Sector Trend Analysis – Pet food trends in Canada

Pet population and ownership

The pet population in Canada has increased by a compound annual growth rate (CAGR) of 0.4% from 27.5 million pets in 2016 to 27.9 million pets in 2020. The pet population is forecast to increase by the equivalent CAGR of 0.4% as the pet population is expected to grow from 28.1 million pets in 2021 to 28.5 million pets in 2025. During 2020 in particular, with the emergence and expansion of COVID-19, Euromonitor concludes that global pet companionship has, and will continue to increase pet ownership and companionship, stimulated by greater home seclusion and remote work.

In 2020, fish accounted for 30.5% of the pet population (8.5 million) while cats and dogs accounted for 29.3% (8.2 million cats)and 25.9% (7.2 million dogs) respectively. Small dogs attained the largest CAGR with populations increasing by 3.3% and 2.4% from 2016 to 2020 and 2021 to 2025. The bird population decreased in growth by a CAGR of 0.3% and is expected to decrease by a further 0.1% during the same historic and forecasted periods.

Canada's cat ownership experienced a 2.3% increase in CAGR from 5.4 million households in 2016 to 5.9 million households in 2020. The percentage of those households owning cats increased from 38.4% in 2016 to 40.1% in 2020. The number of households owning dogs also increased from 4.9 million in 2016 to 5.2 million in 2020 representing a slight increase in the percentage of those same households owning dogs from 35.1% to 35.3% in the same period.

Retail market size

Retail sales of pet food in Canada experienced positive growth in both the historic and forecasted periods despite the recent and future effects of COVID-19 on the Canadian economy. Prior to COVID-19, increasing pet ownership, the pre-dominance of couples -with-children households and their high spending power and decreasing income disparity between urban and rural households were contributing indicators of growth in the demand for pet food in Canada.

The presence and emergence of COVID-19 and its impacts on global health and economies, has since necessitated the recent implementation by the Canadian government of a recovery package worth Can$317 billion to further assist in supporting the economy and the demand for, and consumption of, discretionary goods and services during and post-recovery of the COVID-19 crisis. The addition of such recovery packages, in addition to related indicators such as urbanization, rising disposable income, an ageing population with changing demographics and household structure are expected to lead to greater innovation and product developments (especially for small pets that require less space and maintenance), which will further contribute to the growth in demand for pet food in Canada.

Of note, the global pet care industry has proven resilient in 2020. Unable to commute much to work or to go on holidays, pet owners in advanced pet care markets such as North America, Western Europe and Australasia have maintained much of their purchasing power and habits when it comes to their pets. In addition to this, increased at-home living and the greater isolation and concerns over mental health that have ensued, have led to a surge in pet adoptions; which in turn has a positive impact on pet care sales. (Euromonitor -Pet care quarterly statement Q4 2020).

Canadian retail sales of pet food continued to be driven largely by the premiumization and pet humanization trends, especially during COVID as more time spent at home has fostered pet bonding and strengthened the underlying humanization trend.

As the appropriate healthcare and nutrition of their pets is of primary concern, owners often seek pet food and treats containing functional ingredients, and even try foods with novel proteins. Pet products also continued to see steady value growth, as many Canadian pet owners are willing to spend not only on beauty products or accessories, such as toys and clothing, but also on personalized products and technology such as GPS trackers and smart dog houses.

Retail sales of pet food in Canada has increased 5.8% in CAGR from Can$3.4 billion in 2016 to Can$4.2 billion in 2020 and is expected to increase in CAGR by a further 4.9% attaining Can$5.3 billion by 2025. All categories of pet food experienced positive growth in both the historic and forecasted period, and according to Euromonitor, COVID-19 will reinforce and accelerate the value for money trend that was prominent prior to its emergence.

Dog food was the largest pet food category with retail sales of Can$2.8 billion (65.4% market share) in 2020 and attained the largest growth of 6.3% and 5.1% respectively within the prescribed periods, even though cat population and ownership levels are greater than that of dogs. Cat food was the second largest pet food category with retail sales valued at Can$1.4 billion representing a 32.7% market share in 2020.

