canada's performance in the global marketplace - the george

Canada’s performancein the global marketplace

A Case Study Approach

F O O D R E G U L A T O R Y S Y S T E M S :

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1 Introduction and Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Purpose of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2 Assessment Of The Canadian Food Regulatory System . . . . . . . . . . . . . . . 11

An Overview Of Canada’s Food Regulatory System . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Assessment Of The Canadian Food Product Market Approval SystemAs Compared To Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Administrative/Process Impacts on Food Approval Process Efficiency . . . . . . . . . . . 21

Summary: Identified Lags Affecting Food Approval in Canada . . . . . . . . . . . . . . . . . 25

3 Actual Experiences With Canada’s Food Regulatory System . . . . . . . . . . . 31

Case A:Product Marketed in Canada Without a Health Claim . . . . . . . . . . . . . . . . . . . . . . . . . 34

CASE B:Product Line Marketed in Canada Without a Health Claim . . . . . . . . . . . . . . . . . . . . . 36

CASE C:Product Marketed in Canada Without a Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

CASE D:Natural Health Product Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

CASE E:Unilever – Becel Pro.Activ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

CASE F:Health Claim Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

CASE G:Discretionary Fortification Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

CASE H:Natural Health Product Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

CASE I:Minute Maid Company Canada Inc.: Calcium-Fortified Orange Juice . . . . . . . . . . . . 52

CASE J:Ocean Nutrition Canada: Novel Food and Health Claims Approvals . . . . . . . . . . . . . 55

CASE K:Discretionary Fortification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

CASE L:Food Additive Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

4 What Consumers Are Missing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Canadian Consumer Health and Wellness and Food Purchasing Trends . . . . . . . . . . . 74

Food Innovations Missing in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Increasing Energy Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Weight Management and Body Image . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Missing Food Packaging Messages in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Products that Contain Oat and Heart Disease Claims . . . . . . . . . . . . . . . . . . . . . . . . . 81

5 Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

1

The increased importance of disease preventionthrough diet, particularly as rising health care costs andaging populations continue to top the social agenda,boosts the demand for innovative food and beverageproducts with health benefits.The government says it wants– and in fact encourages –Canada’s food processors andmanufacturers to innovate tomeet this demand and be ableto compete and prosper in aglobal economy.

However, Canada’s rules andregulations governing food innovation actually hinderinnovation. They are outdated, poorly functioningand, by the Government of Canada’s own admission,“increasingly limited and inflexible”, and “falling behindinternational best practices1.”

In many instances Canada is decades behind in termsof building enabling regulatory frameworks to allowindustry to innovate and communicate the benefitsof food innovation to consumers.

Simply put, our trade andinvestment competitors areenabling their producers andprocessors and Canada is not.

While the Government ofCanada has been proposingfood regulatory modernizationfor many years and has been

consulting on how best to move forward, Canada’sfood industry and producers are seriously concernedabout the slow pace of change, the lack of choicefor consumers, the serious costs to the economy,and the fact that Canada is lagging far behind othernations when it comes to food innovation.

Executive Summary

Simply put, our trade andinvestment competitors areenabling their producers andprocessors and Canada is not.

2 Executive Summary

This study provides concrete evidence to support thewidely-held view that Canada’s food regulatory systemis hurting Canada, and is in urgent need of reform.

The study:

• assesses the food regulatory environment inCanada, and compares its main components tothe systems in the United States, the EuropeanUnion, Japan and Australia/New Zealand(Section Two);

• details the experiences of food and beveragemanufacturers with Canada’s food regulatorysystem through 12 case studies (Section Three);

• highlights the broader spectrum of the innovationthat Canadian consumers are missing out on, byshowing what is available in many other countries(Section Four); and

• offers some general conclusions and recommen-dations for Canada’s food regulatory system(Section Five).

ConclusionsThrough an analysis of the performance of Canada’sregulatory system comparedto its competitors, a look at12 actual cases, and a reviewof innovative products anduse of health claims that arenot available in Canada, thestudy draws the followingkey conclusions:

• Canada is not competi-tive; our food regulatorysystem is far behind those of leading nationsin the world. There are substantial differencesbetween Canada’s regulatory system and thosein a number of other countries. Canada’s systemis less accountable and has more lags. The prob-lems exist in all three parts of the system – the

legislation, regulations and administration/processes. As a result, timelines for approval ofinnovative products and the use of health claimsin Canada are much longer than those in theother jurisdictions.

• Canada’s regulatory system needs to bebrought into the 21st century. Canada’s systemneeds a legislative framework, as other countrieshave, that incorporates objectives for bothhealth protection and food innovation. Thiswould require regulators to explicitly considerthe balance between protecting the safety ofconsumers and responding to demand for new,healthful products.

• The costs associated with Canada’s laggingsystem are very high and far-reaching. Twelvecase studies help to quantify the costs as a resultof the lagging system. The costs were categorizedinto direct costs, opportunity costs to the foodmanufacturing companies looking to develop newfood products and/or market products with healthclaims, potential lost sales for retailers becauseof lack of product availability and potential lostsales for primary producers. Overall opportunitycosts to the economy were also examined; these

losses include the foodmanufacturers and all upstreamindustries’ output (lost sales),wages and salaries, foregonetaxes, and employment thatwould have been created dueto the economic activity. Thecosts along the whole valuechain are significant.

Estimated costs associated with the lags outlined injust 12 case studies are more than $440 million.

Estimated costs associatedwith the lags outlined in just12 case studies are more than$440 million.

3Executive Summary

Summary of Direct, Indirect and Total Opportunity Costs

Case Foregone Output, Wages and Salaries, Taxes on Products Foregone Employmentand Taxes on Production ($Cdn) (Individuals)

Direct Indirect Total Direct Indirect Total

A $13,435,680 $17,629,764 $31,065,720 39 98 137

B $69,557,634 $91,270,756 $160,829,819 201 508 709

C $2,799,100 $3,672,868 $6,472,025 8 20 29

E $41,204,353 $54,066,710 $95,271,910 119 301 420

F1 $1,092,981 $1,434,167 $2,527,170 3 8 11

G $31,676,589 $41,564,758 $73,241,998 91 231 323

H $8,696,874 $11,411,692 $20,108,745 25 64 89

J $14,824,104 $19,451,599 $34,276,007 43 108 151

K1 $3,147,881

L1 $12,602,334

TOTAL $200,013,720 $240,502,314 $440,519,799 529 1,338 1,869

Note:

i) these figures are based on only 12 cases. There are likely many more cases experienced by each of thecompanies who participated in the study, and many more companies who did not participate, who wouldhave similar experiences. It is clear that if these results were extended to the entire system, the costs wouldbe much higher.

ii) it is impossible to estimate all the costs because of the deleterious effects of the regulatory system on theunderlying structure of the economy. When suppliers are continually penalized for innovation, they reduceinvestment in Canada, they undertake less research and development, and they do not provide Canadianswith products that could improve their health.

*Some totals may not exactly equal sum of direct and indirect impacts because of rounding

4 Executive Summary

• Lack of commercialization opportunity fuelsthe decline of the sector. The lack of a modernadministrative and procedural infrastructure torespond effectively and efficiently to marketdemand creates a disincentive to commercializefood innovation in Canada and add value to theeconomy. At a time when Canada’s traditionalmanufacturing sector is in decline due to globaleconomic shifts and currency fluctuations, a strongfood processing sector that is properly incented toinnovate in Canada could stem the tide of plantclosures and job losses that are endemic to thewider manufacturing sector and appearing withgreater frequency within the food industry as well.

• There is no evidence that the lags are the resultof measures to help improve the health andsafety of Canadians. The lags identified in thestudy do not relate to food safety componentsbut rather are the result of poor administrativeprocesses and lack of a framework for decision-making. This contributes additional costs anduncertainty to food suppliers, adds to the timeand cost for Canadians to obtain potentiallyhealthier products, and reduces investment inthe food industry.

The conclusions of this study are not new nor are theyconfined to this particular set of regulations. Manyother studies, including on other aspects of HealthCanada’s and CFIA regulations, from plant healthproducts to seed regulations, have drawn similarconclusions, for well over two decades.

Instead of adapting to today’s needs, the system hasbecome a growing burden on the Canadian industry,effectively dampening innovation and economicprosperity, and cheating Canadian consumers andusers of inputs from access to the products that wouldallow them to improve their lot.

Canadian food law expert Ron Doering2 noted thatHealth Canada has discussed and consulted on the“improvement” and “modernization” of the regulatorysystem for years, through initiatives such as: SmartRegulation; Blueprint for Renewal: Transforming Canada’sApproach to Regulating Health Products and Food; Blueprintfor Renewal II: Modernizing Canada’s Regulatory System forHealth Products and Food; Towards a Regulatory Modern-ization Strategy for Food and Nutrition; and the newestManaging Health Claims for Foods in Canada: Towards aModernized Framework. Although the consultationsseem to move in the right direction there is littleevidence of any significant results. It is time to stepup the effort to reform the system.

5Executive Summary

RecommendationsThe following are recommendations:

• Establish the political will to urgently reformCanada’s food regulatory system. Appoint anexecutive at the highest level of government tooversee and champion the process.

• Re-write the legislation to incorporate:

• clear objectives so that regulators are givenguidance on what the public wants from itshealth regulatory system;

• an objective in the legislation to promoteefficiency in the food system, as Australia/New Zealand has;

• the maximum length of time for regulatorsto make decisions and a requirement forthem to be accountable to Cabinet whenthe time line is exceeded.

The Cabinet Directive on Streamlining Regula-tion was published in April 2007. This Directivereplaces the Government of Canada RegulatoryPolicy with a purpose to work “with Canadiansand other governments to ensure that itsregulatory activities result in the greatest overallbenefit to current and future generations ofCanadians”. This Directive applies to the devel-opment and amendment of regulations under theauthority of all federal departments and agencies.

Along with protecting the health and safety ofCanadians, under the Directive, the governmentmust “create regulations through inclusiveness,transparency, accountability and public scrutiny”and “require timeliness” and “promote a fair andcompetitive market economy that encouragesentrepreneurship, investment and innovation”.This Directive may help to improve the environ-ment for developing regulations and seems to beheading in the right direction but may simplyresult in more consultations.

• If the legislation were amended, the regula-tions would also need to be re-written to becompliant. The following are recommendedimprovements to the regulations:

• Pursue administrative approval ap-proaches for food additives and healthclaims rather than lengthy regulatoryamendments after safety has been as-sessed.

• Adjust the heavy reliance on the pre-market assessment process and fullyexplore the use of regulatory proceduresin other countries that do not haveexcessive requirements or have tieredrequirements, and assess how they canbe adopted to be used in Canada. Thiswould relieve many of the regulatoryimpediments mentioned in this report.

• Given the regulatory system is so relianton pre-market assessments, it requires aclear and transparent process and applica-tion requirements. Substantial changes inadministrative procedures need to be madeto speed up and improve this process atHealth Canada, for example:

• Develop a comprehensive submissionguide for applicants to follow indeveloping a submission (DraftGuidance Document – Managementof Pre-Market Submissions is currentlyin the consultation phase).

• Hold meaningful pre-submissionconsultations with applicants withthe intent of ensuring that applicantsunderstand the process and completetheir submissions with the right infor-mation for efficient decision-making.

6 Executive Summary

1 Cases K and L products and one product from Case F would be manufactured in the United States and therefore have not been run through the StatisticsCanada Input-Output model (described in detail in Appendix I). However, the potential lost sales amounts are included in the total economy opportunitycosts because these sales would be attributed to the companies’ Canadian divisions.

2 Doering, R. (2008). More Talk, No Action: Yet Another Health Canada consultation on health claims in announced. Food in Canada. January/February 2008.

• Adopt the legislated Australia/NewZealand policy that requires regularcommunication with applicants at eachstage of the decision process.

• Ensure efficiency by acceptingcredible scientific reviews from otherjurisdictions as part of an applicationand/or utilize third-party experts whenresources within Health Canadaare limited.

• Hold regulators accountable for meetingtimelines. As already indicated, werecommend the legislation be amendedto hold the government accountable.This should become part of normalperformance evaluation within HealthCanada.

• Develop performance indicators andconduct a self-assessment based onthose indicators. Make HealthCanada’s performance on timelinesand other measures public.

• Publish application decisions (positiveor negative) so that the industry canlearn from these experiences. Thiswould also ensure that decisions aremade consistently.

7

As is illustrated by the growth in the world market fornatural health products, nutraceuticals and functionalfoods, consumers are placing greater value on andincreasing their demand for foods that are differenti-ated by health and nutrition attributes.

Noted food industry expert Leatherhead FoodInternational1 estimates the global functional foodmarket grew almost 10 per cent between 2005 and2006 and will grow 50 per cent between 2005 and2010. This growth is driven by changing demographicsand economic and social trends. According toLeatherhead, a key market driver for the functionalfood industry has been the consumer desire to take amore active role in promoting and optimizing personalhealth and wellbeing. Interest tends to be focused onthree main areas: optimizing current health; control-ling specific health problems; and promoting futuregood health.

a key market driver for thefunctional food industry has beenthe consumer desire to take amore active role in promotingand optimizing personal healthand wellbeing

1 Introduction and Purpose


Other thought-leaders say thetrends that are driving the de-mand for natural health foods,nutraceuticals and functionalfoods include2:

• aging populations, particu-larly the large baby boomgeneration;

• increasing interest in‘healthy living’;

• increasing affluence andeducation among worldpopulations;

• increasing understandingof the link betweennutrition and health;

• emphasis on preventative measures to controlhealth care costs;

• increased acceptance and utilization of‘alternative’ treatments;

• general consumer dissatisfaction with conven-tional treatments, therapiesand drugs;

• rising acceptance among doctors, pharmacistsand other health professionals;

• expanding body of scientific and clinical researchto validate effectiveness and safety;

• expanding press coverage of such research;

• increased marketing and advertising activitiesby suppliers; and

• evolving public policy and regulatoryenvironments.

Canadians figure among theglobal population of consumerswho have an increased focus onfood for health and disease pre-vention. However, Canadiansare not benefitting from manyof the foods designed to deliverthese benefits. Canada’s out-dated regulatory standards andpractices limit, restrict anddiscourage innovation by foodmanufacturers that wouldensure Canadians have accessto a variety of foods withhealth benefits.

The Food and Drugs Act and itscorresponding Food and Drug

Regulations and Natural Health Products Regulations andthe Consumer Packaging and Labelling Act impede foodinnovation and place limitations on health and nu-trition claims. The food regulatory frameworks ofother nations have more advanced regulatory processesthat allow products to be presented in the marketaccording to specific consumer segment demands.While the Canadian government publicly urges thesector to differentiate and diversify, it does nothing tochange a regulatory system that rewards samenessand makes innovation costly.

The Canadian food industry is waiting for HealthCanada to publish proposed amended regulationsfor fortification in the Canada Gazette. The proposedCanadian regulations will provide manufacturers withgreater ability for discretionary fortification of foodsthan the current regulatory regime does. However, inorder for the time and money invested in developingthis policy to be worthwhile, the policy must reflectindustry needs for innovation and needs to be flexibleenough to adapt to future innovation.

In spite of the many anecdotal

examples of lost opportunity

that industry provides to gov-

ernment, the sector’s ability to

build an urgent case for change

has been hampered by a lack of

quantifiable data about the

opportunity costs associated

with Canada’s poorly function-

ing regulatory system for food.

9Introduction and Purpose

In the meantime, the industry – and Canadians – aremissing out on significant opportunities. This situationwill only amplify as the Canadian system continues tolag, while the global functional food market experi-ences expected massive growth.

In spite of the many anecdotal examples of lostopportunity that industry provides to government,the sector’s ability to build an urgent case for changehas been hampered by a lack of quantifiable dataabout the opportunity costs associated with Canada’spoorly functioning regulatory system for food.

This study provides the necessary evidence to supportthe growing assertion that the Canadian food regu-latory system is inefficient and ineffective in terms ofspeed, clarity, transparency and accountability, andas a result, is hurting Canada’s economic future andability to prosper and compete globally. It drawsattention to the fact that urgent reform is needed tomeet the expectations of Canadians.

1 Leatherhead Food International. 2006. The International Market for Functional Foods: Moving into the Mainstream? Retrieved May 28, 2007.

2 Scott Wolfe Management Inc. 2002. Potential Benefits of Functional Foods and Nutraceuticals to the Agri-Food Industry in Canada. Research conductedfor Agriculture and Agri-Food Canada. Retrieved Apr. 3, 2007 from: http://www.agr.gc.ca/misb/fb-ba/nutra/ben/pdf/Ag-rpt_e.pdf.


Purpose of the StudyThe purpose of this study is to identify the impact ofCanada’s current food approval system on companieswanting to introduce new products, novel foods and/or make health claims relating to these foods. Ulti-mately the study’s goal is to estimate the magnitudeof the economic cost to the agri-food sector and theCanadian economy.

Specifically, the study:

• compares Canada’s performance against otherfood regulatory systems around the world;

• estimates the direct losses as the result of a poorlyfunctioning regulatory framework for innovativefoods, including losses that stem from delays inthe product approval and/or health claimapproval process;

• quantifies the losses to food companies andretailers, and to the Canadian economy;

• estimates the potential lost market opportunitiesfor Canadian primary agriculture; and

• recommends improvements to the Canadianfood regulatory system.

The losses are quantified through information providedby Canadian food manufacturers about their experi-ences with the regulatory approvals process, whichare written up in 12 case studies in this report. Tostrengthen the case for change and to press for theurgency of the situation, Canada’s food and beverageindustry elected to put forward actual examples of thevarious ways regulatory delays have impacted theability to commercialize innovation in this country.

It is important to note that the food industry recog-nizes the need for high standards. The purpose of thisresearch is not to diminish the importance of foodsafety standards or the reputation for safety that HealthCanada enjoys; instead, the research assesses howinefficient regulatory systems have economically im-pacted the food industry in Canada in an attempt tomake a business case for improvement.

11

To test and assess the widely-held view that theCanadian food regulatory system is inefficient andineffective, the study examined the components ofthe system, and compared them to food regulatorysystems in other jurisdictions. This review focused inparticular on the approval processes for health claims,food additives, novel foods, natural health productsand the discretionary fortification of food.

This section of the report outlines the most relevantfindings. Appendices A through E1 of the reportcontain the complete descriptions of each regulatorysystem. Summary comparative tables of this infor-mation can be found in Appendix G.

An Overview Of Canada’sFood Regulatory SystemThe term “regulatory system” is used to describe adesigned framework governing human interaction.The framework comprises prescribed formal rules,which are the objects of social goals, such as safety oreconomic growth, and delegated procedures andauthority to ensure compliance to these rules. Thecomponents of the system include legislation, regu-lations, administration and enforcement.

Legislation and RegulationsRelevant Canadian legislation and regulationspertaining to foods are the Food and Drugs Act andRegulations and the Consumer Packaging and LabellingAct and Regulations.

2 Assessment Of The Canadian Food Regulatory System


The Food and Drugs Act prohibits the manufacture orsale of all dangerous or adulterated food products any-where in Canada. The Act, which derives its authorityfrom criminal law, is supplemented by regulationsdesigned to ensure the safety and nutritional quality offoods. The Food and Drugs Act also contains NaturalHealth Product Regulations which were implemented inJanuary 2004. Natural Health Products are regulatedas a sub-category of drugs.

