In 2003 and 2004, the Canadian government adopted a landmark series of regulations overseeing the nutraceuticals market. In addition to strengthening standards for labeling, it set standards for GMPs, product and site licensing, as well as product health claims.

The impact of these rules was far reaching. It affected the complete range of nutraceutical-based preparations — from dietary supplements to functional foods.

Vitamins and supplements must obtain a license from Health Canada prior to marketing by submitting product information to the government, including the type, source and potency of ingredients, as well as supporting evidence of health claims. Licensed products carry a number on their labels, indicating their safety and efficacy has been reviewed by Health Canada.

"The new regulations certainly had an effect on the kind and the number of products available on the market, as well as the ability to market them effectively," said Svetlana Uduslivaia, a research analyst for Euromonitor International, which released a market analysis of Canada in 2009.

"The overall market has been shrinking, especially with regards to vitamins and dietary supplements. We anticipate a decline of over 1 per cent in constant value over 2009-2014 in those two areas. The strict regulatory framework has led to fewer products available on the market, a slowed pace of product innovation and a focus on me-too products because of the ease of approval and marketing."

While there is talk that some health claims and functional foods regulations might change in the coming years, Euromonitor does not expect regulations for vitamins and dietary supplements to change, and the overall market is projected to shrink further, Uduslivaia said.

Analysts at The Freedonia Group, which also recently completed a market analysis of Canada, concurs that the market regulations have increased costs and the process of bringing a product to market. On the upside though, product safety has improved.

Consumer skepticism To be fair, manufacturers' challenges in Canada go far beyond the regulatory issues. Even before the new regulations came into force, Canadians had a high level of skepticism about the benefit and value of fortified foods and supplements, Euromonitor says.

"Consumer attitudes have played a role," Uduslivaia said. "For instance, sales of many herbal supplements plunged before the new regulations because of the number of warnings about products safety and quality, product recalls and negative publicity stating a lack of science behind these usually quite-expensive products."

Similarly, weak sales of some functional foods, for instance extra-calcium milk, omega-3 fortified milk and omega-3 juices, had little to do with regulations. "Despite the fact many consumers are well aware of the benefits of omega-3s, they did not trust the efficacy of milk and juice as a delivery format," Uduslivaia said.

There are, however, exceptions to even these examples. Activia probiotic yoghurt has become one of the best-selling yoghurt brands in Canada.

The Freedonia Group points out that Canadians' access to low-cost universal health care also hampers industry sales. "Canada's national health care program has a dampening effect on nutritional preparations, since most citizens have prescription drug coverage," said Bill Martineau, market analyst for Freedonia. "Full or partial reimbursement for prescription medication typically reduces consumer propensity to purchase nutritional preparations, functional foods, dietary supplements and other nutraceutical-based products."

Bright spots
While the overall sales climate in Canada is a challenge, there are some areas of growth, analysts say.

Euromonitor anticipates a 5 per cent increase in constant value of vitamin D sales over 2009-2014. This is attributed to a multitude of studies and endorsements by health professionals that pointed to benefits of vitamin D supplements. Fish oils are another area of projected growth, as are probiotic supplements. Analysts have 'cautious optimism' for functional bottled water (such as vitamin water), and energy drinks are still likely to see growth, "although much slower than in the past few years," Uduslivaia said.

The Freedonia Group sees growth in the development and licensing of nutraceutical ingredients and related delivery systems. Among the top products are Burcon NutraScience, which licenses its patented canola protein extraction technology to ADM; SemBioSys Genetics, which is developing specialty safflower oils for nutraceutical applications; and Forbes Medi-Tech, which commercialises phytosterol functional food additives. Other notable Canadian developers of nutraceutical compounds include Institut Rosell (Lallemand), for probiotics; and Ocean Nutrition Canada (Clearwater Seafoods), for omega-3s.

"We foresee a demand for nutraceutical ingredients in Canada advancing 5.2 per cent annually to $390 million (US) in 2013," Martineau said. "Because of its strength in functional food additives, Canada maintains a trade surplus in nutrients and minerals."

Market Sizes - Historic/ Forecast - Retail Value RSP - US$ mn

2009

2013

Combination Dietary Supplements

247.2

228.8

Herbal/Traditional Dietary Supplements

316.9

286.9

Non-Herbal Dietary Supplements

372.3

390.1

Total

936.4

905.9

Source: ©2010 Euromonitor International