Company and brand shares

Company shares

The five largest pet food companies in Canada controlled 52.0% of the retail market share in 2020 with Petcurean Pet Foods Ltd experiencing the largest CAGR of 5.6% from 2016 to 2020. Nestlé SA and Mars Inc. maintained their prominent positions as top companies with a combined market share presence of 35.5% in 2020. Private label pet food companies represented a 8.1% (versus a 91.9% brand label market penetration share) and have declined in market % share representation by a CAGR of 1.8% from 2016 to 2020.

Brand shares

Pedigree (Mars Inc) was the largest pet food brand in Canada with retail sales of Can$260.8 million in 2020 from Can$220.5 million in 2016, representing an increase in CAGR of 4.3%. Acana (Champion Petfoods LP), the second largest pet food brand attained Can$203.9 million in 2020, representing the second largest CAGR of 7.4% from retail sales of Can$153.1 million valued in 2016.

Three of the top five pet food brands in Canada, Pedigree, Whiskas and Iams, are owned by Mars Inc and held a combined market share of 14.2% in 2020. The remaining two of the top five brands, Acana (owned by Champion Petfoods LP) and Friskies (owned by (Nestlé SA), held a combined 8.9% market share in 2020.

Market Segmentation

Dog food

All categories of dog food performed well historically and are expected to continue to perform well as many Canadian households consider their dogs as members of the family (the pet humanization trend). Total dog food retail sales experienced a CAGR of 6.3% as sales value grew from Can$2.2 billion in 2016 to Can$2.8 billion in 2020. Dry dog food was the largest retail category with values of Can$2.1 billion in 2020 (representing a 74.8% market share) of total dog food sales and is forecast to grow at a CAGR of 5.0% to attain retail sales of Can$2.6 billion in 2025. Dog treats and mixers were the second largest retail category with values of Can$499.6 million in 2020. Treats have also experienced larger growth rates in sales in general as pet owners spent more time at home with their companions and as new pets get trained. Wet dog food represented a 7.1% market share of dog food sold in Canada with retail sales valued at Can$197.5 million in 2020.

Premiumization and dog treats to drive value growth

Pet humanization determines the types of food owners give their dogs, with demand for premium wet and dry dog food products growing 4.9% and 7.2% respectively from 2016 to 2020, continuing to rise faster than mid-priced and economy dog food during this period. Premium product developments remain the focus, as owners are becoming more knowledgeable about dog food and eager to understand ingredient lists and nutrition facts. Both premium wet and dry products are expected to continue their growth trend from 2021 to 2025 as more owners seek high-quality and healthier, tastier and natural and organic offerings for their companions. Contributing to the premiumization trend Euromonitor contends, is the increasing popularity of small dog breeds whose owners are more likely to provide their pets premium dog food products including specialized products such as grain-free dog food, treats with added health benefits, or age-specific ranges. Dog treats and mixers attained the largest growth, reaching a CAGR of 7.7% from 2016 to 2020 and is expected to increase by a CAGR of 5.7% in the forecast period as owners enjoy offering their pets snacks, as they themselves enjoy.

Canadian manufacturers are increasing their presence among dog owners

U.S dog food brands still account for the majority of retail sales, however; Canadian manufacturers' increasing focus on natural and organic (premium products) continue to increase their sales of dog food. Further, pet owners in Canada are keen on brands made in the country, as these manufacturers tend to be independent and considered less profit-driven than the large corporations attracting dog owners looking to feed their pets natural, premium products and buy domestically manufactured food. Regionally-sourced ingredients and locally-manufactured products also appeal to consumers pursuing wholesome lifestyles, including for their pets. Premium private labels allow pet owners to stretch their budgets and increase the value for money trend (Euromonitor-Dog food in Canada), especially important to consumers amidst the recent economic uncertainty experienced in 2020.

Nestlé SA and Mars Inc remained the leading players in dog food with value market shares of 14.9 % and 14.7% each in 2020, despite their decline of 1.0% and 1.5% in CAGR from 2016 due to competition from smaller brands. Their well-known brands, a presence in both wet and dry dog food, and widespread distribution through both mass and specialist retailers provide them their advantage over competitors. Private label dog food companies represented a 5.2% market share in 2020 (versus a 94.8% brand label market penetration share) and have declined in market % share representation by a CAGR of 2.3% from 2016.