The Consumer Packaging and Labelling Act requires thatprepackaged consumer products bear accurate andmeaningful labelling information to help consumersmake informed purchasing decisions. The Act prohibitsfalse or misleading representations and sets out speci-fications for mandatory label information.

Administration and EnforcementHealth Canada and the Canadian Food InspectionAgency (CFIA) are the federal agencies responsiblefor the safety and regulation of food in Canada. HealthCanada’s responsibility is to administer the Food andDrugs Act and Regulations, while CFIA is responsiblefor enforcing the legislation.

Health Canada engages in research, risk assessment,pre-market review and evaluation of all issues relatedto food safety and nutrition. Health Canada is alsoresponsible for assessing the effectiveness of CFIA’sfood safety activities. Along with federal inspectionservices related to food, the CFIA is also responsiblefor enforcing the Consumer Packaging and Labelling Actand Regulations.

Within Health Canada, the Health Products and FoodBranch houses the Food Directorate and the NaturalHealth Products Directorate (NHPD).

The Food Directorate establishes policies, setsstandards and provides advice and information on thesafety and nutrition of food in Canada with respectto the Food and Drugs Act and Regulations. The NutritionEvaluation Division of the Bureau of NutritionalSciences works within the Food Directorate and isresponsible for food fortification, nutrition labellingand food health claim petitions, policies and standards.

The NHPD regulates natural health products underthe Natural Health Product Regulations.

Assessment Of The CanadianFood Product Market Approval SystemAs Compared To Other JurisdictionsThe next section provides an assessment of howefficient the Canadian food product approval systemis at getting safe products to market. It looks at theimpact of the a) legislation; b) regulations; and c)administration; outlines best practices in other juris-dictions; and assesses Canada’s position relative tothem. The jurisdictions chosen for comparison are theUnited States, Australia/New Zealand, Japan, and theEuropean Union, which are considered among themost advanced when it comes to both food safetyand innovation.

A) LegislationThe stated purpose of legislation is what guides over-all decision-making and formation of policy. TheCanadian Food and Drugs Act does not appear to havea defined or stated purpose for food product marketapproval. By default, the focus of the legislation maybe inferred by the fact that the Act and the Packagingand Labelling Act are based on criminal law. The Foodand Drugs Actwas established in 1953 and was de-signed to meet the challenges of the day. It was largelyintended as a consumer protection statute. The Act’ssingular intent is to ensure high safety standards.

13Assessment Of The Canadian Food Regulatory System

The purpose of food legislation in other jurisdictionsvaries. The market approval processes in some of theother jurisdictions appear to be guided by twin objec-tives: to protect consumers and foster innovation.

B) RegulationsHealth ClaimsRegulatory Amendment Requirements Are Lengthy

The efficiency of the health claim approval processis affected by the level of regulatory oversight andregulatory amendments required for approval. In-creased regulatory oversight can lead to a decreasednumber of health claims pursued and/or approved,which in turn leads to a more limited opportunityfor innovation.

Health Canada recently compared the health claimregulatory framework in Canada to the United States,EU, Australia/New Zealand and Japan as part of itsreview of the current framework for the managementof health claims on foods1.

Health claim definitions differ among the countries andmake comparison challenging. Although each jurisdic-tion has its own definition of a health claim, generally,health claims are a statement or representation(through graphics, brand name, trade name) on a foodthat states, suggests, or implies that a relationshipexists between a food or a component of that foodand health or disease risk-reduction. Generally, healthclaims do not refer to dietary information alone thatquantitatively or qualitatively makes reference to thelevel of a nutrient in a food, for example, “zero fat” or“high in fibre”. Such claims are referred to as nutrientcontent claims or nutritional claims.

Prior to regulatory amendments made in 2002, diseaserisk reduction (DRR) claims were not permitted inCanada. After a review of ten DRR claims allowed foruse in the United States, Health Canada amended theFood and Drug Regulations to permit five generic DRRclaims; a proposal to permit two additional diseaserisk reduction claims was published on HealthCanada’s website in 20062.

United States No statement of purpose

Japan Purpose pertains only to safety

Australia Very prescriptive purpose, including the goal of ensuring “an effective, transparent and accountable regulatoryframework within which the food industry can work efficiently” through Food Standards Australia New Zealand

European Union Regulation on nutrition and health claims introduced in 2007 (Regulation 1924/2006) includes in its objectives“to ensure the effective functioning of the internal market whilst providing a high level of consumer protectionand stimulation and protection of innovations”

Objectives of Legislation in Some Other Jurisdictions


In Canada, disease risk reduction claims and certainfunction claims that are made about restoring, cor-recting or modifying body functions (2c in the Tableabove) bring a food product under the definition of adrug3. A food product that falls under the definition ofa drug is then subject to the drug regulations under theFood and Drug Regulations. In order to permit the use ofhealth claims, there are provisions in the regulationsexempting food products with these claims from thedrugs regulations4. This results in a great deal of effortto approve a new health claim as described above, andrequires regulatory amendment following a pre-market assessment and review of submission5.

Health Canada’s international review of health claimmechanisms of approval and oversight found thatthe approach used in Canada to manage disease riskreduction and certain function claims is comparableto the other jurisdictions. Regulatory authorization isrequired for the use of disease risk reduction claims(or their equivalents) in all of the jurisdictions.

In Australia/New Zealand, a tiered system is beingproposed whereby pre-approval would only be re-quired for ‘serious diseases’ in disease risk reductionclaims called High Level Health Claims (seriousdiseases would be defined in the regulations)6. Thoseclaims for ‘non-serious’ diseases, called General Levelclaims, and nutrient content claims would not requireregulatory approval.

In the United States, there are also a number ofmechanisms used in approving disease risk reductionclaims7. The FDA can authorize use of a health claim,the claim can be permitted under the 1997 Food andDrug Administration Modernization Act (FDAMA) if FDAmakes no objection to the claim within 120 days ofsubmission permitting that an authoritative statementfrom the US government or the National Academyof Science is included, and, lastly, if the FDA doesnot deem the claim to have a significant scientificagreement then it can issue a letter of enforcementdiscretion for a ‘qualified’ health claim.

Specific Health Claims: claims about the effects of a food, or foodconstituent, on a specific organ, disease, biomarker or health condition.

1. Disease Risk Reduction Claims: link the consumption of foods orfood constituents to a reduced risk of disease in the context ofthe total diet.

2. Function Claims:

a. claims about the maintenance of body functions that arenecessary to the maintenance of good health and normalgrowth and development;

b. claims about maintaining or supporting body functions associatedwith the maintenance of good health or performance; and

c. claims about restoring, correcting or modifying body functions.

(Health Canada, 2007f)

Health Claim Definitions in Canada

General Health Claims: do not refer to a specific health effect, diseaseor health condition.

They include broad "healthy for you" or "healthy choice" claims thatpromote choosing a food for overall health, promote healthy eating,or provide dietary guidance.


With respect to function claims that include well-known nutrients, the use of a positive-list of acceptableclaims is common among the reviewed countries.Differences arise in the regulatory oversight among thecompared countries with the management of newfunction claims8. In Canada, any new claim requirespre-approval and its addition to the list. In Australia/New Zealand, it is proposed that General Level claimsthat are not on the pre-approved list not require pre-market approval as long as data are available uponrequest to prove the claim9. High Level health claimsin Australia/New Zealand do require pre-approval andthe relevant Code must change to accommodate them.In the United States, there is no positive listing processfor function claims; under the Federal Food, Drug andCosmetic Act, these claims must simply be truthful andnot misleading10.

Although the mechanisms for approval and oversightmay be similar across the jurisdictions, most jurisdic-tions do not require formal regulatory amendments.When a regulatory amendment is required in Canadait involves formal consultations, drafting a newregulation, a Regulatory Impact Analysis Statement,taking it to Cabinet to authorize its publication inCanada Gazette Part I, more consultation, going backto Cabinet and publication in Canada Gazette Part II11.

Canadian food law expert Ron Doering12 suggests thatthis process is appropriate for large new regulatoryinitiatives that will impose new requirements on theindustry. However, the regulatory amendmentsrequired in the food industry in this context are onlyrequired to ‘refine existing regulations’ after the safetyhas been assessed. This amendment can take any-where from 40-120 weeks13 to three years14. Due tothis process, the system cannot respond quickly,thereby discouraging innovation in the industry15.

In the United States, pre-market approval is also re-quired for authorized and qualified health claims, butthe FDA does not require statutory exemptions andtherefore regulatory amendments, resulting in less timerequired to get a health claim to market. The UnitedStates has approved 16 health claims since 1993 underthis process, compared to the five approved in Canada(and two pending review). These health claims havedriven US market development in functional foods16.For example, development in the area of heart healthycereal products began with FDA approval of the claimthat products with oatmeal could lower cholesterol.Development in this area continued to growwith FDAapproval of claims related to psyllium, soya proteinand whole grains.17

Lag

Regulatory amendment requirementsfor certain health claims (DRR andcertain function claims)

Effective Practice

US: does not require regulatory amendmentafter pre-market approval.

AUS/NZ: Proposed tiered system only requiresa Code change for High Level Health Claims.Length of process is accountable to timelines.

Assessment of Canada

Process and response rate to innovationare lengthy.


Cantox18 also compared the depth and breadth ofhealth claim regulations and processes in each of thefive jurisdictions listed above and concluded that thescope of allowable claims linking foods to normalhealth conditions is more limited in Canada comparedto the US. Cantox concluded that “Canada’s currentregulatory framework for health claims has limited theimport of products approved for use in the US. Witha more narrow scope of allowable diet and health ordisease relationships on foods, food manufacturers areless able to capitalize on their research and innovationinitiatives in Canada, many opting to export theirideas, services and products to the US.”19

Food AdditivesPositive List of Approved Additives andRegulatory Amendment Requirements

The efficiency of the food additive approval processis affected by the level of regulatory oversight and reg-ulatory amendments required for approval. Increasedregulatory oversight can lead to a decreased numberof food additive submissions pursued and/orapproved, which in turn leads to a more limitedopportunity for innovation.

Food additives must undergo pre-market evaluationfor safety and efficacy of their intended use and levelof use. In Canada, permitted food additives, the foodsin which they may be used and the maximum levelof use must be listed in Table II, Division 16 of theFood and Drug Regulations. The tables are prescriptiveand state exactly in what type of food an additive maybe used and at what level. If a food additive or itsspecific use is not on the list of permitted substancesthen the additive and its use must be pre-marketapproved. An amendment to the regulations isrequired each time a food additive has successfullybeen approved.

Canadian Regulatory Policy requires that the publichas an opportunity to comment on any regulatoryamendments, including the Food and Drug Regulations.For example, under the proposed revisions, followingpositive review of a food additive by Health Canada’sFood Directorate, the intention for approval is pub-lished in Canada Gazette, Part I and a minimum of 75days are allowed for public review of the intention.Marketing of the food additive is only allowed afterthis review period, approval by the Governor-in-Council, registration of the amendment as regulationsand its publication in Part II of the Canada Gazette20.

As noted above, this is a lengthy process and Smithet al.21 suggest that this has “resulted in numeroussubmissions and ultimately regulatory modificationinvolving relatively trivial amendments”. In an attemptto mitigate this issue of the length of time it takes toget a regulatory amendment, the Food Directorate hasincreased the use of InterimMarketing Authorizationsthat permit the use and sale of food products whilethe regulatory process to amend the regulationsis undertaken22.

The Canadian food additive approval process issimilar to the process in Australia/New Zealand andthe United States. Food Standards Australia NewZealand (FSANZ) also requires pre-market approvalof additives and an amendment to the Food StandardsCode that adds the additive to an approved list. Thedifference in the efficiencies in the processes is thatFSANZ is legally accountable to timelines prescribedin the Act (this is discussed further below). In theUnited States, a new food additive must undergopre-market approval and, once it is deemed safe, aregulation permitting its use is published in theFederal Register.


There is also a major difference within the US regu-latory process as compared to the Canadian system.The US regulatory process for food additives is veryflexible due to the Generally Recognized As Safe(GRAS) process which allows food additives with ahistory of safe use to be used without regulatorychange. The US is the only jurisdiction with theGRAS process. Usually, the safety of the petitionedfood additive has to be determined by the FDA, whilethe safety of the GRAS substance can be determinedby the experts outside of government.

The GRAS and Prior Sanction processes (the latterwhich covers specific substances that were approvedby the FDA prior to the enactment of the foodadditives amendment to the federal Food, Drug, andCosmetic Act) permit greater flexibility in product mar-keting and relieve pressure on the regulatory system.GRAS and Prior Sanction substances are generally notspecifically regulated in terms of product use or levelof use and are not subject to legal review and approvalby the FDA. According to Smith et al.23, the GRASprocess is the major difference between the regulationof food additives in Canada and the US and relievespressure on the regulatory system when dealing withadditives that have a history of safe use.

An example that best explains the difference betweenthe Canadian process and the US process is the useof caffeine as a food additive. In Canada, caffeine isregulated as a food additive and is only permitted incola-type beverages at a concentration level of 200ppm24. In the United States, caffeine is considered aGRAS substance and, if used at a concentration levelof 200 ppm, can be added to various beverages includ-ing waters and citrus-based beverages25. With theenergy drink phenomenon in North America, productsthat use caffeine as their energy sources have soughtstatus as Natural Health Products (NHPs) in Canada,rather than simply being marketed as foods as theyare in most other countries26.

Cheeseman and Wallrock27 imply that only sevenpercent of food additive applications in the UnitedStates are not GRAS, which shows that the foodadditive system is substantially relieved of applicationpressures due to the GRAS process. Due to this reliefon the system, the new food additive submissions in2002 averaged a response rate of 180 days.28

Lag

Specific use listing system requiringcontinuous amendments to regulations

Effective Practice

US: GRAS system which requires no regulationof food additives when there is history ofcomparable use. Relieves regulatory systemand results in a more efficient approval processfor new additive submissions.

AUS/NZ: Similar process to Canada but lengthof process is accountable to timelines.


Very specific in prescribed food additive usesand levels. Greater flexibility would decreasepressure on system.

Process is said to be lengthy, but theIMA streamlines the process for eligiblesubmissions.


Novel FoodsProduct Specific Pre-market Evaluations

A novel food in Canada is defined as a food that hasno history of safe use as a food, is a food manufac-tured using a process not previously applied to thatfood or an existing food that has been geneticallymodified. The EU definition also encompassesgenetically modified organism (GMO) novel foodproducts, although it is uncertain what percentage ofapprovals are GMO related. On the other hand, theUS has no specific novel food regulatory system andhas developed regulations for GMOs specifically,instead of regulating these under the umbrella ofnovel foods. Since there is no explicit definition fornovel foods’, these foods fall under the definition offood additives. Therefore, if there is history of use ina like substance, the food can be processed throughthe GRAS process; if not, then it is considered a newfood additive and the food additive market approvalprocess applies.

The novel food regulations in Canada include a legalrequirement for these foods to undergo a pre-marketsafety assessment. Similar to the food additive require-ments, these submissions can only be used for theindividual products in the submission and, therefore,there are no simplified procedures for novel foods thatare substantially equivalent to existing foods – allcompanies must submit pre-market assessments evenif the same food has already undergone an assessmentand approval.29

In Australia/New Zealand, all novel foods permittedfor sale must be included in a Table in the Code. If thefood or ingredient is not included in the Table then itmust undergo a pre-market safety assessment and, ifapproved, the Code must be amended.

In the European Union, pre-market assessment ofnovel foods is required only for those foods that arenot substantially equivalent to an existing food.30

Companies whose products or ingredients are sub-stantially equivalent to an existing food or ingredientcan undergo a simplified assessment and can simplynotify the Commission that the food or ingredient hasbeen placed on the market.31 Therefore, it wouldseem that this allowance would reduce pressure onthe regulators.

Unlike the food additive regulation, the pre-marketassessment for novel foods in Canada is administrativeonly and does not require a regulatory amendment.Therefore, inefficiencies resulting from a regulatoryamendment requirement do not apply to novel foods.Novel food approvals in the United States and EUalso do not require regulatory amendments.

Lag

Product specific pre-market evaluations

Effective Practice

US: Novel foods fall under food additives andtherefore can be deemed GRAS if there is ahistory of use.

EU: Simplified Assessment if there is asubstantially equivalent food or ingredient.This eases burden on regulatory body.


Very specific in prescribed products. Greaterflexibility would decrease pressure on system.


Lack of Discretionary Fortification PolicyIn Canada, there are significant regulatory restrictionson the addition of vitamins and minerals to foods.This is likely one of the reasons for the large amountof food-like submissions under the NHPD as foodmanufacturers continue to innovate and adapt to thepossibilities within the regulatory system.

Currently in Canada, the fortification of food is onlyapproved to prevent and/or correct nutritional prob-lems, such as adding Vitamin D to milk to preventrickets. Foods can also be fortified if vitamins andminerals are depleted during the manufacturingprocess. The particular vitamins and minerals thatcan be used are available in a list similar to the oneused for food additives in Canada, in Part D of theFood and Drugs Regulations. This current fortificationpolicy is based on guidelines published more than35 years ago.32

In 2005, Health Canada outlined a proposed policyin “Addition of Vitamins and Minerals to Food, 2005: HealthCanada’s Proposed Policy and Implementation Plans” tomeet increasing demands for functional foods by con-sumers and to expand food development opportunitiesand reduce the differences in regulations betweenCanada and the United States.33 The proposed policylays out the following specifics for the discretionaryfortification of food:34

• List of vitamins and minerals that can be added

• Levels of vitamins and minerals that can be added

• Those foods that cannot be fortified at thediscretion of manufacturers

The levels of vitamins and minerals added to foodproducts can vary allowing food manufacturers toindicate whether the product is ‘a source’, ‘a goodsource’ or ‘an excellent source’ of the nutrients. 35

Health Canada states that the proposed science-based

vitamin and mineral levels laid out in the policy are“more conservative than the United States, but moreliberal than some European countries”.36 The policyalso includes a list of staple foods which will beexcluded from fortification.

Although the proposed policy and implementationplan was created in 2005, the public has not yet hada chance to review a set of proposed regulationsthrough Canada Gazette Part I. According to HealthCanada, the process from Canada Gazette Part I towhen the regulations would become law once theyare published in Canada Gazette Part II usually takes12-18 months.37 Therefore, this policy is far frombeing implemented despite the process having startedten years ago.

In the United States, Fortification Policy is publishedunder the Nutritional Quality Guidelines for Foods.38

These guidelines have been interpreted liberally topermit discretionary fortification of many foods withvitamins and minerals in the United.39 For example,calcium can be added to many products sold in theUnited States. However, in Canada, calcium can onlybe added to orange juice by obtaining an InterimMar-keting Authorization (IMA) or by obtaining a DrugIdentification Number (DIN).

In Australia/New Zealand, Policy Guidelines for theFortification of Foods with Vitamins and Mineralswere published in 2006. Food Standards Australia/New Zealand (FSANZ) concluded that vitamins andminerals may be added to foods as long as the forti-fication has demonstrated benefits and no resultingharm. In November 2003, the EU proposed a rule onthe discretionary fortification of foods.40 This rule isbased on a positive list of vitamins and minerals thatcan be added to certain foods at various levels. Japandoes not appear to have restrictions on food fortifica-tion;41 instead, it relies on food labelling under FOSHU(foods for specific health use) as a form of control.


