The Canadian Connection

April 1, 2005
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The Canadian Connection

Canadian suppliers sound off on building partnerships beyond borders.
When you think of Canada, probably the first things that come to mind are cold weather and hockey. And maybe Mounties. But other than that, Canada in general remains on the radar as simply our neighbors to the north and a friendly bunch of people. However, when you have your professional hat on you probably also think of Canadian retailers as all-star private label strategists.
What the general public does not realize is that in the grocery retail industry, Canada is a superstar when it comes to private label. Overall, private label penetration is superior to that in the United States. Having more of a European model, Canada estimates 20 percent private label penetration to the U.S.’s mid-teen percentage penetration. Canadian retailers such as Loblaws and Sobeys have done have done fantastically well with their private label programs, making their products staples in Canadian consumers’ shopping baskets.
But those private label products that ring so well with consumers and retailers have to come from somewhere, don’t they? Enter Canadian manufacturers. PL Buyer recently spoke with some Canadian suppliers to get their take on what sets them apart from U.S. manufacturers. Whether working with Canadian or American retailers, Canadian suppliers have different issues. Everything from cultural influences to the fluctuating economy makes a difference for our neighbor-to-the-north suppliers, and Keith Chen, president of Culinary Destinations Limited, Toronto; Paul DaRe, director of sales and marketing for Furlani’s Food, Mississauga, Ontario; and Jeff Shannon, vice president of sales and business development for Shandex Group, Pickering, Ontario, shared their thoughts with us.
What sets Canadian suppliers apart from U.S. suppliers?
Chen: Canada has a mature market in corporate branding and suppliers have accumulated a large bank of experience with respect to consumer preference and retailers’ needs. Canadian suppliers can offer unique solutions to satisfy consumer preferences of what is becoming a highly niched marketplace. A dual advantage of Canadian suppliers is their ability and flexibility to respond very quickly and efficiently to smaller runs, allowing for specialization and customization in products and services, which some larger manufacturers may not be able to accommodate competitively. And on the other end, Canadian suppliers are also very well positioned to accommodate increased production of larger volumes.
DaRe: Canada is a country of immigrants, so there are a lot of ethnic influences in food, and that trickles into food manufacturing. It also impacts the food manufacturing quality where we not only have innovation, but we also have very high quality standards. The U.S. impression of quality is more closely associated with consistency and portion control, whereas the Canadian impression of quality also has consistency, but also brings sensory elements, visual elements, innovation elements and creativity into the framework.
Shannon: Basically, there is no difference, other than smaller details such as we do business, technically, in another country and under a different currency. But with our proximity [to the United States], a Canadian supplier would likely be viewed as a domestic supplier. Take Detroit, as an example. Would it be more economical to buy something from Texas, thousands of miles away? Or buy from Canadians who are right over the bridge?
What benefits do Canadian suppliers offer North American customers?
Chen: Canada is known around the world for its image of pristine, wild expanses of land and water and enjoys a reputation of clean living. This reputation can cast a positive image on Canadian goods and services and can influence the approach Canadian suppliers take to product development and manufacturing.
Specifically in the food industry and our company’s approach, we endeavor to stay close to Mother Nature when it comes to raw ingredients, using the freshest and least processed whenever possible. This results in high-quality, high-value end products.
DaRe: Innovation and European influence. If you look at our packaging, it’s a hybrid between the United Kingdom and the United States. Our packaging can be upscale in the same sense that UK or Italian packaging is, but the products themselves are North American-style products. We strike a balance, where U.S. manufacturers have traditionally focused on pure production efficiency.
Shannon: Canadian companies offer North American customers a more diversified vendor base that can react to North American conditions very quickly. With shorter lead-times, no language barrier and a well-trained, highly skilled workforce producing high-quality goods, Canada should be a North American customer’s first option.
How does the economy affect relationships between retailers and suppliers in Canada and the United States?
Chen: The U.S. dollar will continue to experience pressure as global markets continue to strengthen and expand in Europe and Asia. Canadian suppliers will have to look for ways to streamline and update their operations to remain competitive in a world market. A great advantage of Canadian suppliers is the value-added service and experience they can offer, being close neighbors to the United States and one of its largest trading partners. Canadian suppliers are committed to building and sustaining long-term relationships, which will ensure long-term success for both the U.S. and Canada.
DaRe: We used to have the adage that if the U.S. sneezes, Canada catches a cold. And that has been true, but lately a lot of economic downturn is currency- or energy-related, and we haven’t suffered as much. In fact, our economy continues to be quite strong and grows robustly. It’s mostly oil-driven because we’re big oil exporters. But as packaged goods purchases decline in the U.S., we haven’t seen that happen yet, at least in our own category, but if we did, we would brace ourselves for a decline as well. We’re very closely related to consumption in the U.S., but not necessarily economic performance.
Shannon: With different currencies fluctuating constantly, the relationships change from day to day. A couple of years ago, when Canada’s currency was in a serious state of devaluation, U.S. companies benefited from a much lower acquisition cost for their goods. Today, the U.S. dollar is devalued. Importing U.S. manufactured goods has been more accessible and profitable. These trends historically have flipped back and forth. 
What are the benefits of overseas customers working with Canadian suppliers?
Chen: The Canadian business environment is highly regulated and numerous review agencies ensure high Canadian standards for safety and quality are met. Overseas customers can look forward to consistent business practices and suppliers that are committed to building long-term sustainable relationships.
DaRe: Canada is a resource-based economy, so they would be able to leverage our resource base. We haven’t seen a lot of opportunity in Europe and Asia for our products simply because consumption patterns are different and we are much more closely related to consumption patterns in the U.S. Also, most of our base crops in Canada are genetically modified as they are in the U.S., meaning corn, soy and wheat. In Europe, non-GMO foods are the norm, and we don’t pursue that market.
Shannon: Again, the same benefits that they see from U.S. suppliers. Since the two countries are virtually identical in its business philosophies, Canada-U.S. simply becomes North America. Offering, quality and service are the specifics.
Why should retailers consider working with Canadian suppliers?
Chen: Canada’s unique geography and access to freshwater and resources has given Canadian suppliers experience in servicing retailers with a diverse range of consumers across wide borders. With a mature corporate brand market, especially with the highly regarded President’s Choice line of national retailer, Loblaws, Canadian suppliers bring a wealth of experience to the table.
DaRe: Dealing with a Canadian company is favorable in terms of economics. And it’s also favorable in terms of offering consumers innovation and new ideas and new products especially in frozen bread, appetizers, snack foods and ethnic foods. There is a huge base to leverage. Toronto, for instance, is really in the true sense, a city of immigrants. And there are small, boutique manufacturers making any product available anywhere in the world in Toronto. So if retailers wanted to, they could certainly leverage the manufacturing base here to extract some of the benefits of those ethnic markets, just in the pure offering sense.
Shannon: Retailers should always know what is going on with potential Canadian suppliers. When the U.S. dollar begins to increase in value and purchasing U.S.-made goods becomes less economical, a retailer should be able to react immediately to their needs. Product implementation and qualifying manufacturers takes time. Time that could be spent purchasing and selling lower-cost goods. Retailers should be able to start buying the moment economic conditions favor a Canadian supplier. The fastest to react will reap the most profit. PLB

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