Natural Health Products in the Canadian Marketplace

Demand for natural health products continues to grow as more Canadians discover the potential health benefits of natural health products, turn to alternative forms of medicine and seek to improve the quality of their lives. Demand is also being driven by a growing interest in self-care, as Canada’s aging population places a heavier strain on the health care system.

Multiple studies have examined Canadians’ interest and use of natural health products. These studies consistently demonstrate a very high usage rate and imply that demand for the products will remain strong. In fact, a recent study completed for Health Canada by Ipsos-Reid revealed 71 percent of Canadians have used a natural health product and 77 percent of Canadians agree natural health products can be used to maintain or promote health.

Earlier this year, the Canadian Health Food Association (CHFA), the Canadian Natural Products Association (CNPA) and the Canadian Homeopathic Pharmaceutical Association (CHPhA) commissioned Leverus Inc. to assess the size and scope of the Canadian natural health products sector. The study clarified several important aspects about the Canadian natural products market.

Market Size

Natural health products (NHPs) are sold in Canada through a variety of channels including health food retailers, traditional Chinese medicine retailers, direct sellers, chain store pharmacies, independent pharmacies and health care practitioners. There are nearly 42,000 products in the Canadian market falling within Health Canada’s definition of NHPs, which includes vitamins, minerals, herbal/botanical supplements and sports nutrition products. Total retail sales of NHPs for 2005 are estimated to be $2.5 billion, with retail sales projected to grow to $2.75 billion by 2010. And more than 90 percent of respondents, including retailers, importers and manufacturers, anticipate continued growth over the next three years.

Additional findings related to the size of the market include:

Sector Employment/Structure

The NHP sector is a major employer in Canada, contributing significantly to the economy. It is estimated to employ close to 25,000 individuals, with the retail sector accounting for almost 18,000 of these employees; 60 percent of that total is part-time employment. Suppliers (i.e., importers, manufacturers) employ close to 6,500 individuals, virtually all of whom are full timers.

The NHP sector is comprised of more than 10,800 enterprises across Canada. Sector participants range in size from sales of less than $200,000 to a number of enterprises generating more than $50 million in revenue annually. There are at least 10,000 retail establishments in Canada offering natural health products including some 2,700 health food stores, 650 traditional Chinese medicine retailers and 7,600 pharmacies. In addition, there are direct sellers, alternative health care practitioners and enterprises selling directly through the Internet. The more than 3,000 health food and traditional Chinese medicine retail establishments are found in most Canadian municipalities and are heavily concentrated in Ontario, Quebec and British Columbia. On the practitioner side, there continues to be significant contributions to use of NHPs through direct product sales.

On the supplier side, there are more than 800 NHP suppliers (i.e., manufacturers, importers, distributors) operating in the Canadian market. They are relatively evenly distributed between Ontario, Quebec and British Columbia, with fewer than 10 percent of the total in the Prairies and Atlantic Canada. Manufacturers identify health food stores and food and grocery stores as their current most important distribution channels, and health food stores and retail pharmacies as their future most important distribution channels. Distributors said health food stores and food and health care practitioners are now and will remain their important distribution channels.

Canada’s trade performance in natural health products is improving, as it remains a net importer of NHPs. However, the trade deficit has narrowed in recent years to about $50 million in 2004. The value of exports reached nearly $200 million in 2004 and is increasing by approximately 2 percent annually. The value of imports of natural health products and ingredients is equivalent to approximately 10 percent of retail sales in Canada.

Valerie Bell is the president of the Canadian Health Food Association (CHFA), a non-profit trade association with more than 1,300 members spanning the natural products industry value chain. The organization promotes natural health products, whole foods and organics and serves as the voice of the natural products industry in Canada. Visit the group at www.chfa.ca.