While the Canadian food industry is waiting forHealth Canada’s proposed fortification policy to bepublished in the Canada Gazette, it is missing out onsignificant opportunities. The proposed Canadianpolicy will provide manufacturers with greater abilityfor discretionary fortification of foods than the currentregulatory regime does. However, in order for the timeand money invested in developing this policy to beworthwhile, the policy must reflect industry needsfor innovation and needs to be flexible enough toadapt to future innovation.

Lag

Restrictive list of pre-approved foods thatcan be fortified with vitamins and minerals

Effective Practice

Canada: Publish the proposed policy forreview in Canada Gazette I. Direct policyto reflect industry needs to encourageinnovation.


Very little discretionary fortification of foodsin Canada.

Slow to publish proposed policy.

Natural Health ProductsLack of Clarity of Definition of NHPs

In January 2004, a new category of products wascreated under the Food and Drugs Act through theNatural Health Products Regulations. In all jurisdictionsexcept for Canada, natural health products are basicsynonyms for dietary supplements (natural medicines).In Canada, natural health products are defined muchmore broadly and can include foodstuffs. However,the Canadian Food and Drugs Act was never amendedto include a definition of NHPs42; therefore, food-likeNHPs are regulated as a subcategory of drugs butwith their own set of regulations.

There are some food products which fit the definitionof both a natural health product and a food. In thesecases, it is up to the applicant company to chooseunder which regulatory process it will market theproduct. As a result, the Natural Health ProductsDirectorate (NHPD) has received a number of productlicense applications for food-format NHPs which wasnever its original intent. There are also products thatfall under the definition of NHPs in Canada that canbe simply marketed as foods in other countries.


Discussion is taking place within Health Canada, inboth the Food and Natural Health Products Direc-torates, as to whether food formats that fit thedefinition of both a natural health product and foodshould be marketed as NHPs under drug regulationsor as foods. In October 2007, the NHPD issued astatement that product license and/or claim approvalsfor NHPs in food format would now be reviewed bythe Food Directorate in order to address this issue.43

Although this is an attempt to better regulate theseproducts, the change has caused confusion for thefood industry. The process and implementation issuesthat have plagued the NHPD, including lengthy sub-mission timelines and capacity issues are likely tocontinue as, under the current system, these productsubmissions must pass through two Directorates.

NHPD’s proposal is to amend the Natural HealthProducts Regulations (NHPR) to exclude food-like NHPsfrom the purview of the NHPR. This regulatoryamendment would make it clear that these productsare not regulated as NHPs and, therefore, wouldalleviate the confusion that the industry is currentlyfacing. However, to support the innovation withinthe industry, the amendment implementation shouldonly take place after Canada has implemented a func-tional and efficient health claims regulatory systemfor food products and a policy for discretionary foodfortification so as not to cause another lag in thesystem and impede innovation. Many companieshave taken advantage of the opportunity that the NHPregulations have provided for the development ofinnovative food products and health claims. For thisinnovation to continue, the proper regulatory system,including an effective route for companies to marketfortified products and products with claims, must bein place.

Administrative/Process Impacts onFood Approval Process EfficiencyThe following is an overview of how Canadacompares to other jurisdictions in terms of the keyadministrative components that may impact foodapproval process efficiency (timeliness, transparency,clarity and accountability in the review and approvalprocess). Since these administrative components gener-ally apply to different food environments (commonadministering body, i.e., Health Canada administersregulations for health claims, novel foods and foodadditives), the administrative impacts on the system’sefficiency are not separated by food environment.

No Clear Framework for Pre-marketAssessment SubmissionsA regulatory system that heavily utilizes pre-marketassessment requires an understandable and transpar-ent system for application requirements in order tofunction efficiently. This does not seem to be the casein Canada. It is not the regulatory requirement of thepre-market assessment that is often the lag. Rather, itis the inconsistent and unclear process in regulationadministration that has caused the lags in approvalsfor food additives, novel foods and health claimsin Canada.

Lack of Submission Guidance and CommunicationA lack of guidance (framework, documents andconsultation) may lead to extended approval processtimelines if applicants are unaware of data and infor-mation requirements. Without a timely preliminaryapplication assessment, applicants may be unaware ofsubmission deficiencies for long periods of time, whichprohibits timely commencement of the scientificreview. The lack of guidance leads to a lack of clarityfor applicants in terms of the process of approvaland the requirements for pre-market assessment.


In October 2007, Health Canada undertook aconsultation on a Draft Guidance Document for theManagement of Pre-Market Submissions for foodadditives, novel foods and infant formulas. The docu-ment provides instructions for submissions, describespre-submission consultation and the submissionmanagement process, and provides performancestandards for the Food Directorate. This documentis long overdue, as there appears that there has neverbeen a submission guidance document for foodadditives as there is for novel foods.

An interim guidance document is provided for healthclaim submissions however, based on a review byCantox44, this document is unclear and incomprehen-sive. Cantox provides a number of recommendationson how to improve and simplify the health claimapproval process in Canada in terms of submissionguidance including mandating consultations withgovernment and industry and creating user-friendlyguidance documents and websites. Based on industryfeedback, it appears that this lack of comprehensiveguidance and a clear framework applies to the wholefood approval process in Canada. Cantox also statesthat although health claim applicants are encouragedto discuss proposals with Health Canada, this is notrequired and contact information is difficult to find.These issues were also mentioned by representativeswithin the industry as part of this research study.

The US and Australia/New Zealand both havecomprehensive submission guidance documents.Australia/New Zealand’s guidance document45 appliesto all food product applications; it increases clarity forapplicants since only one document encompassesall aspects of the submissions.

Australia/New Zealand has recently changed itsapproval process to include an Administrative Assess-ment with a statutory timeframe of 15 business days.The goal of this assessment is “to identify any gaps inthe applications to decrease the number of rejections.”The statutory timeframe on this assessment ensuresthat applicants are informed quickly of deficienciesin their submissions, so that there is no delay in thecommencement of the application review and sub-missions are not rejected on the basis of insufficientdata or information. Australia/New Zealand stronglyurges pre-submission consultations. According toCantox, FSANZ provides a “clear and unambiguousexplanation of regulatory processes for health claimapprovals.” FSANZ is also obliged to communicatewith applicants at various stages throughout theapproval process ensuring that communicationis maintained .46

Lag

Lack of guidance

Effective Practice

US and AUS/NZ: Comprehensive submissionguidance documents.

AUS/NZ: Pre-submission consultations.

US and AUS/NZ: Preliminary applicationassessment.


Incomprehensive guidance documents for novelfoods and health claims. No clear frameworkfor application procedures. Voluntary pre-submission consultation. Initial submissionverification for novel foods and food additivesunder proposed process revisions.

Lack of communication between HealthCanada and applicant

AUS/NZ: Legislated obligation for approvalbody to formally notify applicants of decisions;Review stage updates to applicants.

Legislated notification of decision. No othercommunication required.


Lag

No accountability to timelines

Effective Practice

AUS/NZ: Timeframes to approval prescribedin legislation and accountability throughnecessary documentation of performance.


Prescribed timelines but no accountabilityleads to inability of industry to plan marketinginitiatives for products in approval process.

Lack of Accountability to TimelinesWhile the Food and Drug Regulations prescribe timelinesfor decisions on applications relating to food additivesand novel foods, in reality, Health Canada does notadhere to these guidelines. There is no mechanism forholding the agency accountable for its failure to doso. Anecdotal evidence suggests that the process maytake 20 to 30 times longer than expected based on theregulatory prescriptions.47 Clearly prescribing time-lines is no guarantee of timeliness in decision-making.Because the clock on an application only begins to“tick” once that application is in full compliance withrequirements, some food industry personnel feel thatHealth Canada exploits this provision by continuallyrequesting more information.

On the other hand, Australia/New Zealand’s FSANZAct requires FSANZ to make decisions about foodadditives and novel foods within stipulated timeframes. This requirement will extend to health claimsapplications once the new policy is implemented.Timelines for General Procedure applications underthe Act are measured from the start of assessment(within 15 business days) or receipt of fees, to the

date of approval of the draft food regulatory measure(i.e. amendment to the Food Standards Code). Time isstopped when further data are requested by FSANZ(dictated by s.108 of the FSANZ Act), however,FSANZ is held accountable to these timelines sinceit is required to indicate where it has extended thetimeframe for completion of an assessment or whereit has failed to meet its statutory timeframes and thereasons why in its Annual Report.48

In the US, the FDA is accountable to the timelinesprescribed with respect to health claim submissions.If timelines are not met, the FDA must provide theCommittee on Commerce of the House of Represen-tatives and the Committee on Labor and HumanResources of the Senate with a written explanation.49

In Japan, the Ministry application guidelines specify“the standard period of time required for processing”to be one year. This timeframe begins when theMinistry receives the applications and ends withthe designation or revision of standards of use ofthe food additive.

Requirement for Enhanced Research CapacityAdministrative inefficiencies in the market approvalprocess arise when bodies responsible for review arestrapped with respect to research resource capacity.In its 2005/2006 Fall/Winter Quarterly, the NHPDacknowledged that backlogs occurred as a result ofa lack of human resource capacity.

Two potential solutions exist in response to this lag.The first is that Health Canada could share scientificresearch analysis with other regulators (i.e., in otherjurisdictions). Second, Health Canada could freeup research capacity when overwhelmed withsubmissions by outsourcing scientific assessmentsto external experts.


Lag

Research and resource capacity is limited

Effective Practice

US: GRAS allows for review by externalscientific experts.

AUS/NZ: Previously conducted credibleassessments to be included in submissions.


No allowances for external review orthird party assessment. Puts pressureon resources.

Health Canada still does not accept novel foods andfood additive pre-market evaluations performed andapproved in other jurisdictions for pre-market assess-ment of efficacy of health claims.50 Health Canadarequests scientific reviews and supporting data fromapplicants, and reviews it internally regardless ofwhether the same type of review has been conductedin other jurisdictions or external to the governmentby credible sources.

Health Canada’s Guidance Document for Food Addi-tive Submissions states that an applicant can includeevaluations conducted by other domestic, foreign orinternational scientific bodies such as the US FDA,FSANZ, Codex and the EU, but “such evaluationsdo not replace the requisite national assessments byCanadian authorities” and “it is expected that someof the efficacy data be procured in institutions inCanada or at least ensure that the data is relevant toCanadian manufacturing conditions and practices”.

Cantox suggests that allowing the use of crediblereviews that already exist for substantiation of healthclaims would help to simplify and speed up theapproval process and decrease resources requiredfrom industry and government parties. For example,FSANZ allows applicants to use relevant assessmentsconducted by a list of credible authorities.51

The US GRAS process also works to free up regulatorresources. Usually, the safety of the petitioned foodadditive has to be determined by the FDA, while thesafety of the GRAS substance can be determined byexperts outside of government. Both regular foodadditive and GRAS submissions require the same levelof scientific evidence; therefore, the level of safety isnot compromised.


Summary: Identified Lags AffectingFood Approval in CanadaBased on the discussion above, the Table belowsummarizes the identified major lags affecting foodapproval in Canada and the international best practicescorresponding to these lags. There is substantialpotential improvement in efficiency of the food

approval process that could result from the adoptionof best practices and implementation of more efficientprocesses to improve the lags in the Canadian system.Improved speed, transparency, clarity and accountabil-ity will allow the Canadian industry to move forwardwith its innovation.

Identified Lags in Canadian Food Regulatory System

Legislation

Purpose of Legislation: Current focus solely on safety. No mentionof consumer choice or innovation

Regulation

Health Claims: Regulatory amendment required for certain healthclaims (DRR and certain function claims)

Food Additives: Specific use listing system requires continuousamendments to regulations to add new additives or to add existingadditives to new products

Novel Foods: Pre-market evaluations required for each productcontaining a novel ingredient

Restrictive list of pre-approved foods that can be fortified withvitamins and minerals

Administration

Lack of guidance

Lack of communication between approval body and applicant

Limited research and resource capacity

No accountability to timelines

International Practices/Potential Improvements

AUS/NZ and EU: Clear statements of purpose in legislation encompassinggoals of ensuring consumer safety and fostering food industry innovationand consumer access to choice.

US: Does not require regulatory amendment after pre-market approval.

AUS/NZ: Proposed tiered system only requires a pre-approval and Code changefor High Level Health Claims. Length of process is accountable to timelines.

US: GRAS system which requires no regulation of food additives whenthere is history of comparable use.

US: Novel foods fall under food additives and therefore can be deemed GRASif there is a history of use.

EU: Simplified pre-market procedure if there is a substantially equivalent food.

Canada: Publish proposed fortification policy in Canada Gazette I. Ensurethat the policy reflects innovation of present and future.

US and AUS/NZ: Comprehensive submission guidance documents;AUS/NZ: Pre-submission consultations; US and AUS/NZ: Preliminaryapplication assessment.

AUS/NZ: Legislated obligation for approval body to formally notify applicantsof decisions; Review stage updates provided to applicants.

US: GRAS allows for review by external scientific experts.

AUS/NZ: Allows review by external scientific experts.

AUS/NZ: Timeframes to approval prescribed in legislation and accountabilitythrough necessary documentation of performance.

Identified Lags Affecting Food Approvals in Canada, Corresponding International Best Practices


Global Comparison of Scientific Requirementsfor Food ApprovalHaving detail of the inefficiency built into all levels ofthe Canadian food regulatory system – legislation,regulation as wells as administrative processes – bringsus to the question: is the lack of efficiency a result ofhigher scientific requirements for food approval thatmake Canada safer? The following compares the sci-entific requirements for approvals of food products,food additives, novel foods and health claims acrossthe jurisdictions examined in the previous pages.

In each of the jurisdictions reviewed in this study,scientific requirements for health claim substantiationin particular, address the same three areas: efficacy,safety and quality assurance. In 2007, Cantox com-pared the scientific requirements in these three areasand found that Canada’s requirements are most similarto Australia/New Zealand, more comprehensive thanthe US and less comprehensive than the EU. Overall,despite differences of degree, the requirements aregenerally comparable.52

EfficacyCantox reviewed a number of efficacy factors consid-ered in the approval assessments and found Canada’srequirements to be adequate and comparable to theother jurisdictions. All of the jurisdictions requiredhuman studies, dose-response information, aconsistency of findings across studies, relevance ofstudies to the target group or general population andeffective intake information.

SafetyCantox also found that the safety requirements acrossthe jurisdictions were similar. The primary differencebeing that safety requirements are not always requiredto be addressed in health claim applications. Forexample, Japan requires all aspects of safety to be

covered in health claim applications, whereas Australia/New Zealand and the EU cover food safety require-ments in their novel food applications. The UnitedStates also covers food safety requirements under itsGRAS process or food additive applications. Safetyrequirements in Canada differ depending on whethersafety has already been assessed by Health Canada.Overall, Cantox concluded that Canada’s scientificrequirements for health claim substantiation are simi-lar and adequate compared to the other jurisdictions,but the guidance and communication through theapplication process is lacking in the Canadian system.

Cantox also reviewed the quality and safety informa-tion requirements for novel food applications acrossthe jurisdictions. Although novel foods are definedand regulated very differently across the jurisdictions(a novel food in the United States for example wouldbe regulated as a food additive), the safety and qualityrequirements are comparable with respect to the depthand quality of information required. Informationrequirements include manufacturing details, dietaryintake estimates, toxicology information and nutri-tional implications. Again, Cantox found that themajor difference was not with the requirementsthemselves, but with the process that is used toassess the information and its efficiency.

A review of the scientific information required forfood additive applications (see Appendix G, TableG.2) shows that the requirements are similar. Safetyinformation dominates the requirements and efficacyinformation is required in Canada and Australia/New Zealand. In the United States, food additives canbe declared GRAS or go through the food additiveapplication process if there is less common knowledgeregarding the additive. Under either process, the qualityof the scientific evidence required is the same.53


The reviews predominantly show that Canada’sscientific requirements for food approvals are com-parable to other jurisdictions, suggesting that theyare no higher than those of Canada’s competitors.Therefore, it appears that the Canadian system doesnot result in safer products. It must be noted thatwhile Canada’s regulatory system is regarded as oneof the safest and most credible in the world, it is thoseprovisions extraneous to safety that are holding upthe marketing of innovative food products in Canada.

Canada’s regulatory system may in fact contribute toless safe and healthful outcomes for Canadians. IfCanadian standards are no higher and do not lead tosafer products, yet the system is slow and restrictive,Canadian consumers cannot benefit from productsthat would improve their health and do not receivethem as quickly as they could. Given current demo-graphics of aging populations and rising health carecosts, a sclerotic regulatory system creates an overallreduction in social good. This is consistent with therecent analysis of Malla et al.54, and of Parvavolidaki.55

1 Health Canada. 2007f. Managing Health Claims for Foods in Canada: Discussion Paper. Retrieved Feb. 2, 2008f from: http://www.hc-sc.gc.ca/fn-an/consultation/init/man-gest_health_claims-allegations_sante_e.html .

2 Health Canada. 2007f. Managing Health Claims for Foods in Canada: Discussion Paper. Retrieved Feb. 2, 2008f from: http://www.hc-sc.gc.ca/fn-an/consultation/init/man-gest_health_claims-allegations_sante_e.html






8 Health Canada. 2007f.Managing Health Claims for Foods in Canada: Discussion Paper. Retrieved Feb. 2, 2008f from: http://www.hc-sc.gc.ca/fn-an/consultation/init/man-gest_health_claims-allegations_sante_e.html




11 Doering, R. L. 2006. Word to the Wise: Canada Needs a Smarter Food Regulatory System That Keeps Up With Industry Demands. Retrieved May 6, 2008.

12 Doering, R. L. 2005. A Duty to Do It Well: Regulations and Food Industry Competitiveness and Innovation Under the Food and Drugs Act. GowlingLafleur Henderson LLP.

13 Smith, B. et al. 2007. Comprehensive Summary of Canadian Federal Statutes and Regulations Governing Pre-Market Evaluation, Labelling, Advertising andHealth Claims for Functional Food in the Canadian Market. Prepared for the Office of Science and Innovation, Agriculture Policy Framework, Agricultureand Agri-food Canada by Inter/Sect Alliance Inc.

14 Dixon, M. 2006. Living Biofilter Air-Cleaning Ecosystem for Buildings. Retrieved Feb. 16, 2007 from: http://www.omafra.gov.on.ca/english/research/stories/biofilter.htm.Doering, R. L. 2006.Word to the Wise: Canada Needs a Smarter Food Regulatory System That Keeps Up With Industry Demands. Retrieved May 6, 2008.

15 Doering, R. L. 2005. A Duty to Do It Well: Regulations and Food Industry Competitiveness and Innovation Under the Food and Drugs Act. Gowling Lafleur Henderson LLP.



18 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. CANTOX Health Science International. from: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119.

19 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. Cantox Health Science International. from: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119 .

20 Health Canada. 2007c. Strategy for the Licensing of Natural Health Products (NHPs) With Drug Identification Numbers (DINs). Health Canada. Retrieved June 6, 2008cfrom: http://www.hc-sc.gc.ca/dhp-mps/prodnatur/bulletins/din_trans_din-eng.php

21 Smith, B. et al. 2007. Comprehensive Summary of Canadian Federal Statutes and Regulations Governing Pre-Market Evaluation, Labelling, Advertising and Health Claimsfor Functional Food in the Canadian Market. Prepared for the Office of Science and Innovation, Agriculture Policy Framework, Agriculture and Agri-food Canadaby Inter/Sect Alliance Inc.



