Look to the North
The pressure on Canadian food and beverage manufacturers is pretty strong. At the moment, the Canadian retail market is very concentrated, with 80 percent represented by the five biggest grocers, says Andre Gelinas, co-vice president of sales, RSVP Solutions Group, a Mystic, Conn.-based broker that helps supply U.S. retailers with products, including store brand items, from Canadian manufacturers.
“The cost of doing business in Canada is [high] because there are so few accounts,” he says.
And considering that a major trend in Canadian retail right now is consumers’ shift to value stores such as Loblaw’s No Frills banner in Ontario and Metro’s Super C banner in Quebec, manufacturers are seeing a lot of pressure being put on their margins, Gelinas adds. Therefore, many Canadian food and beverage manufacturers are looking south of their border, desiring to begin or grow their current business with U.S. retailers and their private label programs. This reality is good news for U.S. retailers.
According to Gelinas, some perks for many U.S. retailers and Canadian manufacturers include less expensive shipping — as certain markets in the United States such as the Northeastern U.S. market are closer to Central Canadian manufacturers than they are to U.S. manufacturers out west — and smaller production run minimums, thus allowing retailers that lack the size to source own-brand products from many U.S. manufacturers to secure contracts for store brand products.
Additionally, Canadian products are known for being of high quality, says Steve Peters, executive director, Food and Beverage Ontario, a Guelph, Ontario-based not-for-profit leadership organization dedicated to advancing the interests of Ontario’s food and beverage processors. Canadian products also have a reputation for being safe.
“Most Canadian companies are now GFSI-certified or in the process of getting the certification,” he states. “The Canadian manufacturers are very well perceived by U.S. retailers for providing quality and safe products.”
Eye on strengths
In Quebec, the state of private label manufacturing is “very strong” and has experienced “exceptional growth” over the past five to seven years, with many factors contributing to the growth, says Joan Kimball, business development officer, food industry. She is based in the Chicago office of the Quebec Ministry of Agriculture, Fisheries and Food, a Quebec government agency. She notes that in addition to larger store brand vendors — such as Montreal-based cheese manufacturer Saputo, Saint-Augustin-de-Desmaures-headquartered cookies and bars producer Group Leclerc, and Rougement-based soup, sauce, broth and beverage manufacturer Lassonde Industries (including its A. Lassonde, Lassonde Specialties and Arista Wines divisions) — Quebec boasts a large number of medium-sized private brand manufacturers.
“These companies, in particular, are very flexible in regards to run sizes and production modifications, yet they can still produce large enough [quantities] to satisfy most private brand product demands,” Kimball states. “This is very appealing to many store brand procurement specialists. Quebec’s niche lies especially in medium-sized private brand manufacturers, which is very appealing to today’s world of differentiation and efficiencies.”
Quebec manufacturers also make food safety a priority. Among Quebec manufacturers, third-party safety audits are the norm, Kimball assures.
Meanwhile, Ontario has the most manufacturing facilities in Canada, Gelinas says, offering U.S. retailers a breadth of quality products for their store brand programs.
“You can pretty much source everything from cookies to canned tomatoes to gluten-free products” from Ontario manufacturers, he explains.
But what’s worth sourcing from these two provinces? Peters notes that U.S. retailers can rely on Ontario processors of meat, baked goods, cheese, beer and wine for high-quality, safe products.
However, it’s easier and perhaps safer to source shelf-stable products from Ontario suppliers, Peters points out. Doing so eliminates the concern of perishables’ shelf life when they’re crossing the border.
As for Quebec, Kimball notes that manufacturers there produce a large range of products across most categories. But the province is particularly known for dairy, maple and pork goods. It also is known for organic and specialty items.
Among specialty goods producers, Quebec manufacturers are particularly known for their artisan cheese, Peters says. They’re also renowned for their artisan breads and desserts, Gelinas adds.
“Quebec companies are North American business partners with a European twist,” Kimball states. “Good food is in their DNA.”
How to do business
But before they approach a manufacturer in Quebec or Ontario for store brand goods, U.S. retailers first must understand what to bring to the table. First of all, U.S. retailers need to approach the transaction with “an appetite” for a long-term business relationship, Peters says. They are less likely to have a successful partnership — or a partnership at all — if they desire to only “cherry pick” their Canadian suppliers based on price alone.
It’s also important to be clear about needs, criteria and procurement and delivery process, Kimball notes.
“Whether dealing with private brand manufacturers north or south of the border, if there is a clear understanding by both parties in regards to what is needed right from the beginning, this will create a roadmap to a successful and beneficial partnership,” she says. “There is really no difference from a business perspective — you are still dealing with a North American company. The only thing that may be different is the accent!”
Additionally, U.S. retailers must be sure suppliers are willing to have regular open dialogue about inventory levels and supply expectations, Peters advises. They also must be aware of lead times to best plan for on-time delivery when crossing the border. And choosing partners that have a working understanding of food safety and labeling regulations for the United States vs. Canada is critical to getting Canadian-made store brand products onto U.S. shelves.
And, of course, U.S. retailers need to understand that while doing business in English is the norm for Ontario manufacturers, it’s not necessarily so for Quebec ones. According to Gelinas, if they deal with a Quebec manufacturer, U.S. retailers might have to communicate in French at some point.
“Most managers do speak English, but [communicating in French] is still a possibility,” he says.
Avoid potential pitfalls
Still, even with an understanding of what they should do when doing business with Canadian suppliers for store brand products, U.S. retailers need to know how to avoid potential pitfalls in the transaction and delivery process. Peters notes that some pitfalls include short lead times when inventories run low and different package sizes and configurations for the U.S. market, which might require lead time for a Canadian processor to adapt their processes. Retailers need to communicate openly and often with their Ontario and Quebec suppliers if they want to avoid these issues.
They also need to make sure that the manufacturer they approach has a federally inspected plant, Kimball points out, which is required for any supplier to ship products outside of Canada.
“The first question [you ask] should be, “Are you a federally inspected plant and, therefore, able to export?” she says.
And even though barriers between the Canadian and U.S. markets have “pretty much been eliminated” because of NAFTA, Gelinas states that two segments — dairy products and meat — are still difficult to source because of quotas and more.
“These two segments are still workable,” he says, “But you need more patience to get to the end results.”
“Most Canadian companies are now GFSI-certified or in the process of getting the certification.”
— Steve Peters, Food and Beverage Ontario
“Quebec’s niche lies especially in medium-sized private brand manufacturers, which is very appealing to today’s world of differentiation and efficiencies.”
— Joan Kimball, Quebec Ministry of Agriculture, Fisheries and Food