Why Cool Canada Looks Smokin’ Hot Right Now: A Market Overview

Could a path to U.S. retail growth lead right next door? For certain in-demand products, yes, expansion to Canada can drive sales – even in today’s volatile market.

Canadians love products ‘Made in the USA,’—Canada is the top U.S. export market, accounting for 17.9% ($310 billion U.S.) of all U.S. goods exports in 2020.¹ Canada – Country Commercial Guide. International Trade Administration, U.S. Department of Commerce. August 20, 2021. Canadians spend more than 60% of their disposable income on U.S. goods and services.² Ibid.

Beyond hockey, maple syrup, and the superfluous ‘u’ in words like colour, what do U.S. consumer packaged goods (CPG) suppliers and retailers need to know about selling to Canadians? Let’s examine Canada’s demographics and retail trends to see why more U.S. companies are looking north to fuel growth.

Market overview

Why cool Canada looks smokin’ hot right now

Ongoing supply chain disruption has led more retailers and CPG suppliers to strengthen their regional trade networks to reduce logistics delays and costs. As rising inflation erodes profits, companies seek new ways to grow their top line – and Canada is a wealthy G7 nation poised to spend. That’s because during the pandemic, Canadian households saved $251 billion U.S. in addition to their typical savings amounts – and they could spend $31 billion U.S. of it by the end of 2024.³ Lundy, Matt and Mark Rendell. Canadians are sitting on $300-billion in excess savings. What happens next is anyone’s guess. The Globe and Mail. May 13, 2022.

Market size

Canada’s population of 38 million is approximately one-tenth of the U.S. population.⁴ World Population Review. Median Income by Country 2022. Despite Canada’s vast geographic expanse (it’s the second largest country by landmass), an astonishing 90% of Canadians live within 100 miles of the U.S. border.⁵ Beauchamp, Zack. Canada is a huge country. Most of it is unfit for human habitation. Vox. May 5, 2016.

Urban hotspots

Almost one-third of all Canadians live in or near the cosmopolitan cities of Toronto, Montreal, and Vancouver.⁶ Canada vs. United States. Index Mundi. 2022. These cities outperformed their respective provinces’ year-over-year retail sales and they lie relatively close to the U.S. border, offering U.S. companies potential opportunities to boost sales and minimize shipping costs.⁷ Retail sales, by province, territory and census metropolitan area – Seasonally adjusted. Statistics Canada. April 22, 2022. Montreal is located in Canada’s French province of Quebec.

Age

Compared to the U.S., Canada has a slightly older population, with more consumers aged 25 and up. Canadian shoppers may align with the business strategies of retailers and suppliers that target Millennials, Gen X, and Boomers.⁸ Canada vs. United States. Index Mundi. 2022.

Income

Canadian consumers’ high disposable income creates sales opportunities for consumer goods businesses.⁹ Canada – Country Commercial Guide. International Trade Administration, U.S. Department of Commerce. August 20, 2021. In 2020, the average income per Canadian aged 16 and up was $51,300 CAD ($39,900 U.S.), up 4% from $49,200 CAD ($38,200 U.S.) in 2019.¹⁰ Statistics Canada. Table 11-10-0239-01  Income of individuals by age group, sex and income source, Canada, provinces and selected census metropolitan areas Among Canadians of all ages, the median income in March 2021 was $18,652, slightly below the U.S. median of $19,306.¹¹ World Population Review. Median Income by Country 2022. Companies need to be mindful that today’s rising prices impact 81% of lower-income earners, 50% of middle-income earners, and 35% of high-income earners.¹² Inflation has Canadians rethinking what they purchase, including food. Grocery Business. May 6, 2022.

Race

As a country that welcomes and celebrates a diverse mosaic of ethnicities, Canada has nearly 7.7 million people of color, accounting for 22% of the total population. This proportion could climb as high as 36% by 2036. Among Canadians of color, Southeast Asians, Chinese, and Blacks represent the largest groups, and 27% of Canadians aged 15 to 34 self-identified as a member of a diverse racial or ethnic group in 2016, impacting diversity in marketing.¹³ People of Colour in Canada (Quick Take). Catalyst. Dec 15, 2021.