24 Smith, B. L. 2007c. Examples of How the Regulatory System Can Impede Innovation and Progress. B.L. Smith and Associates.

25 Smith, B. L. 2007c. Examples of How the Regulatory System Can Impede Innovation and Progress. B.L. Smith and Associates.

26 Doering, R. L. 2007. International Food Safety and Quality Network Discussion Forum. Retrieved Feb. 2, 2008 from: http://www.ifsqn.com/forum/index.php?showtopic=8026

27 Cheeseman, M. and J. Wallwork. 2002. FDA’s Office of Food Additive Safety. Food Safety Magazine, December 2002/January 2003. from:http://www.cfsan.fda.gov/~acrobat/opaofas.pdf

28 Cheeseman, M. and J. Wallwork. 2002. FDA’s Office of Food Additive Safety. Food Safety Magazine, December 2002/January 2003. from:http://www.cfsan.fda.gov/~acrobat/opaofas.pdf

29 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. Cantox Health Science International. from: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119



32 Smith, B. L. 2007c. Examples of How the Regulatory System Can Impede Innovation and Progress. B.L. Smith and Associates

33 Health Canada. 2005b. Questions and Answers: Food Fortification Proposed Policy. Health Canada. Retrieved Jan. 10, 2008b from: http://www.hc-sc.gc.ca/fn-an/nutrition/vitamin/faqs_e.html .


34 Health Canada. 2005a. Information Sheet – Food Fortification in Canada – Updating the Policy. Health Canada. Retrieved Jan. 10, 2008a from: http://www.hc-sc.gc.ca/fn-an/nutrition/vitamin/fortification_factsheet2-fiche2_e.html .

35 Health Canada. 2005a. Information Sheet – Food Fortification in Canada – Updating the Policy. Health Canada. Retrieved Jan. 10, 2008a from: http://www.hc-sc.gc.ca/fn-an/nutrition/vitamin/fortification_factsheet2-fiche2_e.html .

36 Health Canada. 2005b. Questions and Answers: Food Fortification Proposed Policy. Health Canada. Retrieved Jan. 10, 2008b from: http://www.hc-sc.gc.ca/fn-an/nutrition/vitamin/faqs_e.html .

37 Health Canada. 2005a. Information Sheet – Food Fortification in Canada – Updating the Policy. Health Canada. Retrieved Jan. 10, 2008a from: http://www.hc-sc.gc.ca/fn-an/nutrition/vitamin/fortification_factsheet2-fiche2_e.html



40 Cantox Health Sciences International. 2004. Food Update: Food Fortification. CANTOX Health Sciences International. Retrieved Feb. 2, 2008.

41 Stockley, L. 2003. Nutrition Profiles for Foods to Which Nutrients Could Be Added or on Which Health Claims Could Be Made: Experiences From OtherCountries and Testing Possible Models. Food Standards Agency. Retrieved Feb. 2, 2008.


43 Health Canada. 2007b.Notice to Stakeholders. UPDATE: Assessment of Product Licence Applications for Natural Health Products in Food Formats. Retrieved Oct. 24, 2007bfrom: http://www.hc-sc.gc.ca/dhpmps/prodnatur/bulletins/food_nhp_aliments_psn-2007_e.html

44 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. CANTOX Health Science International. from:http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119

45 http://www.foodstandards.gov.au/_srcfiles/Application%20Handbook%20as%20at%2027%20August%2007%20_2_.pdf

46 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. CANTOX Health Science International. from: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119

47 The regulations suggest 90 days to decision, whereas Smith et al. (2007) suggest that the process takes between 40 and 120 weeks and that “the food industrycontinues to be concerned about the length of time required to promulgate a regulation permitting a new food additive or an amendment dealing a newuse for an existing food additive.”

48 Food Standards Australia New Zealand. 2007a. Food Matters. Retrieved Oct. 13, 2007a from: http://www.foodstandards.gov.au/foodmatters/.

49 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. CANTOX Health Science International. from: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119


51 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. CANTOX Health Science International. from:http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119

52 Cantox. 2007. International Comparison on the Management of Health Claims and Novel Foods. Cantox Health Science International. from:http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1178736813119

53 US Food and Drug Administration. 2004. Frequently Asked Questions About GRAS. Centre for Food Safety and Applied Nutrition. Retrieved Feb. 15, 2008from: http://www.cfsan.fda.gov/~dms/grasguid.html#Q2.

54 Malla, S. et al. 2007. Valuing the Health Benefits of a Novel Functional Food. Canadian Journal of Agricultural Economics 55: 115-136

55 Paravolidaki, C. 2008. Labelling Information Asymmetry and Functional Foods: A Case Study of Omega-3 Enriched Eggs. A Thesis Submitted to the Collegeof Graduate Studies and Research, in Partial Fulfillment of the Requirements for the Degree of Master of Science, University of Saskatchewan. Master ofScience thesis. University of Saskatchewan.

31

Case Study ExamplesThis section provides evidencethrough twelve actual examplesprovided by Canadian foodmanufacturers that the foodregulatory system in Canadapresents problems and lengthylags for companies seekingapprovals for health claims and new food productsinto the Canadian market.

It also quantifies the impact of these deficiencies in thesystem. The case studies detail the high opportunitycosts for the entire supply chain including the manu-facturers but also retailers seeking to benefit fromthe sale of innovative products as well as a widevariety of input suppliers, including primaryagriculture producers.

Having a measure of direct costsand opportunity costs is vital inexplaining to regulators why thesystem is urgently in need ofreform. Raising awareness ofthe urgency for change has beenchallenging in the absence ofcomprehensive data thatquantifies the real costs caused

by delays and inefficiencies within the Canadianfood regulatory system.

About the Case StudiesAnonymity of the product and manufacturer in eachcase is retained, due to the proprietary information thatwas provided during the interview process, unlesspermission was given by the participating company.The methodology for estimating the economicimpacts is described in Appendix I.

3 Actual Experiences With Canada’s FoodRegulatory System:

Having a measure of direct

costs and opportunity costs is

vital in explaining to regulators

why the system is urgently in

need of reform.

32 Actual Experiences With Canada’s Food Regulatory System

The case studies relate to the pursuit of approvalfrom Health Canada for one of four categories:

1. To use health claims in the Canadian marketplaceor market products without claims that are approvedin other jurisdictions.

Food manufacturers are continually developing andadding “functional foods” to their product lines –foods that have additional nutrients, minerals,cultures or other substances that have positive healthbenefits when consumed – in order to provideproducts that have a benefit beyond the traditionalnutrients they contain.

Manufacturers would like the ability to communicatethese health benefits to consumers by adding healthclaims to the packaging of these products. Healthclaims clearly connect the relationship between anutrient or other substance, and a disease or otherhealth-related condition, and allow consumers tomake informed purchasing decisions. Ultimately theability to use health claims justifies the additionalinvestment required by companies to bring innova-tive products to the market.

A recent on-line survey conducted by National Starchfound that consumers would be 10-26 per cent morelikely to consume products with proven health claims,which may translate into a 20 per cent increase in sales.

Today, Canadian consumers are looking for foods withhealth benefits and exhibit a high level of awarenessof functional foods and the diseases they are relatedto. Two in three Canadians choose foods to maintainhealth, according to the National Institute of Nutrition

and Canadian Food Information Council, 2004. ADecima Research study in 2004, found that overall,Canadians are very positive about functional foods.

Awareness of functional foods is increasing aroundthe world. Datamonitor (2007) found that sales offunctional food and beverage products are risingacross categories in the US and Europe alike, andgrowth rates continue to outperform growth in thefood and drink categories overall.

Food manufacturers serving the Canadian marketwould like to take advantage of this demand butwould also like to effectively market these new andinnovative products to consumers. They are missingopportunities to educate consumers by not beingable to effectively communicate the benefits of theirproducts. The use of health claims on food productshas been proven to increase consumption of healthyproducts1. For manufacturers, health claims can causeconsumers to switch to nutritionally enhanced prod-ucts in a category or they may attract new con-sumers who would not otherwise buy a productwithout an explicitly stated health benefit.

2. To introduce new food products and/or additivesThese case studies illustrate the experiences ofcompanies seeking to gain approval in Canada foringredients/additives that have never been approvedin Canada but are currently approved in othercountries where they have been proven to be safeand effective.

33Actual Experiences With Canada’s Food Regulatory System

3. To introduce fortified food productsFood fortification, sometimes called ‘enrichment’,refers to the addition of one or more vitamins or min-erals to a food product. The Canadian food regulationsapprove food fortification only to prevent and/orcorrect nutritional deficiencies. For example, VitaminD is allowed to be added to milk to prevent rickets.Foods can also be fortified if vitamins and mineralsare depleted during the manufacturing process.

The Canadian food regulations do not have a defi-nition for or a framework to approve functional foods.Regulations to allow for the discretionary use offood fortification by manufacturers have been indevelopment for the past ten years and are pendingpublication in Canada Gazette I.

4. To introduce natural health productsNatural health products (NHP) are a subcategory ofdrugs with their own regulations under the Food andDrugs Act and defined by Health Canada. They referto homeopathic and traditional medicines and othersubstances such as vitamins, minerals, amino acids,probiotics, essential fatty acids, and plant extracts/isolates that, similar to drugs, are represented for usein the diagnosis, treatment, mitigation or preventionof a disease/disorder/abnormal physical state or itssymptoms; or, restoring, correcting, or modifyingorganic functions in humans.

Because the regulatory definition of NHPs does notspecify the form or matrix of NHPs, for example,tablets, capsules, powders, conventional food form,the NHPD has received product license applicationsfor NHPs in conventional food form, in other wordsfunctional foods.


Case A:Product Marketed in CanadaWithout a Health ClaimSummaryCase A is a dairy-based product, currently sold in allmajor grocery chains in Canada. This product containsnon-novel food additives which have recognizedbenefits for maintaining health. Company A doesnot require approval to manufacture and sell thisproduct containing these additives in Canada, but isprohibited from making health claims about it. In theUnited States, similar products are permitted tocarry labels with an explanation of the health benefitsof the ingredients.

Prior to launching the product in Canada, CompanyA conducted substantial research and developmenton the food ingredient levels in the product. It wantedto ensure the levels were maintained throughout theshelf-life of the product and that there were sufficientnumbers of clinical studies to support the desiredhealth benefit. In spite of the restrictions on healthclaims, the company elected to manufacture thisproduct with the added ingredients for the benefitof consumers.

Company A chose to support the launch of theproduct in the Canadian marketplace with an effectivemarketing campaign that would refer to the addedbenefits of this product. This is a common approachtaken by companies in the absence of a health claimapproval.

In order to compensate for the inability to makehealth claims on the package, many food companiesdevelop extremely intricate print advertisementsdesigned to communicate product benefits indirectly.Print advertising does not require pre-market approvalby Health Canada.

As a result of the restrictions on health claims,Company A was forced to pursue a more arduousand time-consuming creative process. This requiredmore investment by the company and ultimatelydelayed the product launch, costing the companylost sales opportunities.

In taking extra care not to breach the regulations, themarketing team ended up creating approximately 50different commercials and campaigns designed toinfer the benefits of the product appropriately.Company A estimates that the direct costs ofdeveloping this product’s nuanced marketingcampaign were $500,000 more than that normallyspent on more effective marketing campaigns forcomparable products. These costs comprise marketingexpertise, legal counsel evaluations and approvals,technical expertise to re-test the science, mediarelations, and expert endorsements from doctors,dieticians and nutritionists as to the benefits ofcertain functional foods.

Company A estimated an additional three to fourmonths was required to get the product to market asthe result of the additional work required to finalizethe advertisements. The lost time, coupled with theinability to directly inform the consumer about thebenefits has resulted in significant potential lost sales,conservatively estimated to be between $12 and$20 million. Losses would have been reduced hadCompany A been granted the flexibility to fullydiscuss product attributes in a more direct manner,using clearer language and using broadcast media toa greater degree to communicate more effectively toa larger audience.


• The total opportunity costs to the Canadianeconomy due to these foregone impacts are$31.1 million, assuming $12 million in lost sales.The total opportunity costs assume $20 millionin lost sales.

Case A: Direct, Indirect and Total Opportunity Costs – Low Potential Sales

The Opportunity Costs• Lost sales at the food manufacturer level would

translate into potential lost sales for retailers of$15 – $25 million, based on company estimatesof retailer mark-ups for this product. This trans-lates to retailer margin losses of $3 – $5 million.

• Dairy producers in Canada have also facedpotential lost sales on an estimated 3 – 4 millionlitres of milk. Based on the current averageCanadian price of Class 3B milk of $71.43/hL,the producers’ losses are between $2.1 and $2.9million since the product launch.

Impact Category Impact Type

Direct Indirect Total

Output $12,000,000 $14,638,920 $26,638,920

Wage and Salary $1,353,960 $2,581,680 $3,935,640

Taxes on Products $19,080 $118,440 $137,520

Taxes on Production $62,640 $290,724 $353,640

Total Dollar Losses $13,435,680 $17,629,764 $31,065,720

Employment (Individuals) 39 98 137


Case A: Direct, Indirect and Total Opportunity Costs – High Potential Sales



Output $20,000,000 $24,398,200 $44,398,200

Wage and Salary $2,256,600 $4,302,800 $6,559,400







CASE B:Product Line Marketed in Canada Withouta Health ClaimSummaryCase B involves an ingredient with scientificallyproven health benefits which is included in a largenumber of Company B’s products. These productsare available in many countries, including Canada.In the United States, UK , and Malaysia, productscontaining a minimum level of this ingredient canbe labeled with a health benefit explanation.

Based on the substantial literature that exists showingthe health-related benefits of this ingredient, CompanyB began in 1999 to consider applying to have a health/function claim approved in Canada for this ingredient.Upon further investigation, including reviewingCanada’s regulations and Health Canada’s GuidanceDocument on health claims, Company B decided notto pursue the application. Due to Health Canada’slack of performance targets and accountability,Company B did not have confidence the claimapplication would be successful, and felt there wastoo much uncertainty associated with regulatoryinefficiency to warrant the human and financialresources, estimated to be $300,000, required forthe application.

Company B acknowledges that if Health Canada hada ‘buttoned-down’ process, including transparencyand accountability, it might have submitted anapplication. The company also said it is scaling backits R&D in Canada due to the sclerotic regulatorysystem which is stifling innovation and unable todevelop an educated health-savvy consumer.

Company B is of the opinion that food manufacturingin Canada as it stands today will disappear if com-panies can’t invest in products of the future and/orcommunicate their benefits to the consumer. This isespecially true now that the majority of food innova-tion involves health/function claims and thefortification of food.

Company B estimates that, based on sales of productscontaining this ingredient in other countries whereclaims are permitted, an approved claim in Canadawould lead to a sales increase of 15 per cent. Thisequates to potential lost sales of $62,124,999.

The Opportunity Costs• Lost sales at the food manufacturer level would

translate into potential lost sales for retailers ofapproximately $72,721,039, based on companyestimates of retailer mark-ups for these products.

• Lost sales at the primary producer level, basedon the volume of the ingredient required andhistorical prices received, total $2,458,803.

• The total opportunity costs to the Canadianeconomy due to this foregone activity are$160.8 million.


Case B: Direct, Indirect and Total Opportunity Costs



Output $62,124,999 $75,786,908 $137,911,907

Wage and Salary $7,009,564 $13,365,572 $20,375,136


Taxes on Production $324,292 $1,505,102 $1,830,824





Case C: Direct, Indirect and Total Opportunity Costs



Output $2,500,000 $3,049,775 $5,549,775

Wage and Salary $282,075 $537,850 $819,925






CASE C:Product Marketed in Canada Without a ClaimSummaryCase C involves a dairy-based product that is soldin all major grocery chains in Canada. This productcontains live probiotic culture, a non-novel foodadditive that has recognized benefits for digestivehealth. Company C does not require approval tomanufacture and sell a product with an addedprobiotic culture but is prohibited from makingclaims in association with the benefits of probioticsand this food product

Company C developed, pioneered, and launchedthis product in Canada. It then introduced similarproducts into other countries; in some jurisdictionssuch as the United States, this product’s label caninclude an explanation that the live cultures arebeneficial for maintaining digestive health.

Company C knows it could increase sales of theproduct, attract new consumers and enhance itsmarketing efforts if it were able to implement acommunication plan and design packaging toinform consumers of the benefits of live cultures.

From its market research the company conservativelyprojects growth of 70 per cent in the first year of beingable to communicate health claims. This translatesto a loss of $2.5 million in potential sales since theproduct was launched.

The Opportunity Costs• Based on wholesale losses of $2.5 million and

estimates of retailer mark-ups for this product,retailer margin losses of $1.0 million werecalculated.

• The estimated potential sales lost as a result ofbeing unable to educate consumers effectively,has also had a significant impact on Canadiandairy producers. The potential lost sales equateto lost demand of 1.83 million litres of milk.

• Based on the current average Canadian price ofClass 3B milk of $71.43/hL, dairy producers havelost the opportunity to sell $1,310,706 of milk toCompany C since the launch of this product.

• The total opportunity costs to the Canadianeconomy due to these foregone sales are$6.47 million.


CASE D:Natural Health Product ApprovalSummaryCase D involves a line of teas that contain vitamins,minerals and herbal ingredients, some of which areconsidered medicinal ingredients in Canada.Company D includes these ingredients at low levelsfor appearance and flavour rather than for theirmedicinal properties.

In the United States, these teas are sold as food itemsand fall under the general food regulations. However,in Canada, the presence of the “medicinal” ingredientsin the product requires that they be regulated asnatural health products (NHP). Company D isawaiting approval for product licenses and NaturalProduct Numbers (NPNs) from the Natural HealthProducts Directorate.

In 2006, Company D took over the importation ofthe teas from its US counterpart. To gain an under-standing of the newly implemented NHP regulationsand the application process for its products, CompanyD attended training seminars hosted by the NaturalHealth Product Directorate (NHPD).

Through this training, Company D determined thata number of its beverages would require NaturalProduct Numbers (NPNs) and that its Canadian dis-tribution centre would require a site license number.To be granted a license, sites must demonstratecompliance with good manufacturing practices(GMPs). The company also determined that a sitelicense was not required for the US manufacturer,so terminated the application process which the USoperation had initiated prior to the new businessarrangement.

In spite of the training seminars, Company D foundthe site license application process unclear and theNHPD unhelpful. It hired a regulatory consultant toprepare the site license application and NPN appli-cations for the teas to ensure the applications werecomprehensive, and ultimately to expedite the process.

Company D has experienced many challengesthroughout this process. The site license was initiallydenied because of a mix-up about the US site (forwhich the application had been withdrawn) and theCanadian distribution centre. Health Canada hadmisplaced some of the information Company Dincluded in the application due to personnel changesat the NHPD and did not contact the regulatoryconsultant who submitted the application to addressthe issue; it eventually contacted Company D directly.Following this period of inactivity and delay,Company D ended up submitting a second sitelicense application.

Although the site license submission number wassent to Company D within 30 days, to date it has notreceived an actual site license number. In anticipationof receiving the site license, Company D had theconsultant proceed with NPN applications as requiredfor the teas. Company D cannot estimate how longit will take. NHPD guidance documents provideestimated approval timelines for single-ingredientproducts but not for combination-ingredient productssuch as the Case D teas.

Given that the site license application is still underreview, Company D submitted the applicationswithout the site license, using the submissionnumber instead.