Euromonitor notes that Nestlé continues to focus on the Purina family (Purina Dog Chow, Purina ONE, Purina Beneful, Purina Alpo, Purina Pro Plan and Purina Beggin'), with key products in mid-priced and premium dog food, whilst Mars's strength continues to lie in Iams, Eukanuba, Pedigree and Cesar, again with leading products within mid-priced and premium dog food.

Specialist brands, which focus on natural or organic products, are becoming increasingly popular among owners challenging the leading players in commercial dog food. Brands such as Blue Buffalo, Hill's Science Diet, Nutro, Natural Balance, Merrick, Greenies and Royal Canin position themselves as offering super-premium ingredients and natural/therapeutic feature.

Smaller local companies also performed well. Local player Petcurean Pet Foods, had the largest CAGR of 5.3% recorded from 2016 to 2020, in market representation, partly due to the launches of new products, including an extension of its Go! Solutions line, with seven new specialist wet dog food products, including Go! Sensitivities and Go! Skin + Coat Care. Another local player, Aliments Mackenzie, a pioneer in Canada's natural pet food market, acquired Petit Muso, a manufacturer of dog treats with distribution in over 300 pet stores throughout Quebec.

Cat food

Growth in cat ownership, especially in urban dwellings

The number of pet cats in Canada is higher than the number of pet dogs, and the percentage of households owning a cat continues to rise over that of dogs, due in part, to Canadians' lifestyles. According to Euromonitor, the number of young single professionals and millennials moving into apartment buildings continues to rise in major Canadian cities, while retired people downsize their homes, signal positive growth potential for the cat population. Further, the cat's independent personality trait, make them an ideal choice as a pet for urban dwellers. Compared with dogs, cats can also adapt more easily to the smaller living space available in cities, and city codes on cats are typically less strict compared with those for dogs.

Cat food sales grew moderately at a CAGR of 5.1% from Can$1.1 billion in 2016 to Can$1.4 million in 2020 and is forecast to increase by a CAGR of 4.7% from Can$1.4 billion in 2021 to Can$1.7 billion by 2025. Dry cat food accounted for a 60.7% market share and Can$841.2 million in retail sales in 2020, representing an increase in CAGR of 5.4% from Can$682.5 million in 2016.

Premiumization strengthens as clean labels grow in popularity

As cat owners increasingly treat their pet cats as family members, owners are becoming more discerning in the cat food choices they make. Regular label checking to verify ingredients to determine the health, naturalness, organic or locally-sourced components of the product are strengthening the clean label trend as consumers demand full transparency from cat food manufacturers.

Both premium wet and dry cat food experienced larger CAGR's than mid-priced and economy wet and dry cat food from 2016 to 2020. Premium dry cat food attained the largest retail sales of Can$433.7 million in 2020 and CAGR of 6.0% in the historic period and is forecast to maintain the largest retail sales, Can$543.6 million and a CAGR of 5.0% by 2025. Whilst premiumization continues to drive growth, Canadian cat owners are still value-conscious and are less willing to pay a higher price for cat food than dog owners paying for dog food.

The competitive environment in Canada is very concentrated in cat food. The top five companies in Canada's cat food sector accounted for a 61.4% market share in 2020, with Mars Inc and Nestlé SA accounting for a high share of values sales in 2020 . Although Mars Inc represented the slightly larger market share in cat food (24.7%) in relation to Nestlé SA (24.6%) in 2020, its growth decreased at a CAGR 0.6% from 2016 to 2020, while Nestlé SA increased its CAGR by 0.1% during the same period. Private label cat food companies represented a 8.1% in 2020 (versus a 91.9% brand label market penetration share) and have declined in market % share representation by a CAGR of 1.8% from 2016 to 2020.

Whiskas (Mars) and Purina Friskies (Nestlé Purina) remained the leading brands and held significant value shares, which indicates a general preference amongst Canadian cat owners for good value offerings. Private label also accounts for a notable value share within cat food, not just because cat owners tend to be more value-orientated, but also because retailers make efforts to push sales. Specialty brands such as Blue Buffalo (recently purchased by General Mills), Hill's Science Diet, Nutro, Natural Balance, Merrick, Greenies and Royal Canin are becoming increasingly popular as they emphasize their super-premium ingredients and natural/therapeutic features.