Consumer behavior in Canada

Top retailers

Many players are familiar, as Amazon, Walmart, and Best Buy are the most popular retailers in Canada.¹⁴ Toneguzzi, Mario. Canadians Returning to Shopping Centres and Brick-and-Mortar Retail in a Big Way: JLL Study. Retail Insider. November 25, 2021. 7-Eleven and Sephora also earn impressive traffic in Canada. The top five grocers in Canada in 2020 in descending order of market share were: Loblaws/Shoppers Drug Mart (27%), Sobeys/Safeway (22%), Metro/Jean Coutu (11%), Costco (9%), and Walmart (8%).¹⁵ Leading grocery retailers in Canada in 2020, by market share. Statista. March 7, 2022. These grocery leaders also sell extensive assortments of pharmacy, health, and beauty products. Yet loyalty has shifted: since the start of the pandemic, 25% of Canadians have changed where they typically shop for groceries.

Bigger baskets

In another lasting pandemic habit, half of Canadian consumers still make less frequent but bigger basket shops.¹⁶ Understanding the Canadian consumer of the moment: Canadian Consumer Insights 2021, Pulse 2. PwC. June 2021. As such, CPG suppliers may want to focus on pitching their products to Canada’s leading retailers, which act as convenient one-stop shops.

E-commerce boom time

Retail e-commerce is now the primary growth driver of retail in Canada.¹⁷ Briggs, Paul. Ecommerce in Canada has nearly doubled since 2019. eMarketer, Insider Intelligence. July 22, 2021. In 2020, Canada’s retail e-commerce economy grew 75%, second only to Argentina, and more than double the U.S. and global growth rates of 32.4% and 25.7%, respectively.¹⁸ Ibid.

E-commerce represents a significant opportunity for

U.S. exporters who want to enter the Canadian market¹⁹ Canada – Country Commercial Guide. International Trade Administration, U.S. Department of Commerce. August 20, 2021.

Last year, 27 million Canadians used e-commerce.²⁰ Ibid. E-commerce accounted for 13.4% of Canada’s total retail sales and will reach 17.2% by 2025 (vs. 23.6% in 2025 for the U.S).²¹ Briggs, Paul. Ecommerce in Canada has nearly doubled since 2019. eMarketer, Insider Intelligence. July 22, 2021. ^,22 Canada – Country Commercial Guide. International Trade Administration, U.S. Department of Commerce. August 20, 2021. To connect with online shoppers in Canada as e-grocery competition intensifies, more U.S. brands now use digital advertising as a 24/7 sales force.

Hungry for e-grocery

The majority (72%) of Canadian adults like being able to order groceries online and more than 20% said they will do more grocery delivery after the pandemic than before.²³ Briggs, Paul. Online grocery delivery is exploding in Canada. eMarketer, Insider Intelligence. February 17, 2022. Younger and whitecollar workers fuelled growth during the pandemic, as 27% of remote workers and students ordered groceries online (vs. 19% of adults overall).²⁴ Ibid. To support Canadians’ growing appetite for online grocery, retailers like Costco, Loblaws, Metro, and Walmart partner with Instacart, whose same-day delivery service is now available to 90% of Canadian households.²⁵ Toneguzzi, Mario. Instacart Expands Same-Day Delivery Across Canada with Major Retail Brands: Interview. Retail Insider. May 8, 2022.

Grocery bestsellers

Canada is the top destination for U.S. exports of high-value agricultural products, including foods sold in supermarkets, ranging from produce to alcoholic beverages. These exports support more than  130,000 U.S. jobs, and many small and medium-sized suppliers.²⁶ Canada – Country Commercial Guide. International Trade Administration, U.S. Department of Commerce. August 20, 2021.

Value shopping 

Pricing increasingly influences Canadian shoppers as:

• 30% say their top priority for shopping is price²⁷ Toneguzzi, Mario. Canadians Returning to Shopping Centres and Brick-and-Mortar Retail in a Big Way: JLL Study. Retail Insider. November 25, 2021.
• 42% of Canadians are shopping more with discount retailers²⁸ Understanding the Canadian consumer of the moment: Canadian Consumer Insights 2021, Pulse 2. PwC. June 2021. 
• 55% of Gen Z shoppers are shopping more with discount retailers (vs. 25% of Boomers)²⁹  Ibid.
• 70% of Canadian grocery shoppers bought private label products for affordability³⁰ Reasons for buying private label products among grocery shoppers in Canada as of February 2022. Statista. April 28, 2022.
• 80% say price will be the most important purchase criteria for them three years from now.³¹ Chaudhry, Lokesh, Ryan Beck, Rodger So, Glenn Parkinson, Carlos Leal, Sulagna Gupta, Patrick Caraan and Niki Non. The CEO imperative: accelerate now, emerge ahead of changing Canadian consumers. EY. May 5, 2021.