In October 2007 the NHPD announced that productlicense and/or claim approvals for products in foodformat would need to be reviewed by the FoodDirectorate. Company D is currently unclear whateffect this change will have on the process or itsproduct license applications. Due to this change inprocess as well as the fact that the NHPD has beenoverwhelmed with applications since its inception,Company D does not expect to have approval forits teas for at least another year.

Such extensive and unclear regulations have substan-tially increased costs for food manufacturers such asCompany D who are looking to produce and/orimport NHP products into the Canadian market.Company D strongly recommends that NHPDincrease its resources so that applicants have access toconsultation and advice regarding their applications.

While the NHPD is working to catch up on applica-tions in the queue, new innovation, research anddevelopment are taking place. There is legitimateconcern that in ten years time there will be anotherten years’ worth of backlogged applications waitingfor approval. As companies become increasingly awareof the enormity of the backlog, the system representsa serious disincentive to food and beverage innovationin Canada.

With the site license number and product applicationssubmitted, Company D can continue to sell the teasas long as it does not make any natural health productclaims. However it is missing out on the potentialto increase sales. And it has invested substantially infinancial and human resources to proceed with theextensive site license application and product numberapplication processes under the NHPD, whichrequired the company to hire a regulatory consultantat a cost to date of $10,000.


CASE E:Unilever – Becel Pro.ActivSummaryCase E involves a margarine fortified with plantsterols, developed by Unilever. It is not approvedfor sale in Canada.

Plant sterols are naturally occurring compoundsfound in many whole foods such as fruits, vegetables,nuts, seeds and legumes. The cholesterol loweringeffect of plant sterols has been studied extensively.

Based on its own extensive research confirming plantsterols represent a significant health benefit becausethey lower blood cholesterol, Unilever decided todevelop a margarine that contains plant sterols toprovide a functional benefit to consumers.

Unilever has launched similar products in approxi-mately 19 other countries, including Australia, andthe European Union. For the launch of Take Controlin 1999 in the United States, plant sterols wentthrough the GRAS process; the product includes theclaim “contains natural plant sterols that can helplower LDL cholesterol levels, and may decrease yourrisk of heart disease”. In Australia the product includesa nutrient function claim; “This product containssterols. Sterols reduce cholesterol absorption”.

In August 2001 Unilever introduced Becel Pro.Activinto the Canadian market. The margarine is fortifiedwith plant sterols from soybeans and is designed tolower blood cholesterol levels. The product wasmarketed as a ‘heart-healthier’ food.

In October 2001 Health Canada released a statementadvising consumers that Becel Pro.Activ was not incompliance with the Food and Drugs Act andRegulations. Health Canada contends that Unilever

did not receive the required pre-market approval tolaunch the product. Unilever maintains that HealthCanada reviewed scientific data provided by thecompany under a Novel Foods application for twoyears and the process was complete.

Under the Act and Regulations, any food that makes ahealth claim is considered a drug. Health Canada’sview is that since managing cholesterol is considereda claim, Pro.Activ should have been approved as adrug. Health Canada also stated in its advisory thatthere was evidence to suggest that Pro.Activ wasnot safe for all Canadian consumers. To support thisassertion, Health Canada released a study that sug-gested 0.001% of the population would experiencered blood cell issues if they consumed plant sterols.

Unilever was caught in a regulatory quandary and,instead of waiting to be ordered to take Pro.Activ outof the market by Health Canada, voluntarily withdrewthe product.

Now that the Natural Health Products Directorate hasapproved a plant sterol pill called ModuChol, fromPurity Life Health Products, the safety and efficacyissues about plant sterols can no longer be used toargue against products containing plant sterols. Today,Health Canada no longer references the study linkingplant sterol consumption with red blood cell issues.

With the introduction of the Natural Health ProductsDirectorate in 2004, Unilever restarted the approvalprocess, this time to register Pro.Activ as a NHP.Unilever submitted its application in the fall of 2004.NHP applications for “products in food format” havebeen variously shuffled between the NHPD and theFood Directorate. This lack of coordination withinHealth Canada is unduly delaying applications.


Health Canada remains apprehensive about thelabelling of food products containing plant sterols,as well as the manner in which the dosage in theproduct is stated. The agency says it is concernedthat consumers could eat too much of the product,possibly over-consuming the active ingredient. Butinstead of discussing labelling options to deal withthis concern, Health Canada is simply withholdingproduct approval.

Unilever has found it extremely frustrating to com-municate with Health Canada because there is noformal mechanism or framework for reviewing thestatus of applications. The absence of a clear approvalframework also means there are no timelines for whichthe government is accountable for making decisions.

The company feels that a framework with clearaccountability is essential in order for companies tobe able to forecast sales and create marketingcampaigns. Lack of clarity with respect to processand timelines is exploited by Health Canada officialswho face no penalties for arbitrarily drawing outthe process by continuing to request more data andinformation as way to avoid making any decisions.

It also suggests that the lack of a plan for effectivecollaboration between industry and Health Canadacontributes to the agency’s lack of understanding ofthe food formulation and marketing processes incommercial enterprises. Given the criminal law focusof the Food and Drugs Act and Regulations, HealthCanada is preoccupied mostly with a safety andhealth protection mandate and as a result, is forfeitingthe opportunity to enhance the overall health andwell-being of Canadians.

Unilever has begun an ‘educational’ campaign onplant sterols with key stakeholders (health profession-als, governments and NGO’s). In 2007, Unileverinvited Health Canada and the Heart and StrokeFoundation to learn more about plant sterols in foods.While the sessions have been informative, theapproach is not advancing the issue, as Unilevercontinues to meet with the Food Directorate and itslicense application is tied up in the NHPD.

In the meantime, Unilever is at a competitive disad-vantage because the NHPD has already approved theplant sterol pill – ModuChol. This has effectivelyeliminated the competitive advantage Unilever hadby launching Becel Pro.Activ as a first-to market plantsterol product.

Unilever continues to be prevented from selling andmarketing a product that was available for launch inCanada as far back as 2001, not because of concernsabout the safety of plant sterols but because HealthCanada has not designed a framework under whichto approve it.

Unilever has estimated annual sales of $5 millionsince August 2001 due to first-to market advantage,which translates to a total loss of $36,801,430 inpotential sales.


Case E: Direct, Indirect and Total Opportunity Costs



Output $36,801,430 $44,894,432 $81,695,862

Wage and Salary $4,152,305 $7,917,460 $12,069,765


Taxes on Production $192,103 $891,588 $1,084,538




The Opportunity Costs• Based on company estimates of lost sales and

retailer mark-ups, the potential lost sales wouldresult in just over $46 million compounded atthe retail level.

• Although figures were not calculated, soybean oildemand (a primary input) would increase if thisproduct were approved in Canada, resulting incurrent potential lost sales for primary producers.

• The total opportunity costs to the Canadianeconomy due to these foregone impacts are$95.3 million.


a disease risk reduction claim would be the best routefor the company. Health Canada gave strong signalsthat an application in the latter category would bemore straight-forward andmore likely to be successful.

The company submitted the initial required data. Alengthy period of back and forth ensued, with HealthCanada requesting further data. The company com-plied, submitting further data and addressing aseemingly endless series of issues raised by HealthCanada. Requests for further data and informationcontinued even after the company felt confidentthat it had fulfilled all conceivable requirements(meta-analysis studies, literature, research trials etc.).

In August 2007, the company received notice thatthe application was in preliminary review by HealthCanada’s nutrition division, pending further informa-tion from the company. The company once againcomplied. In late October 2007, the company wasnotified that additional questions could arise onceHealth Canada initiated its detailed scientific reviewwhich is not due to commence until late 2008 becauseof resource/staffing shortages. Company F wasdiscouraged by this notification. Given the manyissues that it had already addressed in response toHealth Canada requests, the company was under theimpression that a detailed review of the applicationwas already underway.

The company’s consultant has since asked HealthCanada to provide more information about theprocess and next steps in the approval process includ-ing details relating to timelines, the evaluation team,and the components of the scientific review. Inresponse, Health Canada has provided the companywith steps and proposed timelines for a health claimapplication. The company is skeptical that HealthCanada will abide by these timelines.

CASE F:Health Claim ApprovalSummaryCase F involves an application for a health claim re-lated to an ingredient in two similar food productsmanufactured by Company F and sold in Canada.While one is manufactured in Canada and the otherin the US, both are manufactured for the Canadianmarket. Company F manufactures similar productscontaining the same primary food ingredient forother international markets.

Company F has submitted an application in Canadafor a disease risk reduction claim related to the foodingredient. Approval of the health claim applicationwill require an amendment to one of the five approvedhealth claims for disease reduction (the current claimis attributed to the ingredient in question). The healthclaim in question has been allowed in the UnitedStates since 1998, and is pending approval in the UK.The Australian equivalent to this product is marketedwith a structure function claim regarding the foodingredient in question and has been allowed in thatcountry for three years.

Company F initiated discussions with HealthCanada for several years and in 2005 commencedthe health claim application process. The companyhired a consultant to pursue the application processand provide advice on the scientific requirementsand regulatory process.

A pre-application meeting between Health Canadaand Company F left the company feeling encouragedby Health Canada’s suggestion to pursue an applica-tion. Originally, the company intended to seek aproduct specific health claim regarding the foodingredient. However, Health Canada suggested that


As of April 2008, the company had yet to receivenotice from Health Canada that the science submittedby the company for the claim had been approved.

Company F’s experience with Health Canada’sapproval process has been fraught with delay, lackof clarity around administrative and process issuesand endless procrastination on the part of officialswho lack either the capability or the authority tomake decisions. The Health Canada representativeswho had encouraged the application have since lefttheir positions, rendering the process more confus-ing and disjointed for the applicant.

Because the health claim approval process underHealth Canada has not been formalized, neither theapplicants nor Health Canada have a good grasp ofwhat it entails. This lack of transparency and a formal-ized approval framework yield a lack of confidence.At this point in time the company is questioningthe marketing and sales investment in this productgiven they cannot make a relevant consumer healthclaim. Eventually this product may be withdrawn,essentially putting an end to any subsequent productinnovation using this ingredient.

The research trials to support the application began inthe 1990s. The company estimates that the costs ofresearch to support the application were approximately$2.5 million over 7-8 years. The last substantial trialrelated to the food ingredient cost $1.2 million.

Furthermore, the company has invested $100,000to $150,000 over the last two years on a consultantto assist in assembling and addressing issues relatingto the scientific evidence and a further $50,000 to$100,000 per year (for the last two years) for a policyconsultant to assist with regulatory issues.

The Opportunity Costs• The losses in the form of foregone sales due to

the inability to use the disease risk reductionclaim are estimated to be $0.5 million per yearper product. Due to the fact that it would bereasonable for an approval decision to be madewithin one year, this company has experiencedpotential lost sales over the last year. One yearof potential future lost sales are also included inthe opportunity costs calculation since HealthCanada has advised Company F that the scientificreview will not commence until later in 2008.This results in potential lost sales of approximately$2 million for these two products.

• Although the company cannot quantify losses tomarket development and R&D, it noted thatproduction would have increased at the Canadianmanufacturing facility as a result of the expectedincreases in sales for this product. In the absenceof an approved health claim the company isunlikely to invest in additional R&D related tothis food product.

• The potential lost sales at the food manufacturerlevel would translate into potential lost sales forretailers of $2,635,714, based on companyestimates of retailer mark-ups for this product.This would result in retailer margin losses of$683,333.


• Although the exact volume has not been calcu-lated, the estimated foregone sales from theinability to market this product using a diseaserisk reduction claim also results in a significantlost opportunity for grain producers in Canada.

• The table below outlines the direct, indirect andtotal output, wage and salary, taxes on products,taxes on production and employment opportunitycosts to the Canadian economy resulting from

regulatory barriers on Case F product marketing.These losses are calculated based on the lost salesof the product that would be manufactured inCanada. The total economic opportunity coststo the Canadian economy due to these foregoneimpacts are $2.53 million.

Case F: Direct, Indirect and Total Losses



Output $976,190 $1,190,864 $2,167,054

Wage and Salary $110,144 $210,018 $320,161







CASE G:Discretionary Fortification ApprovalSummaryCase G involves a product fortified with calcium,which cannot be marketed in Canada, but is sold inmajor grocery chains across the United States.

Several years ago, Company G initiated discussionswith Health Canada to investigate the requirementsfor approval of this product in Canada. At the time(and to this day) Health Canada was reviewing aproposed policy and plans for the addition of vitaminsand minerals to foods. Company G was told tosubmit an Interim Marketing Authorization (IMA)application. IMAs are a regulatory tool whereby onecan request dispensation from existing regulations inanticipation of a change to regulations that wouldeventually remove an existing prohibition.

The submissions and scientific evidence required byHealth Canada to obtain an approval decision andreceive an IMA seemed clear. Company G hadpositive initial meetings with the agency and theprocess seemed straightforward and transparent. Itsubmitted existing scientific data and Health Canadapopulation survey data to provide a scientific rationalefor the fortification of this product.

Company G has not found information from HealthCanada forthcoming. The agency has not indicatedhow long the application process would take or whenCompany Gwould learn of the decision. When asked,Health Canada has responded to requests for clarityand explanations, but Company G must initiate allcommunication with the agency.

After a period of time, Company G was asked to are-submit its IMA application. Health Canada thenchanged its position and denied the approval inwriting. Prior to the written response from Health

Canada, Company G had expected relatively quickapproval, given the pre-submission face-to-facemeetings with Health Canada.

Health Canada began a review of its fortificationpolicy in 1998. In 2005 it released its amended policyand subsequently developed draft regulations forpublication in Canada Gazette I. There is no indica-tion when those regulations will actually be published.

Company G has found the Canadian regulatorysystem to be extremely time consuming, restrictiveand prescriptive. Company G suggested that theinability to fortify food products in Canada hasresulted in less innovation in food products here.

Company G estimated the cost of the IMA application,including the compilation of data and the time andlabour required for consultations to be $30,000.

The Opportunity Costs• Company G has experienced lost potential sales

of approximately $28 million as a result of theinability to market fortified products in Canada.These figures are based on the product’s USsales history.

• Based on wholesale losses of just over $28 millionand estimated retailer mark-ups for this product,retailer margin losses of $5.65 million werecalculated.

• The estimated potential sales losses at the foodmanufacturing level have also resulted in opportu-nity costs for Canadian dairy producers. Basedon potential lost food sales, dairy producers havelost an opportunity to sell $12,838,279 of milkto Company G.



Case G: Direct, Indirect and Total Opportunity Costs



Output $28,291,763 $34,513,404 $62,805,166

Wage and Salary $3,192,160 $6,086,690 $9,278,849







CASE H:Natural Health Product ApprovalSummaryCase H involves a beverage fortified with vitaminsand minerals for which Company H has applied for aproduct license and Natural Product Number (NPN)and is awaiting a response from Health Canada.

Company H submitted its application for an NPNfor this line of beverages in March, 2004. Under theNHPD, if a line of beverages has varying flavours, onlyone approval is required, unlike Drug IdentificationNumbers (DINs). Company H provided the NHPDwith all the information requested.

At one point NHPD suggested that Company H waitfor the proposed discretionary fortification regulationsto be enacted. These proposed regulations have yetto be published in Canada Gazette I, which meansenactment is still a long time away.

Six months later, and after much dialogue, CompanyH received a submission number. Company Hsuggests that the NHPD was undergoing too manychanges in early 2004 to be effective. They did nothave an adequate number of staff to review theproducts waiting to transfer from DINs to NPNs,along with all the new products being developed byfood manufacturing companies in anticipation ofthe new process. There was also a lack of expertisein the Directorate as staff members were transferredto the NHPD from other Directorates. Company Hcontinued to follow up during the assessment phaseto see whether there was any progress made onthe NPN.

In December 2004, Company H decided to put ahold on producing products that would requiregoing through the NHP approval process. Aroundthe same time, Company H received a letter fromits contact at NHPD to say that a working group

had been created to look for a solution to food-likeapplications. Six to eight months later Company Hreceived a phone message from NHPD stating thatthey were proceeding with an evaluation to assignan NPN to these types of fortified beverages.

Companies wishing to market products registeredunder the Natural Health Products Directorate mustobtain site licenses for those facilities where NHPswill be manufactured. With the submission numberreceived, Company H was able to obtain a site licensefrom a separate group under the NHPD. Company Hcontinued to ask the NHPD whether they requiredany additional information. The Company was toldthat the application was sufficient, and that theassessment process was moving along. Then staffingchanges occurred at the NHPD and Company Hlost its original contact person; this contact wasnot replaced.

The product has now been in the assessment phasefor four years. NHPD cannot tell Company H wherethe application stands in the queue. Company H feelsthe NHPD has no ability to estimate decision-makingtimelines and no accountability for adhering to them.

This waiting has resulted in a substantial amount oflost opportunity for Company H. Since marketersat Company H are judged on the success of theircampaigns, they do not want to start a campaign forany of the fortified products until they are certain theproduct will be approved. For this reason, marketlaunch of the product will inevitably be delayed evenshould the NPN materialize in the future.

In order to remain in step with consumer demandsand emerging trends, Company H plans developmentof and launches new products within a one to twoyear timeframe. However, based on this experienceCompany H would need four to five years to work


with the NHPD and therefore be launching prod-ucts too late to remain on top of consumer trends.The slow process within the NHPD diminishestimely innovation.

The NHPD announcement in October 2007 thatproduct license and/or claim approvals for productsin food format would be reviewed by the FoodDirectorate, has left Company H unclear what effectthis will have on the process and Company H’sapplication.

As a result of its frustration, Company H has placeda moratorium on introducing any more products intothe Canadian marketplace that require approval fromHealth Canada. Company H is currently marketinga product similar to the one outlined in this casestudy which has a DIN due to expire in 2009. After-wards, this product will need to be either convertedto an NPN or withdrawn from the market. CompanyH has made the business decision to discontinuemarketing the product. Company H acknowledgesthat this is a drastic measure that stifles the innovationand growth of its product line in Canada and mayreview its decision if discretionary fortificationregulations are ever implemented.

Company Hwould have preferred the NHPD to comeback immediately with a definitive rejection of theapplication. Instead Company H continues to wait.

Company H has been continually monitoring its NPNapplication through phone calls and emails for morethan four years which has added many hours infollow up activity for its staff.

The Opportunity Costs• Company H has estimated that growth in

business and market share through sales of thisbeverage would have been substantial. CompanyH planned to launch this product in the secondquarter of 2005, figuring on more than one yearfor the NHPD approval process. This applicationrepresents a line of three flavoured beverages.Based on the estimated annual sales for cases ofeach flavour, Company H has lost a total of$7.8 million in potential sales compounded overthe last three years.

• Based on company estimates for lost sales of justunder $7.8 million, and estimated retailer mark-ups for this product, retailer margin losses of$3.1 million were calculated.

• The ingredients for these juices would likely comefrom imported sources. Although Company Hsources all of the Canadian produce it can for itsfresh juices, the supply of juice-grade produceis declining in Canada due to new technologiesand production practices used by producers.Supply is also an issue in Canada since manyorchards have been converted to other, moreprofitable horticultural products, or have disap-peared as producers exit the business.