As seen in dog food, local brands are also becoming increasingly popular in cat food, with local player Petcurean Pet Foods performing particularly well in 2020. Petcurean Pet Foods Ltd again, (attained the largest increase in CAGR of 5.3% market share representation in dog food sales from 2016 to 2020) recorded the largest increase in CAGR (5.1%), as their market share representation increased from 1.8% in 2016 to 2.2% in 2020. This can be attributed to its constant new product development, with the introduction of its Go! Solutions collection of seven wet food products for cats. This new collection is an integral part of its broader Go! Solutions line, which also includes dry recipes for cats, as well as dog food. The company has also announced the launch of Go! Solutions Carnivore, a newly repositioned collection of protein-rich kibble for cats, formerly known as Go! Fit + Free (Euromonitor-Cat food in Canada).

Local company Open Farm has also seen success in cat food, although it also offers dog food. Launched in Ontario in 2014, it first expanded across the country, and then into the US. Its grain-free, sustainably sourced cat food is now stocked in 2,500 pet retailers across the continent. The company focuses on traceability, transparency and an ethical supply chain. Consumers can use the code on the packaging to find out where all the ingredients, such as non-GMO coconut oil and locally grown sun-cured alfalfa, originated. It reaches younger consumers through digital marketing with Facebook, YouTube and Instagram advertisements targeting pet owners. The brand also leverages influencers, many of them unpaid bloggers who simply like the products (Euromonitor-Cat food in Canada).

Other pet food

Dogs and cats remain the primary focus of the pet food industry as indoor birds, tropical and other fish, small mammals, including guinea pigs, rabbits ferrets and rodents, are not as popular amongst Canadian pet owners as having a dog or cat as a pet. Nevertheless, there is still interest in these more unusual pets, leading to slow but stable value growth in retail sales in other pet food in 2020. However, increased time spent at home due to social distancing and various lockdown measures have recently increased the popularity of other pets such as fish, deemed an easier pet to acquire and look after.

Retail sales of other pet food increased at a CAGR of 1.8% from Can$76.8 million in 2016 to Can$82.4 million in 2020 and is forecast to continue to increase by a CAGR of 2.4% as retail sales are expected to reach values of Can$92.2 million by 2025. Fish food was the largest category of pet food (as this category experienced the highest price rises) with a market share of 44.7% and retail sales of Can$36.8 million in 2020, an increase in CAGR of 2.1% from Can$33.9 million in 2016.

Owning birds as pets remains a niche hobby, as certain species (exotic) requires high up-front costs, attention and time. Bird food retail sales were valued at Can$30.6 million in 2020 and are forecast to experience an increase in CAGR of 2.8% with retail sales of Can$34.6 million by 2025.

Small mammal/reptile food was the smallest pet food category with an 18.2% market share and retail sales of Can$15.0 million in 2020, an increase in CAGR of 1.7% from Can$14.0 million in 2016. Small mammal/reptile food is expected to achieve the largest CAGR of 3.9% as retail sales are forecast to increase to Can$17.8 million by 2025. Of note, owners of small mammals and reptiles tend to purchase higher-quality food for their pets.

Other pet food has a fairly concentrated competitive environment. Spectrum Brands Holdings Inc and Rolf C Hagen Inc were the largest two other pet food companies in Canada with market shares of 23.4% and 21.0% respectively in 2020. Euromonitor notes that Spectrum Brands Holdings maintains its lead by leveraging the manufacturing and distribution capabilities of its global pet supplies business, whilst Rolf C Hagen (Living World, Nutrafin and Exo Terra) focuses on high-quality natural foods to appeal to more knowledgeable consumers.

The pet humanization trend in other pet food is less prominent than that evidenced in the dog and cat food categories however, pet humanization and premiumization are expected to become more prominent, especially with the immediate prominence of COVID-19. Small mammals specifically, hold greater potential for premiumization as the owners of these pets seem more willing to pay for premium/luxury offerings.

Hartz Mountain Corp attained a 14.7% market share representation in 2020, offering specially formulated other pet food and treats. Private label other pet food companies represented a strong 12.6% market share in 2020 (versus a 87.4% brand label market penetration share) while market % share representation remained stable (unchanged) from 2016 market representation.

