Appendix 2
Nutrition And Health As Drivers Of Food Supply And Consumer Demand In Canada

Retail and Food Services in Canada: Supply, Sales, Prices and Demand Drivers
Until the recent economic downturn, Canadian consumer demand for food seemed to be on a generally increasing trajectory, in particular for food bought for home consumption. Almost 75% of all Canadian meals are purchased from retail stores, to then be prepared and eaten at home (Figure K1).²¹⁷ Reflecting the progressive concentration of the food retail industry in Canada and worldwide, Figure K2²¹⁸ shows that the constant increase in food retail sales has been accompanied by a significant decrease in the number of stores in Canada.

	Figure L. The evolution of food prices.

In 2007, the market share of the commercial food service accounted for almost 80% of the whole foodservice category and sales of this segment have increased by 45% during the last decade but at a slower pace than that of the non-commercial sector (Figures K3, K4).²¹⁹ Between August 2001 and August 2008, an increase of 5.7% occurred in the percentage of total household expenditures on food and drinks out of the home.²²⁰ The average Canadian family visits a restaurant for a meal or snack approximately 520 times per year and spends about one-fifth of total household food expenditures at restaurants.²²¹ Interestingly, the number of establishments in the food service sector has remained stable since the late 1990s, without showing an intense concentration, as in the retail sector.

Food prices have also evolved over time. Between 1997 and 2006, the amount of household money spent on food has increased (Figure L1).²²² However, these increases have more or less followed the increase of income, even when looking at the lowest quintile of the income distribution (Figure L2).²²³ Trends started to change in 2007, and this reversal may be intensified with the recent food prices and financial crises: in 2007, the consumer price index for food increased by 2.7% above that of 2006. This increase was larger than the average consumer price index increase (2.2%) and, in turn, food was ranked as the third largest item increase in the Statistics Canada index.

The drivers of consumer demand, food quality (in particular taste), and nutrition have long been the top two “top of mind” criteria for consumers when purchasing food, be it when eating at home or when dining out (Figure M).²²⁴ Notably, the relative power of these two criteria shifts according to the context; quality becomes the primary criteria when dining out and nutrition prevails when buying food for home.

	Figure M. The evolution of food prices. Source: Consumer Perceptions of Food Safety and Quality Wave 2 Tracking 2006, AAFC

Nutrition and Health as Supply and Demand Drivers
Consumer awareness of the importance of food and nutrition for health – be it to control one’s weight, to prevent cancer and other chronic diseases, or simply to ensure quality of life with aging – has never been so high. As this increased awareness is progressively translating into changing behaviours and consumption patterns, it becomes more natural for consumers to limit the intake of certain foods or ingredients in their diet, thereby galvanizing the power that nutrition and health has to drive both supply and demand in many segments of the agriculture, food and food service industries. Selected segments are reviewed next.

Fruits and vegetables
While it is well-established that consuming a diet rich in fruits and vegetables reduces one’s risk of obesity and chronic diseases, most Canadians still do not eat the recommended 5 to 10 servings per day, as illustrated in Figure O1. The supply has remained relatively stable over the last few decades and the consumption prediction for the next 20 years remains almost flat (Figure N2, N3).²²⁵

Yet, there are important financial and health costs associated with a low consumption of fruits and vegetables. According to Lock and colleagues (2004),²²⁶ the global burden of disease attributed to low fruit and vegetable consumption accounts for approximately 2.7 million deaths and 1.8% of the total worldwide disease burden. A report on Canadian food trends until 2020 shows that the most significant health driver in the next 10 years will be obesity. The Canadian population will adopt a healthier lifestyle but the move will be slow. Adults faced with serious health concerns related to their weight may be motivated to change their diet and activity patterns.²²⁷ In Canada, the cost of cardiovascular diseases and cancer is over $32 billion per year.²²⁸ Reducing the rates of diseases through the consumption of 5 to 10 servings of fruits and vegetables per day would save the health care system approximately $6.4 billion in direct and indirect costs.²²⁹ Figure O2²³⁰ shows an inverse relationship between fruit and vegetable consumption and rates of obesity for both men and women. Despite numerous efforts, the per capita consumption of fruits and vegetables remains sub-standard.

Figure O. Fruit and vegetables: Consumption and health consequences. Sources: Statistics Canada and 2004 Canadian Community Heath Survey: Nutrition.

Organic food
Another trend that has shaped both consumer demand and food supply is that of organic food. Canada’s organic fruit and vegetable industry is slowly expanding, with sales still representing a niche market in most parts of Canada. Between 2001 and 2006, the number of Canadian farms that claim using organic production methods increased by nearly 60%.²³¹ In 2006, 3,555 farms reported growing certified organic products compared to 2,230 in 2001.²³² In 2006, as in 2001, “fruit, vegetable, and greenhouse products” were the second most commonly reported cert-ified organic product category, with 41% of organic foods sold in supermarkets being in the fruit and vegetable categories. The concept of organic food has penetrated most other product categories sold in supermarkets, including packaged and prepared food, dairy, eggs, bread, and grains (Figure P).²³³

Figure P. Organic food. Sources: P1: Copyright 2008 by Mintel International Group. Reprinted with permission. P2 and P3: Retail Sales of Certified Organic Food Products in Canada, Organic Agricultural Centre of Canada.

Reformulated processed food
Behaviours such as avoiding trans-fats, salts, or refined carbohydrates, and eating more fruits, vegetables, fibre, and yogurt have become progressively a part of the consumers’ more permanent choice set for everyday diet. Accordingly, leaders in the food processing industry have begun adjusting product formulation and strategic product and brand extensions to reflect this health-friendly shift. A Report by ACNielsen, tracking nearly 500 food product categories annually, reported that approximately one in five active manufacturers’ listings in retail grocery stores in 2003 were considered “better for you products.”²³⁴ The number of “better for you” product listings had more than doubled in three years, while the market share of these foods increased by 1% annually. In fact, six of the seven retail grocery categories experiencing double digit growth in 2003, as tracked by ACNielsen on a global basis, were “better for you” products. However, while there has been significant progress made in reducing trans fat, salt, and saturated fat, reformulation still presents great difficulties, particularly in attempting to maintain taste so that the products remain acceptable to consumers.

Functional foods for nutrition and health
Many of the new products put on the market have been in the area of technology-supported functional food and natural products. This marketing taps into the increased prevalence of chronic diseases and the aging of the population worldwide, as well as the recognition that today’s consumers are increasingly making the connection between health and nutrition. Table B²³⁵ indicates the diversity of motives that drive consumer demands for functional food.

As Figure Q²³⁶ shows, the number of new processed food products making functional claims has steadily increased worldwide over the last few years. This rising trend is reflected in the market value of functional food in Canada, the U.S., and other industrialized countries (Figure R).²³⁷ In 2008, the functional foods and natural health products (FFNHP) sector in Canada reported significant growth in recent years, both in terms of the size of the domestic market and in terms of export sales. Currently, this sector has an approximate share of 2.6% ($3.2 billion) of the more than $100 billion global market for functional foods and dietary supplements.²³⁸

	Figure Q. Copyright 2008, Mintel International Group. Reprinted with permission.

	Figure R. Functional food market value for Canada and the U.S., 2000-2012. Source: Nutri-Net Canada and Agriculture and Agri-Food Canada.

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