Price wars between major retailers in the Canadian grocery sector between 2012-2013 have left major pasta brands reeling. The grocery retail sector has undergone a massive upheaval and consolidation of local players has occurred with Sobeys acquiring Safeway and Co-op Atlantic. Meanwhile, the arrival of Target in 2013 prompted Walmart to announce a massive expansion campaign. The two retailers entered a price war, which impacted the entire Canadian grocery sector, and Target has since exited the market.

Major retailers cut prices on loss leading items such as milk, coffee and pasta in order to attract consumers. The effects of this price war can be seen in 2013 retail sales figures for the pasta category. While volume sales increased by 1,000 tonnes, value sales fell by $17 million CAD. In 2015 there has been a return to normality; however, consumers are still coming to terms with higher grocery prices, and this could suppress sales growth in the short term.

The 2006 Census put the number of Italians in Canada at 1.4 million, which at the time represented 5% of the population. The Italian community has played a major role in establishing Italian food culture in Canada. With a per capita consumption of 4kg in 2013, according to Mintel estimates, and based on data from Statistics Canada, pasta is more entrenched in the Canadian diet than across the border in US, where per capita consumption is 25% less.

Canada is the world’s leading producer of durum wheat

The pasta category has particular importance to Canada on account of its natural advantage as a leading producer of durum wheat. Canada is the world’s largest single producer of durum wheat as well as the largest exporter of durum wheat, accounting for between 50-60% of global durum wheat exports in any given year. The proximity to the world’s largest supply of durum wheat and the sizable consumer market of North America make Canada an attractive market for pasta manufacturers. This fact is not lost on Ebro Foods, the world’s second largest pasta company.

Ebro’s local brand Catelli is the leading brand in the Canadian dry pasta category. In March 2014, they announced the acquisition of Olivieri, Canada’s leading chilled pasta brand from Maple Leaf Foods. Hot on the heels of the Olivieri deal, in June 2014, they announced they had acquired a majority shareholding of 52% in Italian pasta company, Pastificio Lucio Garofalo, S.p.A. Soon after this announcement Garofalo was launched in Canada where it now competes among premium Italian brands. While locally made pasta using Canadian grown wheat reigns supreme in the market in terms of the combined market share they hold, Italian brands such as Barilla have managed to secure significant market share in Canada on the strength of their marketing might and premium, Italian-made positioning.

Enhancing the appeal of local pasta brands

Gluten-free & organic claims accounted for 29% of new pasta launches in 2015

Going forward, the level of competition in the category will mean brands will need to remain responsive to changing consumer demand to maintain a presence. As is the case in many developed markets, health and natural claims are on the rise in the Canadian pasta category. Gluten-free and organic claims were the most popular health related claims accounting for nearly three in ten (29%) of new pasta launches in the 12 months to August 2015. High fibre and wholegrain pasta varieties continue to appear. Ebro announced in their first half 2015 analyst presentation that despite difficulties such as flat demand for pasta in the US market, their better-for-you varieties, such as gluten-free and Healthy Harvest range were doing exceptionally well.

Brands that use local, Canadian-grown wheat have an advantage in a market in which there is increased activity in natural and organic products. The industry body, Pasta Canada, actively promotes Canadian wheat and pasta and supports its members which include Catelli and Italpasta. The Canadian government is also keen to support the local pasta industry. In February 2015 the Minister for Agriculture announced that the government was investing $3.4million in Italpasta to help them expand into the macaroni and cheese segment. The goal was to help the company supply more retailers with ‘made in Canada’ pasta products, to grow local employment and stimulate demand for locally produced durum wheat and cheese.

Jodie Minotto is a Global Food and Drink Analyst at Mintel. She has more than 13 years of experience in sales, marketing and market research roles, predominantly in the food and beverage industry, working for both global CPG companies and SMEs. Her expertise lies in the dairy, confectionery, meal solutions, snack foods, beer and wine categories.

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