Distribution channels

Pet food retail sales in Canada were distributed primarily through store-based retail channels (76.6% market share representation), while the remaining pet food retail sales were distributed via non-store retailing, e-commerce (21.7% market share representation) in 2020. All distribution channels market share representation, whether categorized as store-based or non-store based retailing, declined in varying CAGR's from 1.5% to 6.9% between 2016 to 2020. Further, store-based retailing declined by 4.1% in CAGR from a 90.7% market share representation recorded in 2016 in contrast to non-store retailing (E-Commerce) which increased by the largest CAGR (30.0%) in all channels, from a 7.6 market share recorded in 2016. Within store-based retailing, grocery retailers (hypermarkets and supermarkets), despite their decline in CAGR of 3.3% and 3.9%, performed well as distribution channels in terms of market share representation of 19.2% and 21.9% respectively, while non-grocery retailers (pet superstores) attained a 13.1% market share in 2020, representing a decrease in CAGR of 5.2% from a 16.3% market share recorded in 2016.

In 2020, with the emergence of COVID-19 and more at- home living and working, e-commerce has further increased its presence as a distribution channel. E-commerce has enabled consumers to sustain activities amid social distancing measures while contributing to eroding prices through lower profit margins and wider competition. Subscription models have also assist in the lowering of prices via additional discounts to 'lock in' shoppers.

The growth of e-commerce in pet care is expected to continue, despite the future economic uncertainties of COVID-19, changing the competitive environment of pet food in Canada. Consumers value this channel due to convenience, a wide product range, including premium brands and the benefit of having often heavy goods delivered to their door. In response to the expansion of e-commerce as a channel, hypermarkets, supermarkets and pet superstores (store-based retailing) are revamping their sales strategies (offering premium products and one-stop shopping convenience) and putting greater emphasis on implementing e-commerce, which is expected to drive strong growth in this channel. Furthermore, the addition of e-commerce availability within store-based retailing as a means to increase sales may also serve to offset the reduced foot traffic experienced in brick-and-mortar stores due to the pandemic, as consumers prioritize essential trips and ration their use of in-store services (grooming), (Euromonitor -Pet care quarterly statement Q4 2020).

Dog food purchased through e-commerce as a distribution channel, has seen significant growth while there are also a growing number of pet specialist stores distribution channels, many of which are independent stores, focusing on premium offerings and Canadian brands.

Cat food is still mainly sold through modern grocery retailers, predominantly supermarkets and hypermarkets, where mid-priced products and limited premium offerings and Canadian brands, are available, however; e-commerce as a distribution channel of cat food, is also gaining in value share. E-commerce channels offer premium and Canadian brands while providing a convenient option to compare products and deals while providing home delivery to time-pressed consumers.

Other pet food is primarily purchased through non-grocery specialists (pet shops and pet superstores) distribution channels which offer a vast selection of product offerings, supplies and expert advice. Similarly, as with dog and cat food purchases, e-commerce is increasing its presence as a distribution channel in the other pet food category even though total online sales remain small.

Owners of birds, fish and small mammals/reptiles generally tend to purchase food for their pets in pet superstores and pet shops, together with other pet supplies they need. Other pet food is also inexpensive compared with the price of dog and cat food, meaning that it is hard to spend over the free shipping threshold, which discourages some owners from shopping online.

Canadian imports

Canada has a diverse supply network of pet food providers. In 2020, Canada imported Can$1.2 billion in pet food (HS codes; 230910, 100830) globally. The United States was the largest supplier to Canada (Can$1.1 billion) representing a 91.5% market share in 2020. In terms of value, each of the top exporting countries have experienced positive growth varying from 9.2% (the U.S) to the largest growth of 128.6% (Italy).

Canadian import requirements for pet food

The Canadian Food Inspection Agency (CFIA), is responsible for regulating the safety and quality of food, animal and plant health in Canada. The CFIA regulates pet food imports and related products to prevent animal diseases from being introduced into Canada. Import policies: animal products and by-products, Pet Food and Treats containing Animal Products and By-Products, specifies those products regulated under the Health of Animals Regulations, if they are imported into Canada. Personal and commercial imports of pet food are permitted pending the below requirements.

Personal imports

Travellers may bring into Canada a personal import of pet food (limit of 20 kg), if the import meets all of the following requirements:

• the pet food or product must be of United States origin and be commercially packaged
• the pet food or product must be in the possession of the traveller at the time of entry from the U.S.
• the animal that will eat the imported product must accompany the traveller at the time of entry
• the imported product is fed only to the animal that accompanied the traveller into Canada

Commercial imports

A review of the specific risks is required before the CFIA will issue an import permit. In some cases, the CFIA may require an inspection of the producing establishment in the foreign country to obtain more information before it makes a decision.

