Innovators and investors

Report showcases Canada’s natural and functional food

By Jana Manolakos

Hit by Crohn’s Disease, Ted Fleming turned to drinking non-alcoholic beer, a beverage that was less irritating for his intestines. The problem was that most non-alcoholic beers lacked flavour and variety, so he grabbed the bull by the horns and began to brew his own, launching Partake Brewing in 2017. Since then, his Calgary-based operation has grown into an award-winning producer of non-alcoholic beers that offer taste and low-calorie profiles (10 to 30 calories per can).

Partake is one of several startup and early stage companies featured in a new report by Natural Product Canada (NPC), an active investor and innovation cluster. The report, titled “Game Changers”, identifies companies, products and investors that NPC expects will have a major impact on Canadian functional food, nutrition and natural health products.

“The Game Changers report shows the breadth of innovation and investment activity that is happening in Canada. It reflects the quality and diversity of players that are involved in this growing area of Canada’s economy,” says Shelley King, CEO of NPC.

The report features investment and acquisition activities over a 24-month period in Canada, as well as insights into some of the unique characteristics of the Canadian natural nutrition landscape, such as the legalization of cannabis, and the exceptional standards for quality product development. King suggests that Canadian businesses can benefit from the report’s bird’s-eye view of what’s going on, to get a sense of the types of players out there, and what they might be looking for in their next product or partner.

“Our focus on promoting Canada is two-fold,” she explains. “First, we see high-innovation, high-quality Canadian products and companies that may not be on the radar of Canadian consumers, retailers or investors because of their size or relative stage of development. But the quality and potential is there for them to be solid – really excellent additions to the food supply chain in Canada. Secondly, Canada is a great place for international food and nutrition companies to do business.”

Driven by consumers who are increasingly educated about the foods they eat and who are strongly motivated by healthier lifestyles – a trend that has been further fuelled by health concerns stemming from the global pandemic – the market for natural and functional foods is growing in leaps and bounds.

Consumer interest in alternative proteins and plant-based diets, functional beverages, microbiomes, CBD and hemp is driving a burgeoning health and wellness product market which a Canadian government report says “is expected to reach US$20.7 billion in 2022 from US$14.9 billion in 2013.” Healthy natural products had the largest market size in 2017 – a segment that is expected to surpass all the sub-segments in the health and wellness sector by the end of 2022.

“The plant-based movement in particular is driving more attention and investment into Canadian product development and capacity,” King says. “The fact that so many of the big food players are focused on real, tangible innovation in everything from ingredients to sustainable packaging, means this industry is ripe for growth.”

Companies like Maple Leaf Foods, which now offers meatless alternatives, and McCain Foods, which has pivoted to clean-label foods, have responded by expanding their traditional product portfolios and investing in healthier, plant-based ingredients. Newer companies like New Brunswick’s Millennia TEA are attracting investments through sustainably sourced products.

For the cannabis sector, since it became legalized two years ago, many startups are tackling challenges associated with improving the quality of their products and reducing costs. “Technological developments in critical sectors such as lighting, genetics and growth systems have the potential to resolve many of the industry’s challenges, but on top of already high operating costs, the costs of R&D can often be a huge burden,” notes Nicholas Garcia, head of manufacturing consulting services at Leyton Canada.

This is where NPC can assist, explains King. The innovation cluster helps Canadian natural product entrepreneurs overcome key commercialization hurdles and attract investment. She explains, “We have everything they’re looking for to make substantial investments into R&D and production – agricultural capacity, an exemplary research and development system, a highly educated workforce, efficient national distribution systems and a stable, innovative infrastructure of government supports.”

For Partake Brewing, NPC’s commercialization programs enabled the fledgling company to hire a VP of sales, which led to increased market share and revenues, and helped them with their capital raise of $4M.

Sales of Partake Brewing have grown steadily, increasing 250 percent between 2019–2020, and sales continued to grow during COVID-19, with an increase of 100 percent from March 2020 to early 2021. Partake has added more than 1,000 retailers to its roster since the 2017 launch, and in April, launched a new ecommerce site to bring a more convenient retail experience to consumers.

Company owner Fleming acknowledges, “The support, guidance and insights NPC has provided put us in an excellent position to expand our category leadership and accelerated the success of our great-tasting, low-calorie, craft non-alcoholic beers across Canada and the United States.”

He offers advice for new companies: “The potential to gain traction and build momentum comes from solving a shared problem. Identify the problem, get started with a good solution and improve it along the way with feedback from customers. Your solution, combined with passionate customers and a sizable market opportunity, will bring investors to you.”

Connecting with future investors is an almost daily occurrence at NPC. King explains, “When we start to help them take a closer look, you can see them get really interested in what Canada has to offer. The report was really developed to give a quick overview of how much innovation is happening, and how that’s translating into business opportunities. Game Changers makes it clear that Canada is a great source of innovation, and an excellent place to do business.”

She concludes, “The outlook for the Canadian natural foods market has never been brighter. The consumer focus on natural and clean label just keeps growing.”

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