Case H: Direct, Indirect and Total Opportunity Costs



Output $7,767,563 $9,475,728 $17,243,291

Wage and Salary $876,414 $1,671,114 $2,547,528







CASE I:Minute Maid Company Canada Inc.:Calcium-Fortified Orange JuiceSummaryCase I describes the experience that The MinuteMaid Company Canada Inc. (“Minute Maid”) hadin launching a calcium-fortified orange juice for theCanadian marketplace – Minute Maid Calcium RichOrange Juice from Concentrate with modified milkingredients. Minute Maid’s parent corporation, TheMinute Maid Company, has marketed a similar typeof calcium-fortified orange juice in the United Statessince 1986.

Research indicates many Canadians do not get theappropriate daily amount of calcium. The MinuteMaid product was designed to provide between 25and 30 per cent of the recommended daily intake (RDI)of calcium. It was seen as a good way to providemuch needed calcium to consumers who do notdrink milk for a variety of reasons including allergies,lactose intolerance and personal taste preferences.

Minute Maid viewed this product as an importantopportunity to provide a functional beverage optionto Canadian consumers and meet a market demand.In fact, Minute Maid had received a number of callsfrom consumers asking where this product was soldin Canada after seeing it or consuming it in the UnitedStates. At the time, there was considerable competitivepressure to market this product; most manufacturersof orange juice products saw this as the next logicalorange juice product extension in Canada. As the ma-jority of the international manufacturers were alreadyselling a product like this elsewhere, they were poisedwith existing formulations that could easily be usedin Canada had the regulations permitted it.

Prior to Minute Maid launching this product on themarket, calcium was only permitted to be added tocertain food products such as cereal products, mealreplacements, nutritional supplements, flour, and avariety of egg products. The regulatory provisions listthe types of foods that can be fortified and specifythe nutrients that can be added and at what levels,and how to meet the labelling requirements.

Minute Maid invested a significant amount of time,energy and money in order to determine a method bywhich it could launch the product and remain com-pliant with the provisions of the Food and Drugs Actand Regulations. Minute Maid devised a formulationthat contained modified milk ingredients in order toproduce a finished product that contained sufficientamounts of calcium. This formulation proved to bemuch more expensive and complex to manufacture,distribute and sell, than the calcium salts that thecompany was using in the United States.

The first calcium-fortified orange juice product waslaunched in 1999 by Industries Lassonde. MinuteMaidthen launched Minute Maid Calcium Rich OrangeJuice and modified milk ingredients. Shortly thereafterseveral other manufacturers entered the marketplacewith calcium rich products; the most notable wasthe launch by Tropicana of a mineral supplementwith a Drug Identification Number (DIN) whichcontained orange juice and calcium.

In March of 1999, the company was notified inwriting that Health Canada objected to the sale ofthe product on the basis that it contravened theprovisions of the Food and Drug Act and Regulations.According to the regulator, the use of modified milkingredients was deemed to be a form of calciumfortification not permitted by the Act and Regulations.


In addition the company was put on notice by theCanadian Food Inspection Agency (CFIA) that ifsales of the product continued, the product could bedetained, resulting in considerable embarrassmentin front of retail customers.

After the notice from Health Canada, the FoodDirectorate Division put Minute Maid (and likelyother similarly situated manufacturers) on noticethat in order for Minute Maid to continue to marketthe product pending regulatory review, it would haveto apply for a Temporary Marketing AuthorizationLetter (TMAL). Minute Maid met with Health Canadaofficials over the spring of 1999 to review the TMALrequirements and related implications for the market-ing of the product. Minute Maid also made changesto the packaging and advertising of the product whichultimately was marketed as a special purpose food“specifically designed as a source of calcium for peoplewho do not drink milk”.

In addition, Health Canada imposed a variety ofadvertising restrictions, including that the productmust not be represented for consumption by childrenunder the age of 12 years. The imposition ofadditional marketing and packaging requirementsaffected only manufacturers selling the product as afood. Products marketed with a drug identificationnumber (DIN) were not affected by these terms andconditions. The terms of the TMAL allowed for theuse of the less expensive calcium salt ingredientultimately permitting closer alignment with theexisting US formulation.

Health Canada provided Minute Maid and all othermanufacturers of like products who applied for theauthorization with a TMAL for a period of two years.At the conclusion of the two-year period, each com-pany and would be required to conduct post-marketresearch regarding consumers’ understanding of the

label statement and the product benefits and to assessconsumer calcium intakes. This information wouldthen be used to support a regulatory amendment toallow for calcium fortification of orange juice inCanada. This additional requirement had not beenimposed in any other jurisdiction where the productwas sold. This study required the company to hirean outside consultant. What’s more, the TMAL,being temporary in nature, had to be renewed everytwo years.

After Health Canada received sufficient post-marketresearch, it indicated to industry that the regulationswould be amended to allow for the sale of calcium-fortified orange juice. Many years later, Minute Maidapplied for a TMAL to market a calcium and vitaminD formulation and was advised by Health Canadathat since the regulations had not yet been amended,the new proper regulatory authorization would hence-forth be an interim marketing authorization (IMA).Since that time, calcium-fortified orange and tangerinejuice products have been approved for sale in Canadaas IMAs.

It has been a decade since the launch of these productsand the regulatory reform has yet to be completed asit is part of the overall food fortification regulationswhich are pending publication in Canada Gazette I.

Given that the company was unable to use calciumsalts initially, it allocated significant resources andtime to developing and validating a formula that fitwithin the parameters of the regulations. Ultimately,it chose a formula with modified milk ingredientsthat scored lower with consumers on various tasteattributes in comparison with the lower cost USMinute Maid formula utilizing calcium salts. In orderto optimize the modified milk ingredient formulation,two rounds of consumer research were conducted inCanada at a cost of $65,000 per study. The modified


milk ingredient product was launched despite itbeing a more complex formulation and having a lessappealing taste profile. If the salts formula had beenallowed, no consumer taste research would havebeen required.

The launch of modified milk ingredients was techni-cally complex from a manufacturing perspective andas a result of the milk protein component, significantcapital investments were necessary to modify pro-duction equipment in the plant facilities belonging tothe company as well as its co-packers. Once calciumsalts were permitted to be used, this investmentwas lost.

Due to the high level of perceived regulatory risk inlaunching this formulation in Canada, Minute Maidwas conservative in its approach and prepared anin-depth public relations campaign in preparationfor the possibility of action from Health Canada andthe CFIA.

Once the product was on the market under the TMAL,post-market research was conducted to meet itsrequirements. A specialized consultant was hired toproperly formulate the research study and to obtainthe data that Health Canada required. Additionalinternal resources from the market research, regulatoryand legal departments were needed to advise andsupervise the research study and to finalize andreport the findings to Health Canada. Much of thiswork was also likely duplicated by other manufacturerswho had the same TMAL and therefore the samepost-market research requirements. Money spent onthe post market research was approximately $75,000.

The Opportunity Costs• A core product for Minute Maid is frozen

concentrated orange juice. Due to technicaldifficulties, the modified milk formula couldnot be utilized in the frozen orange juice formatand therefore Minute Maid was not able tocapitalize on that market with the modified milkformulation. The introduction of a frozen productwas delayed until approval was secured to usecalcium salts in the formula under the TMAL,thus resulting in considerable lost sales andopportunity costs.


CASE J:Ocean Nutrition Canada: Novel Food andHealth Claims ApprovalsSummaryCase J involves a novel food approval, a nutrientcontent claim and a biological role claim approvalfor a microencapsulated gelatin EPA and DHA(omega-3) powder produced in Canada and marketedglobally including in the US, Mexico, the EU andcertain Asian countries.

Ocean Nutrition Canada (ONC) specializes in researchand development of omega-3 supplements and foodcomponents. Its supplements are sold in health foodand grocery stores and its food ingredients are soldto food processors for addition to ‘better for you’food products marketed in all major grocery stores.

The stabilizing agents and fish oils used in the ingre-dient are not novel. However, the ingredient wasconsidered novel by Health Canada because itsproduction process conceals the taste of the fish oil.As such, Health Canada was concerned that a lack oftaste could lead to large amounts of consumptionof the ingredient, since its consumption would notbe inhibited by the “fish” taste of the food productscontaining it.

While the ingredient is currently available for sale inCanada having cleared the necessary regulatoryapprovals for a novel food, the process leading upto the approval was a difficult one. ONC is nowseeking nutrient content and biological role claimapprovals for the product. This process has takenfour years so far and has yielded no success to date.

The current labels for products containing this ingre-dient can only make factual statements indicatingthat omega-3 ingredient is contained within the food,but cannot claim that the food is rich in omega-3, ora good source of omega-3. This would be considered

a nutrient content claim which the ingredient iscurrently not authorized to make. A label on a productcontaining this ingredient cannot state that it offersany cardiovascular health benefits which constitutesthe biological role claim also currently under review.

Discussions with Health Canada regarding thisingredient began in January 2003 and a submissionfor a novel food approval of the ingredient was madeinMay 2003. The novel food was approved more thanthree years after the original submission, in June 2006.

The company felt that the process was not transparentin terms of timelines or data requirements, whichresulted in an unnecessarily lengthy process andunexpected costs to the company.

The submission process was challenging becausethe Canadian novel food approval process is gearedtoward the review of genetically modified organisms.The company did not find the novel food submis-sion requirements helpful in guiding this particularingredient submission. ONC was unsure about datarequirements and, as a consequence, ended uphaving to make several additional submissions ofdata, and spent much more time than if HealthCanada had provided a more clear understanding ofthe submission requirements upfront. In fact, ONCwas required to generate new evaluations of safetyrelated to estimated average daily consumption whichrequired that toxicological consultants be retainedto meet these requirements.

The approval process for the novel food componentwas protracted, due to the debate with Health Canadaregarding the range of foods that would be allowed touse the ingredient. ONC submitted an application fora broad range of foods. The breadth of food in thesubmission was based on a similar submission ONCwas making in the United States. Health Canada asked


the company to shorten the list, claiming that thiswould result in a shorter approval process. ONCobliged, short-listing six to ten foods, which it hadprioritized according to envisioned consumer demand.

The outcome of this discussion was that HealthCanada approved the novel food for all foods withthe exception of commodity foods (foods that arefundamental to many products and, as such, tendto be consumed often and in large quantities) suchas flours, pastas, rice, butter and some other foodssuch as infant formula, tea, coffee and maple syrup(the basis of these choices being unknown to ONC).ONC was satisfied with this outcome, with theexception of the prohibition of the ingredient for usein pasta products, which company clients like to workwith. However, the original Health Canada requestfor a short-list of products, which did not play a rolein the final choice of approved foods, was wastefulin terms of time and finances invested by ONC.

The approval process was further delayed by discus-sion with Health Canada regarding the quantity ofthe novel food component that would be allowedin the final food product. Currently, one nutrientcontent claim exists for omega-3 in Canada thatrequires the presence of 300 mg of omega-3 perserving2. ONC submitted its application requestinga 300 mg per serving quantity for the novel foodcomponent, since it intended to use a nutrient contentclaim along with the novel food component applica-tion. However, Health Canada was not comfortablewith this quantity. The original 300 mg nutrientcontent claim, according to Health Canada, wasintended for plant-based omega-3 only (flax seedsource from ALA)3.

The company representative interviewed for thisreport stated that this narrow restriction to plant-basedsources of omega-3 appears to be a retrospectiveprescription on the part of Health Canada. In fact,the nutrient content claim omits any such limitationand there is no suggestion that there was any intentto impose such a restriction on that Health Canada’sclaim of its limitation was retrospective. Following aseries of lengthy discussions, Health Canada finallyset a limit of 100 mg per serving (50 mg was theproposed quantity at one point in the discussion).

ONC did submit a nutrient content claim applicationin December 2003. As of January 2008, Health Canadahad not approved the claim and there has been noresolution regarding what quantity of fish sourceomega-3 would ultimately be required (or permitted)in order to make such a claim. The interviewees pointout that even if Health Canada were to approve thenutrient content claim application immediately, 18-24months would be required to complete the regulatoryprocess. Even under the best case scenario, ONCwould not be able to label food with a nutrientcontent claim until approximately 2010 posingsignificant concern to the company.

ONC continues to pursue a biological role claimapproval. Currently, one biological role claim for DHAis allowed in Canada connecting the benefits of DHAto brain, eye and nerve health. ONC also submittedan application for a second biological role claim inMarch 2004 that would allow the company to claimthe benefits of omega-3 for cardiovascular health4.As of January 2008, this claim had not been approved.


The company contends that Canadian consumershave the right to know the health benefits of foodsthey are eating. Although the awareness of omega-3health benefits has been growing among consumers,the company is concerned that the hype is misleading.The omega-3 used in most products offering healthclaims, especially in cereal products, is plant-based,even though research has been based on fish-basedomega-3 benefits. Therefore, according to thecompany, the next step in increasing consumerawareness in this health food area is to familiarize theconsumer with the distinction between plant-basedand fish-based omega-3.

The company made the point that ONC is seekingapproval in Canada, even though it has been verysuccessfully marketing its products globally becauseit wants to market the product properly in its homecountry. The company and its employees feelpassionate about Canadian consumer awareness ofhealth benefits of certain foods and about increasingthe affordability of healthy products to all Canadianconsumers. They believe that consumers have a rightto the health benefits of omega-3 through omega-3enriched foods, especially those who are unable toafford seafood or supplements. This is especially truein light of the fact that ONC offers fish oil benefitswithout the taste of fish (a draw for those individualswho would not consume seafood otherwise) andpurified of contaminants associated with many kindsof seafood (such as lead and mercury).

In addition, the company feels that the regulatorysystem in Canada creates a disincentive for domesticcompanies to commercialize their R&D and leveragenew technology and innovation.

In terms of resources expended seeking the threeapprovals (including the two outstanding claimsubmissions) ONC invested a lot in travel to Ottawaand time in discussions with Health Canada. ONCalso hired government relations advisors to try tospeed up the process. External toxicological consultantswere also hired to help gather the safety evaluationsrequested by Health Canada during the process.

The estimate of direct costs to ONC for the novelfood component approval is $1.2 million ($250,000for the first dossier, plus additional costs throughoutthe approval process). In addition, ONC estimatesthat the time and effort being spent on the claimsapprovals has cost the company $800,000 to date.

The company noted that although these costs are veryhigh, they will continue to pursue approval becausethey want to sell their product in the country in whichit is produced.

The Opportunity Costs• The lengthy novel food approval process

resulted in significant lost sales for ONC betweenJune 2004 and June 2006. Based on estimatedannual sales ONC lost a total of $2.2 millioncompounded over that time period.

• In addition, because the claims have not beenapproved, food manufacturers intending toproduce products containing the ingredienthave cancelled product market launches. Thesefood manufacturers acknowledge the benefitsof omega-3 in their food products but will notadd the ingredient to their food products if theycannot alert consumers to the benefits of the in-gredient on the food package.


• As a result, the company conservatively estimatesthat, in the Canadian market, it has experiencedlost sales of $3.5 million annually while awaitingthe health claims approvals – a total of $11million over the last three years.

• In total, for both the lost sales experienced duringthe novel food approval process and the healthclaims processes, ONC has experienced potentiallost sales of $13.2 million.

• Companies wishing to use the microencapsulatedpowder in food products have likely also experi-enced potential lost sales as a result of notlaunching the products using the ingredientbecause of the inability to inform the consumerof its benefits.

• The total opportunity costs to the Canadianeconomy are $34.3 million.

Ocean Nutrition: Direct, Indirect and Total Losses



Output $13,240,063 $16,151,685 $29,391,748

Wage and Salary $1,493,876 $2,848,467 $4,342,343







CASE K:Discretionary FortificationSummaryCase K involves a beverage line marketed and soldin Canada but produced in the United States. In theUnited States, this line includes products fortifiedwith vitamins and minerals in order to meet consumerdemands for healthier or ‘Better for You’ products.However, Canadian regulations prohibit discretionaryfortification of all but a small number of products.The US parent company producing these productswishes to export the same fortified products to theCanadian market and inform consumers of the benefitsof the fortified ingredients.

The lack of regulatory synchronization between thetwo countries means that items destined for sale inCanada require a separate production run, leadingto inefficiencies and increased production costs. Insome cases, a US manufacturing plant may not beable to accommodate the extra changeovers forCanada because of the negative impact on efficiency.Conversely, Canadian manufacturing plants cannotcompete for the North American product mandatesthat they otherwise might if product formulationswere harmonized.

This case study addresses the serious limitations oninnovation when public policy makers forfeit their re-sponsibilities to ensure that regulatory infrastructureis renewed to enable business to flourish and meetemerging market needs. In 1998, Health Canadabegan reviewing its current food fortification policy,in light of concerns from stakeholders suggestingthat the current policy limited consumer access tofortified foods and limited the development of newfood products. Health Canada released a policy forthe discretionary fortification in 2005. Regulationsto give that policy effect were drafted; yet, despiterepeated urgings that the government proceed withpromulgating the regulations, they have yet to pro-ceed to Canada Gazette I.

Company K estimates that consumer demand for‘Better for You’ products is the same in Canada asin the United States. Based on this assumption,Company K is forfeiting significant sales revenuesin Canada with related economic impacts.

Product line K has been on the market less than ayear in the United States and a smaller, non-fortifiedversion of the product line is sold in Canada. Sales ofthe US product line have been growing substantially.

Company K has investigated how to bring thisproduct line into Canada and is assessing whetherto submit an Interim Marketing Authorization (IMA)application. The application would require a scientificrationale for the desired fortification process. IMAsare a regulatory tool whereby one can requestdispensation from existing regulations in anticipationof new regulations that would eventually revoke theexisting prohibition.

Until discretionary fortification regulations in Canadaare promulgated, the process that companies mustundergo in order to add vitamins and minerals to foodis long, complicated and quite expensive, makingsuch products largely unavailable to Canadianconsumers. Even if the regulations are eventuallyimplemented, the criteria that foods will be requiredto meet in order to be fortified raises uncertainty forCompany K as to whether its product could ever bemarketed in Canada.

Not only does Company K want to fortify theseproducts, it wants to inform consumers about theirbenefits, letting them know that these products are‘better for you’ through a nutrient content claim.

If fortified products were allowed in Canada andconsumers could be educated about the benefits,Company K has indicated that it would launch aline of products fortified with vitamins and minerals.This launch could immediately double Company


K’s business for this product line. Due to consumerappeal for ‘Better for You’ products in the UnitedStates, and the growth in sales of these products,Company K estimates a growth rate of 10 per centper year for these products, compared to the currentgrowth rate of 2.5 per cent for traditional products.

The Opportunity Costs• Based on this estimate, potential future lost sales

for the next five years5 have been calculated at$3.1 million. The ability to sell this product linein Canada would be significant for Company Kand would contribute significantly to consumerchoice for these functional foods.

• Based on company estimates of lost sales of justover $3 million and estimated retailer mark-upsfor this product across all retail chains, retailermargin losses of $771,231 were calculated.

• Due to the fact that these products would beproduced in the United States and imported intoCanada, the potential Canadian value chainimpacts cannot be calculated using the StatisticsCanada food industry multipliers. However,spin-off effects from the sales of these productsin Canada cannot be overlooked, including theeconomic effects on those involved in transportingand marketing the product.

• Although Case K involves a product that will beproduced in the United States, it is an exampleof the inability to market a functional foodproduct line to Canadian consumers.