Specific import requirements, based on the applicable animal health policies, can be reviewed in the Automated Import Reference System (AIRS). Once you've accessed AIRS and determined that you require a permit to import, it can be requested through the Agency's online service portal,My CFIA. By signing up for a My CFIA account, you can submit a new service request, track the status of your application and pay for the service online. A list of online services currently available can be found on the Agency's website.

If you do not have access to My CFIA, a completed application can also be faxed or mailed to CFIA,Centre of Administration (CoA).

In addition, CFIA's official Guidance Documents (Guidance Document Repository - GDR) provide the Agency's functional direction regarding their compliance verification activities and provide guidance to regulated parties regarding program requirements. As part of their Guidance Document Repository (GDR), the CFIA has created a 'Guideline for Preparing Export Certificates for the Canadian Pet Food Industry' with a listing or requirements from importing countries. Related documents may be requested via Search for related documents in the Guidance Document Repository.

Opportunities for Canada

In 2020, Canada exported Can$1.1 billion of pet food to global markets, representing an increase in CAGR of 11.3% from exports valued at Can$727.0 million in 2016. The U.S was the largest market (35.7% market share) valued at Can$399.0 million, followed by China (20.6% market share) Can$230.0 million in 2020, representing the largest increase in CAGR (181.8%) from Can$3.6 million recorded in 2016.

Ontario, Alberta and British Colombia (B.C) were the three largest provincial exporters of pet food globally with a cumulative market share of 84.2% in 2020 (Ontario 46.8% market share, Alberta 26.7% and B.C, 10.7%). Ontario exported Can$522.5 million, while Alberta and B.C exported Can$298.5 million and Can$119.6 million respectively, of pet food in 2020. B.C and Ontario experienced the largest increase in CAGR, (38.2%) and (20.2%) from Can$32.8 million (B.C) and Can$250.0 million (Ontario) recorded in 2016. In contrast, Québec experienced the largest decline in CAGR (7.4%) as exports of pet food decreased from Can$94.5 million in 2016 to Can$69.5 million in 2020.

A total of 452.3 million kilograms of pet food was exported globally from Canada's provinces/territories, representing an increase in CAGR of 8.0% from 331.9 million kilograms exported in 2016. Ontario, Saskatchewan and Alberta were the three largest provincial exporters of pet food globally with a cumulative market share of 85.5% in 2020. Ontario, Saskatchewan and Alberta exported 167.4 million kilograms, 126.5 million kilograms and 92.9 million kilograms of pet food globally in 2020 while B.C experienced the largest increase in CAGR (34.2%) as exports increased from 8.7 million kilograms in 2016 to 28.2 million kilograms in 2020. Newfoundland experienced the largest decrease in CAGR (8.6%) as exports of pet food declined from 5,322 kilograms in 2016 to 3,718 kilograms in 2020.

Canada's broad (and growing) trade network provides Canadian companies preferred access to diverse markets all over the world. Information on Canada's free trade agreements (FTA) may be found at Global Affairs Canada, Trade and investment agreements. Summaries of Canada's newest (and/or revised) agreements are provided below.

The Canada-UK Trade Continuity Agreement (Canada-UK TCA) Economic Impact Assessment:

• The Canada-United Kingdom Trade Continuity Agreement (Canada-UK TCA) replicates the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) on a bilateral basis. The TCA, therefore, is meant to maintain the status quo in the Canada-U.K. trade relationship
• The United Kingdom officially left the European Union (EU) on January 31, 2020, and CETA will cease to apply to Canada-U.K. trade on January 1, 2021.
• To avoid a gap in preferential trade access into each other's markets, Canada and the United Kingdom negotiated a trade continuity agreement - the TCA - that provides Canadian exporters, services providers, and farmers with continued preferential access to the U.K. market carried over from CETA. CETA removed 98% of tariffs on Canadian goods and over time will remove approximately 99% of tariffs, in addition to the other CETA benefits including improved access for services, greater certainty and transparency, protection for investments and intellectual property.
• In May 2020, the United Kingdom announced the applied MFN tariffs, which it refers to as the UK Global Tariff (UKGT), that would take effect on January 1, 2021. Under these tariffs, 94.4% of Canada's exports to the United Kingdom would be MFN duty-free. Under the United Kingdom's proposed bound duties -- the highest tariffs that the United Kingdom could apply, which closely resemble the EU's Common External Tariffs (CET), 87.5% of Canada's exports would be MFN duty-free.