By July 2020, private label’s market share in Canada grew to 18.2% (vs. 17.2% in 2019), slightly below the U.S. share of 19.5%.³² Kucharsky, Danny. Private label ramps up. Canadian Grocer. November 20, 2020. ^,33 Redman, Russell. PLMA: Private brands uphold market share despite pandemic. Supermarket News. April 14, 2021. As inflation surges, private labels, discount retailers, promotional deals, and value bundles are poised for higher demand to help Canadians stretch each dollar.

Diversity

Canada’s wide ethnic diversity and Canadians’ high disposable income create new sales opportunities for consumer goods businesses.³⁴ Canada – Country Commercial Guide. International Trade Administration, U.S. Department of Commerce. August 20, 2021. Notably, Canada’s most populous cities are home to diverse consumers, with more than half of Vancouver and Toronto residents identifying as visible minorities.

Canadian retail assortments could benefit from more variety from diverse suppliers, especially in categories like grocery and beauty. To resonate with diverse Canadians, companies can create content that accurately reflects different cultural backgrounds to celebrate diversity and build meaningful connections with these consumers.³⁵ Bhaskaran, Aarti. Marketing across Canada’s multicultural landscape? Read new research from MediaCom Canada. Think with Google. December 2017.

Purpose-led brands

Purpose influences sales and loyalty, as 69% of Canadians believe brands must positively change the world, such as protecting health, sustainability, and social good.³⁶ Chaudhry, Lokesh, Ryan Beck, Rodger So, Glenn Parkinson, Carlos Leal, Sulagna Gupta, Patrick Caraan and Niki Non. The CEO imperative: accelerate now, emerge ahead of changing Canadian consumers. EY. May 5, 2021.

• 52% of Canadian consumers want to make healthier choices in their product purchases in the longer term³⁷ Ibid.
• 59% will prioritize the environment and climate change in how they live and the products they buy³⁸ Ibid.
• 67% will be more likely to buy from companies that ensure what they do has a positive impact on society³⁹ Ibid.

To stand out and engage conscious consumers in Canada, businesses can emphasize their environmental, social, and governance (ESG) initiatives, including metrics and success stories.

Keep it quick, seamless, and affordable

Now that more retailers embrace in-store grocery tech for a swift, convenient customer experience, 53% of Canadians intend to regularly use self-checkouts over the next six months. In addition, 60% of Gen Zs and Millennials plan to use them more often.⁴⁰ Charlebois, Sylvain. Sylvain Charlebois: Are Self-Checkouts Winning the Machine vs. Human Battle? Retail Insider. May 25, 2021. Shoppers aged 45 to 54 prefer to avoid hassles and crowds.⁴¹ Toneguzzi, Mario. Canadians Returning to Shopping Centres and Brick-and-Mortar Retail in a Big Way: JLL Study. Retail Insider. November 25, 2021.

“Convenience, speed of service and price

are now provoking change in retail.”

~ George Minakakis, CEO, Inception Retail Group

However, only 26% of Canadian respondents said they had become more optimistic about the economy over the previous six months (vs. 36% globally).⁴² Understanding the Canadian consumer of the moment: Canadian Consumer Insights 2021, Pulse 2. PwC. June 2021. To engage Canadians, businesses can focus on competitive pricing, distinct marketing, and product innovation.

Comparing and contrasting Canada and the U.S.

While many Canadian and American market trends overlap, U.S. companies should pay attention to differences that impact retail and CPG marketing in Canada, including product assortment, pricing, and promotional strategies.

Consider serving Canadians

Overall, Canada may be the right fit for U.S. retailers and CPG suppliers to improve their top line, given many similar cross-border consumer and competitive trends. If your business aligns with Canadians’ growing demand for e-commerce, value, diversity, and purpose, consider satisfying the needs of your friendly, affluent, hockey-loving neighbors to the north.