CASE L:Food Additive ApprovalSummaryCase L is an innovative and ‘healthier for you’ foodproduct produced, marketed and sold in the UnitedStates. Company L cannot bring this product toCanada as it contains a food additive that is notcurrently approved for use in Canada. This product isexperiencing strong growth in the United States andCompany L is aware, through consumer research,that there would be a demand for the product fromCanadian consumers and a strong business case forintroducing it into Canada.

When it began investigating the possibility of bringingthe product into Canada a number of years ago,Company L discovered that one of the enzymes usedin the United States product has not been approvedfor use in Canada.

Food additives permitted for use in Canada are listed inPart B, Division 16 of the Food and Drug Regulations.All new additives must first be approved for use byHealth Canada and subsequently listed.

This additive has been chosen by the ingredientcompany that supplies Company L because it is themost appropriate for the product and productionprocess. The easy fix would be to exchange theadditive for one that has already been approved inCanada for products destined for the Canadianmarketplace. As this product would be produced inthe same plant as the US product, Company Lexamined the economics of conducting short pro-duction runs of Product L using an additive alreadyapproved in Canada for the Canadian market, anddetermined it would not be economical. Substitutingthe additive would also result in an inferior product.Therefore, Company L initiated a discussion withHealth Canada to discuss its options.

Company L was advised that it had a number ofoptions including:

1. Initiate the standard regulatory approval process.Company L and the food ingredient companyhave estimated that this process will take sixyears to complete. Despite the long time frame,the company plans to commence this process in2008. The approval process would be initiatedby the food ingredient company that providesCompany L with the additive since it wouldhave the appropriate food safety research. Thefirst step in the approval process of new foodadditives is the safety assessment which thefood ingredient company has already completed.Company L would help facilitate the process.

2. After the scientific evaluation has been completed,Company L could apply for an InterimMarketingAuthorization (IMA) in order to ‘bridge thetime between the completion of the scientificevaluation of certain enabling amendment andpublication of the approved amendments in theCanada Gazette, Part II’. Company L will belooking into this expedited option as well.

3. The last option would be to explore a “workaround” approach that would allow the additiveto be approved in Canada if it qualified as a foodprocessing aid.

The food ingredient company working with CompanyL continually conducts research regarding thedevelopment of new and better additives for foodproduction processes and products. With respect tothis case study, their research includes investigatingimprovements in performance of ‘generations ofenzymes’. Each time the research yields an improvedadditive for use in Product L, the regulatory systemin Canada would require that this additive undergothe approval process all over again because there isno mechanism for approving “families of enzymes”that are essentially very similar. Again, this leads to


slower food innovation in Canada, and explainswhy undergoing the Health Canada food additiveapproval process is a low priority for the ingredientcompany.

Company L is frustrated with the lack of protocol forthe introduction of food additives in Canada. Theprocess is not clearly laid out for applicants so theydo not know what to expect as the process unfolds.Company L believes that Health Canada delaysprogress by issuing continuous ad hoc requests forinformation rather than spelling out the data andinformation requirements at the outset. Company Lnoted that in the United States the process to approvea new food additive is clear and transparent andapplicants are aware of the information requirementsand their responsibilities.

The Opportunity Costs• Company L has calculated projected sales of

this product in Canada, based on current salesin the United States and the appeal of convenientand ‘healthier for you’ products in Canada.Potential future lost sales for the next five years7

are calculated at $12.6 million. The ability to sellthis product in Canada would mean significantsales for Company L, and would provideCanadian consumers with another convenientand ‘healthier for you’ food choice.

• Based on company estimates of lost sales of justunder $12.6 million and estimated retailer mark-ups for this product, potential retailer marginlosses of $5.04 million were calculated.

• Because these products would be produced inthe United States and imported into Canada,the potential value chain impacts cannot becalculated using the Statistics Canada foodindustry multipliers. However, there would bespin-off effects from the sales of these productsin Canada that cannot be overlooked.


Summary of the Lags and Challenges Experienced byCase Study CompaniesThe case studies profiled in this report provide ampleevidence that the Canadian regulatory system is notequipped to deal with the needs of the food industryseeking regulatory approvals for their products, noris it accountable or responsive. The majority of thecases highlight the inefficiencies within the systemas a result of: poor administration including a lackof guidance and clear framework for the processes;communication; transparency; and accountability totimelines. A regulatory system that relies heavily onpre-market assessment and regulatory amendmentsrequires a clear, understandable, transparent system.

Lags Identified Through the Case StudiesOf the twelve case studies:

• All 12 experienced lags because there isno expressed purpose of the legislationthat is guiding decisions to deal withtheir submissions

• One quarter are facing obstacles forapproval of certain types of healthclaims because a regulatory amendmentis required first

• One cannot obtain approval for use ofa food additive because a regulatoryamendment is required to add it to theapproved list

• Two are facing lags due to product-specific requirements in pre-marketevaluations for their submissions forapproval of novel foods

• One third cannot obtain approval tofortify their foods with vitamins andminerals because of the restrictive list

• Three quarters have faced significantlags because of a lack of guidance inthe system

• Half say the lack of communicationwith the approval body has caused lags

• Seven have experienced obstaclesbecause of Health Canada’s limitedresearch capacity

• Nine cite lack of accountability totimelines for causing significant lags


Direct Costs for ManufacturersThe following table shows some of the direct coststhat participants incurred while working within theCanadian regulatory system to get their products,food additives or health claims approved. It shouldbe noted that the companies accept that there arecosts associated with food approval applications inCanada, but they have issues with the costs that are

deemed unnecessary or excessive. Some of the directcosts listed below include initial and additionalresearch requirements requested throughout theprocess, consultant fees to aid in the applicationprocess, the cost of monitoring the progress ofsubmissions in the queue, and marketing costs tocompanies that cannot utilize health claims allowedin other jurisdictions.

Direct Costs to Food Manufacturers

Case Estimated Cost Reason/Explanation

A $500,000 • Above and beyond what is normally spent on more effective marketing campaigns

B N/A • Research conducted to determine feasibility of approval submission

D $10,000 • Regulatory consultant fees

E $millions • Launched a product, voluntarily recalled a product and resubmitted application under another process

F • $2,500,000 • Research to support application• $275,000 • Chemistry and policy consultant fees

G $30,000 • Submission of IMA application, encouraged by Health Canada and then rejected

H 50 hours of work • Continual monitoring of application progress

I • $130,000 • Consumer research on modified milk ingredient formulation• $75,000 • Post-market research requested by Health Canada

J • $1,200,000 • Novel food submission: research, consultants, lobbyists, personnel time• $800,000 • Health claims submissions: research, personnel time


Potential Lost Sales along the Food Value Chain

Case Potential Lost Sales

Food Manufacturers Retail Primary Producers

A – low $12,000,000 $15,000,000 $2,142,900

A – high $20,000,000 $25,000,000 $2,857,200

B $62,124,999 $72,721,039 2,458,803

C $2,500,000 $3,500,000 $1,310,706

E $36,801,430 $46,001,787 N/A

F $1,952,381 $2,635,714 N/A

G $28,291,763 $33,950,115 $12,838,279

H $7,767,563 $10,874,588 N/A

J $13,240,063 N/A N/A

K $3,147,881 $771,231 N/A

L $12,602,334 $5,040,934 N/A

Potential Lost Sales along the Food Value ChainThe table below shows the total potential saleslosses to food manufacturers, retailers and primaryproducers (where the information was availableand/or relevant) as a result of delays by Health Canada(in excess of a reasonable processing time of one year)in rendering approval/rejection decisions. In some

cases, sales losses include an estimate of the foregoneadditional sales of products that could have beenrealized had the company been able use health claimson these products. In other words, sales were expectedto be higher if manufacturers were able to bettercommunicate the health benefits of the innovationto Canadian consumers.


General ConclusionThe foregone economic activity resulting fromthe impediments faced by food manufacturersworking within the Canadian food regulatorysystem includes foregone economic activityof $440 million and foregone employmentof 1,869 individuals for only these 12 casestudies. This represents a significant loss tothe economy.

Summary of Potential Direct, Indirect and TotalOpportunity CostsThe potential sales losses of products that would be(are) manufactured in Canada were used to calculatethe potential direct and indirect opportunity costs tothe overall Canadian economy in the form of directand indirect foregone output, employment, wagesand salaries, and taxes. Direct opportunity costs arethose corresponding to the final product manufacture(i.e., the foregone economic value of potential sales,related employment, wages and salaries, and taxrevenue generation) while the indirect opportunitycosts reflect the economic value of industries support-ing the production of the food product (i.e., foodingredients, transportation). The indirect losses to allupstream stakeholders include the primary producerimpacts as shown in the table, as well as other inputsuppliers and transport providers in terms of foregonesales, wages and salaries, and tax revenues due tostifled economic activity.

The total opportunity costs in the table below are atotal of direct and indirect opportunity costs includingthe foregone direct output (potential sales losses tomanufacturers shown in the above table), foregoneindirect output, foregone direct and indirect wagesand salaries and forgone direct and indirect taxes asa result of the lessened economic activity. Direct andindirect employment losses are shown separately inthe table below as they reflect the number of individ-uals employed, rather than a monetary value.


Summary of Potential Direct, Indirect and Total Opportunity Costs

In interpreting the results using the multipliers, itshould be understood that losses to the broadereconomy represent a potential, rather than a pointestimate. This is true because the approval of theproduct would not necessarily have generated entirelynew sales. Depending on the case, some consumersalready purchasing the product would continue todo so, and other consumers purchasing substituteproducts would switch to consume the newlyapproved product. In other cases, consumers wouldcontinue consumption of all other foods but increaseconsumption of the newly approved product due tothe health claim and or new functionality. In practiceit is impossible to disaggregate these effects, so thiscaveat should be observed in interpreting the broadereconomy benefits.

These case studies are merely the tip of the iceberg.For many companies who participated in this research,these cases represent just one example from anumber of challenges they are experiencing with theCanadian food regulatory system. The magnitude oflost opportunity from these cases is conservative andrepresents a mere sampling of the impact that the cur-rent regulatory system has had on Canadian-basedcompanies seeking to commercialize better-for-youinnovation.

It is important to consider that the significant andvaried costs represented in the above tables are shortterm. In the longer term, the costs will be higher; casestudy participants agreed that research and develop-ment and new product introductions in the industrywill decrease if these new products cannot be marketedin Canada.



A $13,435,680 $17,629,764 $31,065,720 39 98 137

B $69,557,634 $91,270,756 $160,829,819 201 508 709

C $2,799,100 $3,672,868 $6,472,025 8 20 29

E $41,204,353 $54,066,710 $95,271,910 119 301 420

F 7 $1,092,981 $1,434,167 $2,527,170 3 8 11

G $31,676,589 $41,564,758 $73,241,998 91 231 323

H $8,696,874 $11,411,692 $20,108,745 25 64 89

J $14,824,104 $19,451,599 $34,276,007 43 108 151

K7 $3,147,881

L7 $12,602,334

TOTAL $200,013,720 $240,502,314 $440,519,799 529 1,338 1,869



Conclusions from the Case StudiesThe message from the case studies is clear: the adhoc and unstructured administrative processes withinHealth Canada prevent Canadians from accessingnew and innovative products that could meet theirdemands and improve their health, and has resultedin significant foregone economic activity.

In addition to the hard economic data, case studyparticipants provided observations and anecdotesthat lead to the following general conclusions:

1. The Food and Drugs Act should include anobjective to “enhance the health of Canadians”

One of the fundamental problems with Canada’sfood regulatory system is that the Food and DrugsAct does not have objectives for which regulatorsare accountable, not even those related to publichealth protection. Particularly dismaying to foodand beverage companies is the fact that the Actdoes not include an objective to ensure efficientoperations or to contribute to efficiency in thefood system. This is in direct contrast to theFood Standards Australia New Zealand Act whichin addition to providing for accountability,acknowledges that the food industry plays arole in enhancing the health of its citizens. TheAustralia New Zealand Food RegulationMinisterial Council reformed its health claimapproach based on its acknowledgment that in-dustry requires a regulatory landscape thatenables new product development.

2. Inefficiencies are created by “patchwork ofregulatory processes”

In Health Canada’s Blueprint for Renewal II,the agency acknowledges that the “currentpatchwork” of regulatory processes creates inef-ficiencies in the system. This fact was confirmedin a thorough and wide-ranging study byCantox in 2007. For the food and beverage in-dustry these inefficiencies stem from a lack ofclarity and understanding of the requirementsthat must be met in order to secure approvals.Industry is often unclear as to how processes andframeworks vary depending upon the type ofapproval being sought, for example for applica-tions for novel foods versus for food additives,and which directorate (Food Directorate orNatural Health Products Directorate) is chargedwith overseeing different types of applications.

Australia/New Zealand’s food authority(FSANZ) has one application handbook for alltypes of applications which ensures transparencyand efficiency for applications with FSANZ.Applications are assessed under one of threeprocedures – minor, general or major.


3. Natural Health Product Regulations create a‘work around’ to market certain food productswith claims

Since the implementation of the Natural HealthProducts Directorate (NHPD) in January 2004,food products can come under the definition ofboth a food and a natural health product (NHP).In fact applicants can now choose whether tomarket these products as foods or drugs. WhileHealth Canada has a clear preference thatproducts in food format be marketed as food,the implementation of the NHP regulations hasprovided a whole new avenue of market accessfor food manufacturing companies.

However for those in the industry who wouldprefer to market their functional foods as “foods”,the NHP route is viewed as a ‘work-around’.Although the requirements that must be met inorder to market foods as NHPs are relativelyonerous, some companies are more than willingto work within the confines of the ‘work-around’if it means being better able to market theirproducts by including claims.

There is now discussion within Health Canada,in both the Food and Natural Health ProductsDirectorates as to whether food-format NHPsshould be marketed as NHPs or foods. InOctober 2007 NHPD issued a statement thatproduct license and/or claim approvals forproducts in food format would now be reviewedby the Food Directorate in order to address thisissue. Although this is an effort on behalf ofHealth Canada and the NHPD to improve itsprocesses, some companies suggested that thiswill initially lead to further elongated applicationprocesses as both directorates review food-likeNHPs.

Due to the demand for fortified foods as wellas companies’ desire to gain access to healthclaims for their products, the NHPD route offeredan attractive option and opened the floodgatesfor thousands of applications once the Directoratewas launched in 2004. Despite the window thathas been afforded, the system is now hopelesslybacklogged and many companies interviewedacknowledged that a regulatory framework fordiscretionary fortification and a better adminis-trative process for health claims approvals couldmitigate the current burden on the NHPD. Notonly is the NHPD completely overwhelmed andunder-resourced due to the amount of food-likeproduct applications it has received, it is also deal-ing with products that are currently marketed withDrug Identification Numbers that are requiredto migrate to NPNs by December 31st, 2009.

4. Administrative and process improvementswithin Health Canada are urgently needed toimprove the management of food applicationsand reviews

The lack of clear and transparent frameworksfor regulatory approvals has created hugefrustration within the industry. In addition tobeing confusing and unclear, the approvalprocess often results in unexpected requests foradditional information as well as repeated andchronic delays. Loose and imprecise processeslead to inconsistency in the manner in whichapplications are assessed. Without consistentapplication reviews, companies cannot benefitfrom experience in previous applications.Participants suggested that transparency withinthe system through the use of a comprehensiveguidance document would be beneficial.


However, the lack of accountability within HealthCanada for meeting performance targets forcommunication with applicants, scientific reviewsand decision-making creates huge uncertaintiesfor companies who have increasingly given upon commercializing innovation in Canada.

5. Stakeholder collaboration is needed

There is currently no mechanism requiringgovernment, industry, the scientific communityand medical communities, consumers or otherrelevant stakeholders to discuss or exchangeideas about the enhancement of health throughfood and the protection of the health of Cana-dians through food regulation. Currently, thestakeholders along the value chain whose activitiesare independent of each other work in silos.

On-going stakeholder collaboration, where partiescooperatively work together, rather than industryconsultation, would result in a better under-standing on behalf of all parties regarding eachstakeholder’s responsibilities and views for thefuture of food in Canada. If more collaborationoccurred, Health Canada could be made awareof the range of products in the pipeline and gaina greater understanding of the innovation takingplace in the marketplace today. Industry wouldbe made aware of the regulatory processes andprocedures new innovations will face, resulting ina mutually beneficial working relationship.

6. The inefficient regulatory framework hascreated a disincentive for R&D

The implications from the experiences of theparticipants are that fewer innovative and func-tional foods will be available in the marketplaceif the regulations and their administration providea disincentive for R&D. Innovation must keepup with market trends, however the uncertainand protracted processes in the Canadian foodregulatory system does not allow Canadian foodmanufacturers to stay ahead of the innovationcurve. In order to conduct R&D, companies mustreceive a sufficient return on their investment;this return is impeded by lengthy delays.

It is clear from the case studies and conversationswith participants that companies will not availthemselves of opportunities to commercializeinnovation if the resulting products cannot belabelled and health claims cannot be made tocommunicate benefits to consumers.

The experiences of other countries as well clearlydemonstrate that product sales increase whenconsumers are made aware of the functionalbenefits through health claims. If companiescannot get a sufficient return on the developmentof new innovative products, research and inno-vation will decline with fewer innovative andfunctional foods appearing in the marketplace.

Instead of utilizing health claims to promote thehealth benefits of food products companies arehaving to invest in expensive and convolutedmarketing campaigns to convey the benefits oftheir products indirectly. Some participantsacknowledged that as a result, marketingcampaigns are less effective because healthclaims cannot be used.


Although the current regulations were establisheddecades ago, and some of the products andscience are new. Therefore, a regulatory frame-work for health claims that evolves with theindustry would be beneficial for both industryand consumers.

7. Consumers are confused

Messages allowed on packaging and in advertise-ments differ from one country to another andhave resulted in consumer confusion. In today’sglobal world, with TV, magazines, the internet andtravel, borders are porous and food manufacturershave acknowledged their desire for uniform andconsistent messages across the countries in whichthey market their products. Participants suggestedthat due to the proximity of Canada and theUnited States and the heavy movement of peoplebetween the countries, a uniform message, if nota global one, should span the Canada-US border.It was also suggested that the majority of infor-mation consumers obtain about food productsCFIA has no control over, such as on the internet,word of mouth etc.

Consumers see the ‘latest and greatest’ productson the internet and US TV stations – however inmany instances the products are the same but aremarketed differently in the various jurisdictions.Consumers see products available in otherjurisdictions but not in Canada and call foodmanufacturer’s hotlines to ask about thedifferences. This can be especially confusing ifconsumers hear about the benefits of foodproducts from many sources but not the foodmanufacturing companies themselves.

With respect to mixed messages, Canadian-owned companies are competing withmultinational companies that have other toolsto use in getting messages to consumers. Someparticipants suggested that Canadian-ownedcompanies are put at a disadvantage of havingno spillover advertising from the United States,in which they can more effectively communicatethe benefits of their food products.

Participants acknowledged that there is concernthat consumers will begin to assume that foodmanufacturing companies in Canada are lessinnovative than those in other jurisdictions. Whilethis may be the case, it is not for a lack of trying.

Although these food companies acknowledgethat they sell food products to make money andthat because there is less effective education ofthe consumer, messages don’t get through andsales are stifled, they also underline the importanceof consumer awareness regarding the addedbenefits of certain innovative food products.

8. The current system has created significantlost opportunities

It is widely agreed that the fastest growingcomponent of the food business today is the‘functional’, convenient and ‘healthier for you’foods. As food companies want to improve theirproduct offerings in this area, Health Canadarepresents a significant blockade.