Canada-United States-Mexico Agreement (CUSMA) Summary of CUSMA:

• On November 30, 2018, Canada, the United States, and Mexico signed an agreement to replace the North American Free Trade Agreement (NAFTA) with the Canada-United States-Mexico Agreement (CUSMA). Subsequently, on December 10, 2019, Canada, the United States and Mexico agreed to update certain elements of CUSMA to improve the final outcome and clear the path toward ratification and implementation of the agreement in all three countries.
• CUSMA will maintain the tariff-free market access from NAFTA, and includes updates and new chapters to address modern-day trade challenges and opportunities.
• NAFTA eliminated virtually all tariffs between Canada, the U.S. and Mexico, with very few exceptions. CUSMA maintains these benefits and ensures that the vast majority of North American trade will continue to be duty-free. Additionally, a new chapter on customs administration and trade facilitation standardizes and modernizes customs procedures throughout North America to facilitate the free-flow of goods.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP explained):

• The Asia-Pacific is now the world's leading region of economic growth, offering major opportunities for trade and expansion.
• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement currently in force between Canada and 6 other countries in the Asia-Pacific region: Australia, Japan, Mexico, New Zealand, Singapore and Vietnam. Once fully implemented, CPTPP will also include Brunei, Chile, Malaysia and Peru.
• Trade in goods: With lower tariffs or no tariffs at all, it costs less to take Canadian products or services to the Asia-Pacific region, especially in markets where Canada previously faced high tariffs, such as Japan and Vietnam. Once CPTPP is fully implemented, 99% of CPTPP markets' tariff lines will be duty-free
• Rules of origin and origin procedures: Canadian exporters and producers have clear and favourable rules that determine which goods are considered originating and procedures that establish obligations for importers, exporters and producers if the importer wants to make a claim for preferential tariff treatment. Companies can approach the customs administration in the market they are targeting to receive an advance ruling on the origin of their product.
• Customs and trade facilitation: Canada and other CPTPP countries are working to keep customs procedures simple, effective, clear and predictable. This reduces processing times at the border and makes it easier to move goods between countries.
• Regulatory cooperation and conformity assessment: CPTPP helps reduce unnecessary regulatory requirements. It also includes measures that make it easier for Canadians to do business in the Asia-Pacific.

Canada-European Union Comprehensive Economic and Trade Agreement (CETA explained):

• The EU is one of the largest economies in the world and Canada's second-largest trading partner after the United States. It is also the world's second-largest importing market for goods. The EU's annual imports alone are worth more than Canada's GDP. By opening new markets in the EU to Canadian exporters, CETA gives us a competitive advantage in the global market, which benefits all Canadians.
• Trade in goods: CETA eliminates tariffs and reduces barriers for virtually all sectors and aspects of Canada-EU trade. Prior to this agreement, only 25% of EU tariff lines on Canadian goods were duty-free. With CETA, 98% of EU tariff lines are now duty-free for Canadian goods.
• Rules of origin: Canadian exporters have clear and favourable rules that consider Canada's supply chains to determine which products are considered originating and therefore eligible for preferential tariff treatment.
• Customs and trade facilitation: Canada and the EU are working to keep customs procedures simple, effective, clear and predictable. This reduces processing times at the border and makes it easier to move goods between countries.
• Regulatory cooperation and conformity assessment: CETA helps avoid unnecessary or discriminatory regulatory requirements. Canadian and EU regulators are collaborating to create regulatory measures that make it easier for Canadians to do business in the EU.

Product launch analysis

According to Mintel's Global New Products Database (GNPD), there were 1,025 new pet food products launched in Canada between January 2016 and December 2020. The number of yearly product launches has declined in growth by a CAGR of 10.4% from the larger launch of 259 pet products in 2016 to its lower and most recent launch of 167 pet products in 2020.

