wines, Leiser states.

But unique products are just one advantage that comes from doing business with Canada. Another advantage is economic.

Canadian products are cost-effective for U.S. retailers because the Canadian retail marketplace is very competitive, and manufacturers are offering very competitive pricing, Brezina says. And the Canadian dollar has declined in value in comparison to the U.S. dollar. Therefore, U.S. retailers could purchase products more cost-effectively.

“U.S. retailers should take advantage of the strong U.S. currency,” says Fiore Napolitano, vice president sales and marketing, Les Aliments O’Sole Mio Inc., Boisbriand, Québec. “That translates to higher retail margins or more aggressive retail pricing.”

But not all of this advantage will flow through to pricing, Brezina cautions, as many ingredients and packaging materials in Canadian products are, in fact, sourced from the United States. Retailers will also face some upfront costs to develop labels and modify product formulations for the U.S. market, something that will need to be addressed through discussions with the Canadian supplier.

The ‘B’ word

Some U.S. retailers are hesitant to work with Canadian suppliers because products must cross a border. They feel that this process could be very inconvenient and time-consuming.

“Sometimes American buyers are almost afraid to purchase from abroad because they think it’s complicated — but we’re not overseas,” Napolitano says.

To prove how uncomplicated it is, Napolitano says it is easier for his company — based in Québec — to ship product to the Northeast region of the United States than to ship it west to Vancouver within Canada.

Whether a sale is made within the United States or Canada, both buyers and sellers need to work within specific parameters for a successful transaction, Leiser says. The border is just another parameter.

“I wouldn’t categorize border-crossing regulations as obstacles,” Leiser adds. “Canadian companies who successfully export to the United States have taken the time to learn the regulations for working with Customs, FDA, USDA and other regulatory agencies.”

And, really, all of the burden to get through the border successfully lies on Canadian suppliers, Napolitano says. The exporters are the ones that have to provide all the paperwork and work with the government agencies. U.S. retailers simply write a purchase order the way they would for any other supplier.

“The border is not an obstacle,” he adds. “Canada and the United States have a trade agreement that makes it very easy.”

Plus, products that cross the border must be tested, validated and sampled by the USDA and FDA. Retailers should view this as a benefit, Napolitano says.

“At the border, a third party samples and tests our products for listeria and bacteria, so that’s a reassurance U.S. retailers won’t necessarily get from U.S. suppliers,” Napolitano notes. “When we cross the border, they’re also validating and checking the labels, product and quality.”

Be a good communicator

While many Canadian suppliers are familiar with exporting to the United States, good communication must be available from the very beginning, Brezina says. For example, it is important for U.S. retailers to be clear about volume requirements, to ensure that the Canadian retailer can supply the scale required.

“Often, Canadian suppliers are best suited for a regional or local U.S. market,” he adds. “This creates opportunities for U.S. regional retailers and also for national retailers to do regional market tests.”

Larger-volume requirements could be addressed through longer-term contracts that enable the Canadian supplier to make investments in capacity, Brezina continues. Some additional lead time needs to be in place for managing any regulatory requirements and supply logistics.

U.S. retailers will also need to communicate with Canadian suppliers regarding requirements in terms of volume, timing, any unique product or packaging and secondary packaging (e.g., case size), “all of which can be readily addressed through regular dialogue with the Canadian supplier,” Brezina states.

It makes sense

U.S. retailers, after reviewing the positives and negatives of doing business with Canadian suppliers, might be interested to know what Harry S. Truman told the Canadian Parliament in 1947.

“Canadian-American relations for many years did not develop spontaneously,” he said. “The example of accord provided by our two countries did not come about merely through the happy circumstance of geography. It is compounded of one part proximity and nine parts good will and common sense.”

U.S. retailers cannot expect relationships with Canadian suppliers to just develop spontaneously. However, proximity, good will and common sense sure will help once that initial contact is made.