Dog snacks and treats, dog food wet and cat food wet, were top sub-categories of newly released pet food product launches while low/no/reduced allergen, no additives/preservatives and pet-adult were top claims associated with new pet food products released during the prescribed period.

Flexible stand-up pouch, can and flexible package types released via new product, new variety/range extension and new packaging launch types were predominant product attributes of new pet food products released between January 2016 and December 2020 .

Chicken, beef and unflavoured/plain were top flavours (including blends), while food acids (food), salt (food) and supplement (non-food) were top ingredients identified during this period.

Examples of new products

Conclusion

Despite the emergence of COVID-19 and its impacts on global health and economies, the global pet care industry has proven resilient in 2020. Pet owners in advanced pet care markets such as North America, Western Europe and Australasia have maintained much of their purchasing power and habits when it comes to their pets.

The pet population in Canada has increased by a CAGR of 0.4% from 27.5 million pets in 2016 to 27.9 million pets in 2020 and is forecast to increase by an equivalent CAGR of 0.4% as the pet population grows from 28.0 million pets in 2021 to 28.5 million pets in 2025. Further, the percentage of those households owning cats increased from 38.4% in 2016 to 40.1%, while households owning dogs also increased from 35.1% to 35.3% in the same period. During 2020 in particular, with the emergence and expansion of COVID-19, global pet companionship has, and is expected to continue to increase pet populations and ownership, stimulated by greater home seclusion and remote work. Similarly, the historic and forecasted increase in Canadian pet population and ownership are evident and also reflected in the growing retail market for pet food in Canada.

Retail sales of pet food in Canada has increased 5.8% in CAGR from Can$3.4 billion in 2016 to Can$4.2 billion in 2020 and are expected to increase in CAGR by a further 4.9% attaining Can$5.3 billion by 2025. All categories of pet food experienced positive growth in both the historic and forecasted period. Dog food was the largest pet food category with retail sales of Can$2.8 billion (65.4% market share) in 2020 and attained the largest growth of 6.3% and 5.1% respectively within the prescribed periods, even though the cat population and ownership levels are greater than that of dogs. Cat food was the second largest pet food category with retail sales valued at Can$1.4 billion representing a 32.7% market share in 2020.

International exports of Canadian pet food increased at a CAGR of 11.3% as exports grew from Can$727.0 million in 2016 to Can$1.1 billion in 2020. Given the expected continued growth of pet populations, ownership and pet food retail sales both domestically and within international markets, Canadian pet food producers have an opportunity to maintain and increase their presence and distinct brand image within domestic and global markets. Canadian exports of HS code 230910 (dog or cat food, put up for retail sale) and HS code 100830 (canary seed), as well as other pet food products, remain as important trade opportunities. That said, it is important for Canadian exporters to work closely with their importing partners to ensure that import requirements for chosen international markets are met. Review of Canada's Free Trade Agreements (FTA's) and their applications to pet food and pet food ingredients, are essential for successful exports of Canadian pet food products internationally.

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

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Resources

• Canadian Food Inspection Agency (CFIA), Import policies, Animal products and by-products, Pet Food and Treats containing Animal Products and By-Products.
• Canadian Food Inspection Agency (CFIA), Automated Import Reference System (AIRS), Requesting import permits through My CFIA.
• Canadian Food Inspection Agency (CFIA) , Guidance Document Repository - GDR, Guideline for Preparing Export Certificates for the Canadian Pet Food Industry. Related documents may be requested via Search for related documents in the Guidance Document Repository.
• Euromonitor International; Country Report | 19 May 2020. Cat Food in Canada
• Euromonitor International; Country Report | 19 May 2020. Dog Food in Canada
• Euromonitor International; Country Report | 19 May 2020. Other Pet Food in Canada
• Euromonitor International; Pet Care: Quarterly statement Q4 2020, November 2020
• Global Affairs Canada, Trade and investment agreements, The Canada-UK Trade Continuity Agreement (Canada-UK TCA) Economic Impact Assessment, Canada-United States-Mexico Agreement (CUSMA) Summary of CUSMA, CPTPP explained (international.gc.ca) and CETA explained (international.gc.ca)
• Global Trade Tracker, 2021
• Mintel Global New Products Database, 2021

Sector Trend Analysis – Pet food trends in Canada
Global Analysis Report

Prepared by: Laurie Bernardi, International Market Research Analyst

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2021).

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