The experiences that food companies have hadworking within the regulatory system in Canadahave led them to seriously reconsider developingproducts that would require regulatory approval.Unfortunately, this will lead to stifled innovationand therefore less growth and investment inCanada. Canada is losing its capital attractioncapabilities, and curtailing business opportunitiesfor food manufacturing companies.


1 (Paul et al. 1999; Marquant, 2001 as cited in (Williams, 2005)

2 The current fish-source omega-3 content requirement for source claims in the United States is 32 mg per serving.

3 According to the interviewees, there is currently a misconception among consumers regarding the difference between fish-based and plant-based omega-3.Many consumers believe that omega-3 contains the same fatty acids, regardless of its source. However, according to the interviewees, plant-based (flax seed)omega-3 source claims are based on ALA content, whereas fish-based omega 3 contains DHA and EPA. The 300 mg source claim approved by Health Canadais based on plant-sourced ALA. As a matter of fact, many of the established health benefits from this source of omega-3 are based on the assumption that thebody converts ALA to DHA and EPA. Although this conversion is scientifically established, the conversion rate is very low. Therefore, much more ALA isrequired to produce the health benefits of DHA and EPA. As such, the interviewees claim that, even if Health Canada is uncomfortable with the 300 mg perserving quantity of EPA and DHA for a source claim, a lower quantity of EPA and DHA should be sufficient to make a source claim. However, the intervieweesalso submitted that there is no established risk of overconsumption of DHA and EPA (based on internal clinical studies and external research) and that HealthCanada has already set a precedent for the 300 mg amount by recommending that Canadians consume at least 2 servings of fish per week. Furthermore, sincethe novel food component is purified of contaminants, which are often a cause of concern in setting recommendations for seafood consumption, contaminantscannot be a justifiable cause for prohibiting a source claim for this novel food.

4 The omega-3 components being proposed for the heart health claim differ from the brain, eye and nerve health claim in that they contain different ratios ofEPA and DHA. According to the interviewees, both health benefits, with their respective EPA and DHA ratios, have been scientifically established. As a matterof fact, the interviewees claimed that there is more research supporting the heart health claim than the previously approved brain, eye and nerve health claim.

5 Five years of potential future lost sales was chosen as a standard time frame.

6 Five years of potential future lost sales was chosen as a standard time frame.


73

The 12 cases highlighted in Section Three of thisreport provide a small sampling of the impact theCanadian food approval system has had on foodinnovation and access to new products with healthbenefits that consumers desire.

There are many more examples of lost opportunitiesrelated to food products. A search of the internet,food journals and a comparison of internationalcompany websites found numerous innovative andnew products that are not available in Canada, as well

as more effective advertising of products with bene-ficial attributes in other countries than in Canada,undoubtedly due to Canada’s health claim restrictions.

This section provides a broader perspective on theinnovations that Canadian consumers are missing outon. In some instances it may be that the manufacturerhas not attempted to have the product approved inCanada, the product may not fit the Canadian marketor the Canadian food regulatory system has impededits approval in Canada.

4 What Consumers Are Missing


Canadian consumer response to the question: How concerned are you about?

(Source: Nielsen PanelTrack Health and Wellness Survey, 2007)

0 20 40 60 80 100%

Minimizing potential future health problems

Increasing energy levels

Reducing stress

Losing weight

Improving body image

Minimizing signs of aging

Very Concerned Somewhat Concerned Not Very Concerned Not at all Concerned

Canadian Consumer Health and Wellness andFood Purchasing TrendsCanadians want access to foods with health benefits.According to the Nielsen PanelTrack Health andWellness Survey, 2007, Canadian households’ primaryhealth and wellness concern is preventing potentialfuture health problems. Canadians are becomingproactive in managing their health today to stayhealthy in the future through exercise and diet.Twenty-seven per cent of Canadians are exercisingto stay healthy and 31 per cent of consumerspurchase functional or fortified foods to preventfuture health issues.

The survey results also show that Canadian consumersare increasingly using health symbols and logos onfood packaging as an important information sourcein order to make healthier food choices. Canadianconsumer awareness of the benefits of functionalfoods and ingredients, including awareness of thebenefits of omega-3’s, probiotic cultures, wholegrains and fibres, has also been increasing.

75What Consumers Are Missing

Food Innovations Missing in CanadaFoods that Minimize Future Health ConditionsHeart Health and Cholesterol Reduction – PlantSterols and StanolsTwo food innovation trends to minimize potentialfuture health conditions that have really taken offare foods that help to improve digestion and guthealth through the use of probiotics and hearthealthy foods that help to lower cholesterol.

Health Canada permits probiotics to be added tofood sold in Canada but they can be marketed withlimited claims. A number of products that have beendeveloped to reduce cholesterol through the use ofplant sterols and stanols are available in manycountries but not approved in Canada.

Plant sterols (phytosterols) arenaturally occurring plantcompounds which have asimilar chemical structure andbiological functions as choles-terol. There is “broad basedefficacy and safety support ofplant sterols in the treatmentof high cholesterol and heartdisease from key third parties”including the British HeartFoundation, American HeartFoundation, InternationalAtherosclerosis Society, Dutch Heart Foundation,World Heart Foundation, Finnish Medical Society,Finnish Nutritionist Association and the SpanishAtherosclerosis Society.

Studies have shown that individuals may lower theirLDL-cholesterol levels by about 10 per cent with plantsterols depending on the age and individual metabo-lism of the person. In addition to the benefits forindividuals with high blood cholesterol, plant sterols

may also provide anti-cancer, anti-inflammatory, anti-atherogenicity,and anti-oxidation benefits to theaverage consumer, according to theAustralian Heart Foundation.1,2

Furthermore, plant stanols havebeen proven to reduce harmfulcholesterol and lower the risk ofheart disease. There are a myriadof food products available thatcontain plant sterols and stanolsand millions of consumers worldwide have access tothese products, which are convenient to include inone’s diet without having to resort to supplements andother means. In Europe, plant sterols can be found in

products such as table spreads,dairy products (milk, yogurtand cheese), cereal, spicysauces, and rye bread(pumpernickel). In the US,they are also permitted inorange juice. In Australia/New Zealand, they can beadded to table spreads, lowfat yogurt and milk, andbreakfast cereals.

In spite of their safe history ofuse in other countries, plant

sterols are not approved in Canada. Canadianconsumers are again missing out on health benefitsof these products due to our regulatory system.

The table on the next page lists a number of foodproducts proven to reduce cholesterol through the useof plant sterols and starols the countries in whichthey can be found, and corresponding allowablehealth claims.

In spite of their safe history ofuse in other countries, plantsterols are not approved inCanada. Canadian consumersare again missing out on healthbenefits of these products dueto our regulatory system.


Food Products Containing Plant Sterols/Stanols to Reduce Cholesterol

Unilever:Flora/Becel Pro.Activ products

Kroger Company:Active Lifestyle Fat Free Milk

Minute Maid: Heart Wise Juice

Raisio Group: Benecol

Margarine Spread

Yogurts

Milk Beverages

Breakfast Cereals

Milk containing Corowise brand(from Cargill) of plant sterols toreduce LDL cholesterol

Juice/juice drink containing 1gper 8 fl. Oz of naturally sourcedplant sterols proven to reduceLDL cholesterol

Cream Cheese

Dairy Free (Soya-based) Drink

US (1999)Australia (1999)EU (2000)New Zealand, Switzerland,Brazil, South Africa, Japan,Czech Republic

US (2004)EU (2004)Australia (2006)

EU (2004)Australia (2006)

Australia (2006)

US (2007)

US

BelgiumIrelandUKLuxembourg

UK (2007)Ireland (2007)Belgium (2007)

Food products containingvegetable oil sterol esters.

Health Claims:US: “…contains natural plantsterols that can help lower LDLcholesterol levels, and maydecrease your risk of heartdisease…’

Australia: “This product containssterols. Sterols reduce cholesterolconsumption.”

EU: “Becel pro.activ is clinicallyproven to significantly lowercholesterol as part of a healthydiet.”

Package states: “Helps ReduceCholesterol.”

Proven to help reduce cholesterol.

Benecol is a range of foods thatcontain plant stanol esters.

Package states “Proven to ReduceCholesterol.”

Company/Product Description Countries Available(year approved)

Health Claims/Comments


Tropicana Orange Juicewith Benecol

Hain Celestial:Rice Dream Heart Wise

General Mills, Nature Valley:Healthy Heart ChewyGranola Bars

Kesko Food and Scanvit Ltd.:Pirkka Reducol Rye Bread

Orange juice with addedplant stanols

Rice milk beverage that containsCorowise brand (from Cargill)of plant sterols that help reducecholesterol and the risk ofcardiovascular disease

Granola bars that containcholesterol-lowering plantsterols

Rye bread that contains Reducol(from Forbes Medi-Tech); a plantstanol and sterol mixtureprocessed from tall oil thatreduces cholesterol

England (2006)

United States (2004)Europe

United States

Finland (2007)

Helps to reduce cholesterol.

US package states: Can HelpLower Cholesterol.

“Foods containing at least 0.65gper serving of vegetable sterolesters, eaten twice a day withmeals for a daily total intake ofat least 1.3g, as part of a dietlow in saturated fat and choles-terol, may reduce the risk ofheart disease.”

Package states: Helps LowerCholesterol.

Plant sterols eaten twice a daywith meals for a 0.8g daily total,may reduce heart disease risk ina diet low in saturated fat andcholesterol. Nature Valley has0.4g per bar.

There is a Pirkka Reducol line ofproducts including: rye bread,Buckthorn yogurt, vegetable-oilspread and low-fat yogurt.




Increasing Energy LevelsAs is outlined in some of thecase studies described inSection Three, companiesare experiencing foregoneeconomic opportunities as aresult of not being able toenrich certain food andbeverage products withincreased amounts of vitamins and minerals. At thesame time, 86 per cent of Canadian consumers areconcerned about increasing their energy levels in orderto maintain or gain an active and healthy lifestyle.3

Certain vitamins and minerals can play importantroles in energy metabolism and tissue formation;discretionary fortification could help provideCanadians with additional vitamins and mineralsin convenient food and beverage products.

According to Health Canada,with fortification, “the nutri-ents available in our foodsupply will increase (withinthe safe limits set by HealthCanada). Canadians wouldenjoy the freedom to makechoices from a wider rangeand variety of fortified foods

while knowing that they have been protected fromthe health hazards of consuming too much of agiven nutrient”4. However, it has been a decade sinceHealth Canada began a review of its discretionaryfortification policy and the proposed amendedreglautions are yet to be published in CanadaGazette I.

The Table on the next page lists a number of bever-ages and energy drinks that are currently not availablein Canada but based on current health and wellnessand food purchasing trends, could be popular amongCanadian consumers.

86 per cent of Canadianconsumers are concerned aboutincreasing their energy levelsin order to maintain or gain anactive and healthy lifestyle.3


Beverages and Energy Drinks Currently Not Available in Canada

Coca Cola Company:Diet Coke Plus

Coca Cola Company:Dasani Plus

DDO: FullProtein energy drink

Ocean Spray: Cranergy EnergyJuice Drink

A sparkling, calorie-free beveragewith vitamins B3, B6, and B12,and the minerals zinc andmagnesium.

Vitamin enhancedflavoured water

The world’s first egg-white drink.An energy drink for athletes.

Cranberry juice enhanced withgreen tea extract and Vitamin B.

US (2007)

United States

PortugalSpainUK

United States

Three flavours:

Refresh & Revive:Vitamins B3, B6, B12

Cleanse & Restore:Vitamins E,B3, B6, B12,1g fibre

Defend & Protect:Vitamin E, Zinc

This product is currently not avail-able in Canada because OceanSpray is currently investigatinghow to apply for a Natural HealthProduct Number




up to 100 calories, raise metabolism and providesustained energy for up to three hours. The drinkcontains a unique blend of natural ingredients such asgreen tea with EGCG, ginger, calcium, chromium, Bvitamins and vitamin C. It is proving very successfulin the United States and won the 2007 Global BeverageInnovation Award in Madrid, Spain for the Best NewFunctional Drink.

Kellogg’s Special K2O Protein WaterKellogg’s has developed flavouredwater that contains 5g of protein in a16 oz. bottle in order to manage hunger.Kellogg’s is targeting those consumersinterested in weight management andhas come out with a whole line ofprotein-fortified products, includingsnack bars. This product was released in the UnitedStates in 2006, and Kellogg’s then released singleserve packets in 2007. The packages of the variousflavours state: “Takes the edge off hunger” and “Feelfull longer”. These drinks also contain a combinationof calcium and B vitamins. Currently, this product isnot available in Canada.

Essensis Yogurt, DanoneDanone has introduced anumber of products inrecent years that have theadded benefit of some healthattributes, most notably Activia yogurt enhanced withprobiotics. In 2007, Danone launched a yogurt aimedat beauty. Essensis is marketed to nourish skin fromthe inside and prevent skin dehydration. It contains acombination of probiotics, antioxidants, green tea,omega-6 fatty acids from borage oil and vitamin Ecalled the Pronutris Complex. Again, this is an exampleof an innovative food company meeting consumerdemand for foods that are cosmetically beneficial.

Weight Management and Body ImageThe top six health and wellness concerns of Canadianconsumers are rounded out by weight managementand body image concerns. According to the Nielsenresearch, 29 per cent of Canadian consumers exerciseportion control as a way to manage weight. Again,food manufacturers have kept on top of consumertrends and have developed a variety of food andbeverage products to help mitigate hunger, burncalories and fat, and prevent skin dehydration, toname a few. However, due to Canada’s antiquatedregulatory system, many of these products are notavailable in Canada.

The following are just some innovative food andbeverage products that contribute to weight manage-ment and body image.

NaturlineaCorporación Ali-mentaria Peñasanta(CAPSA), a Spanishdairy group, was thefirst company tolaunch dairyproducts with added conjugated linoleic acid (CLA),under the Tonalin brand from Germany. CAPSA’srange of dairy products includes milk, yogurt anddaily-dose yogurt drinks that are marketed with aclaim to inhibit body fat formation and encouragethe breakdown of body fat. CAPSA launched theseproducts in 2004, and in two years brand salesreached $60 million (US) in Spain alone.

Celsius, Sparkling BeverageCelsius Inc., an innovative sportsnutrition company from theUnited States, markets Celsius asthe “original calorie burningsparkling beverage”. The drink ismarketed with a claim to burn


Missing Food Packaging Messages in CanadaIn 1992, a National Institute of Nutrition study onconsumer use and understanding of nutrition foundthat health claims were a keyelement that influenced prod-uct choice of consumers whenhealth issues were a concern.Health claims have becomeeven more important in thelast decade due to the growthin the availability of functionalfoods and consumers lookingto attain health from foods. Therefore, manufacturerswant the ability to communicate the benefits offood products to consumers.

To date, Canada has approved only five science-baseddisease risk reduction health claims. As a result of arecent review of health claims in other jurisdictions,Health Canada is looking to approve two more. TheUS, by comparison, has approved twelve healthclaims. The following are only a few examples ofthe different messages that can be used on packagedfoods in the United States and other countries, butare limited in Canada.

Oatmeal/Oat bran and Heart HealthA popular health claim in the United States relates tooat (bran, meal, whole oat flour) intake and reducedrisk of coronary heart disease. This claim has been wellsubstantiated in the scientific literature, was the firstapproved health claim for specific foods and has beenapproved in the United States since 1998. The claimstates that “soluble fibre from oatmeal, as part of a lowsaturated fat, low cholesterol diet, may reduce therisk of heart disease.”

Similar health claims have been approved in severalEuropean countries with respect to oats and cholesterolreduction, including in the United Kingdom, Sweden,

Finland and the Netherlands.Finland was the first countryto recognize the cholesterollowering ability of oats – itsclaim states “soluble fibre helpsto control blood cholesterol.X amount of oat bran/rolledoats is rich in soluble fibre”.

In Canada, however, manufacturers have beenlimited in their ability to make health claims on oatproducts in particular and their benefits in reducingheart disease.

Products that Contain Oat andHeart Disease ClaimsProbiotics and Gut Health/DigestionThe inclusion of probiotics in food products has reallytaken off and demand for these products will continueto grow as awareness of their health benefits increases.Some of the proven benefits include immune stimu-lation, enhancement of bowel mobility, and thereduction of inflammatory or allergic reactions.

In the United States, there are no approved healthclaims for probiotics yet, but manufacturers canpromote their benefits on food packages throughstructure/function claims, qualified health claims orsignificant scientific agreement claims. A structure/function claim describes the role of an ingredient,such as probiotics, intended to affect the normalstructure or functioning of the body. These claimsdo not require FDA pre-approval but scientificsubstantiation by the manufacturer is required.Products containing probiotics in the United Statescan include statements such as “Supports ImmuneFunction” or “Supports Healthy Intestinal Balance”,whereas in Canada, these statements are not allowed.

health claims were a keyelement that influenced productchoice of consumers whenhealth issues were a concern


1 Australian Heart Foundation. 2007. Position Statement: Questions and Answers. Australian Heart Foundation.

2 Berger, A., Jones, P.J.H., & Abumweis, S.S. 2004. Plant Sterols: factors affecting their efficacy and safety as functional food ingredients. Lipids in Health andDisease. 3: 5. Retrieved from http://www.lipidworld.com/content/3/1/5 <http://www.lipidworld.com/content/3/1/5> , (May 7, 2008).

3 Nielsen PanelTrack Health and Wellness Survey, 2007

4 Health Canada. 2005a. Information Sheet – Food Fortification in Canada – Updating the Policy. Health Canada. Retrieved Jan. 10, 2008a from:http://www.hc-sc.gc.ca/fn-an/nutrition/vitamin/fortification_factsheet2-fiche2_e.html.

83

Through an analysis of the performance of Canada’sregulatory system compared to its competitors, alook at 12 actual cases, and a review of innovativeproducts and use of health claims that are notavailable in Canada, the study draws the followingkey conclusions:

• Canada is not competitive; our food regulatorysystem is far behind those of leading nationsin the world. There are substantial differencesbetween Canada’s regulatory system and thosein a number of other countries. Canada’s systemis less accountable and has more lags. The prob-lems exist in all three parts of the system – thelegislation, regulations and administration/

5 Conclusions and Recommendations

processes. As a result, timelines for approval ofinnovative products and the use of health claimsin Canada are much longer than those in theother jurisdictions.

• Canada’s regulatory system needs to bebrought into the 21st century. Canada’s systemneeds a legislative framework, as other countrieshave, that incorporates objectives for bothhealth protection and food innovation. Thiswould require regulators to explicitly considerthe balance between protecting the safety ofconsumers and responding to demand for new,healthful products.


Summary of Potential Direct, Indirect and Total Opportunity Costs

• The costs associated with Canada’s laggingsystem are very high and far-reaching. Twelvecase studies help to quantify the costs as a resultof the lagging system. The costs were categorizedinto direct costs, opportunity costs to the foodmanufacturing companies looking to developnew food products and/or market products withhealth claims, potential lost sales for retailersbecause of lack of product availability andpotential lost sales for primary producers.

Overall opportunity costs to the economy werealso examined; these losses include the food man-ufacturers and all upstream industries’ output(lost sales), wages and salaries, foregone taxes,and employment that would have been createddue to the economic activity. The costs along thewhole value chain are significant.

Estimated costs associated with the lags outlined injust 12 case studies are more than $440 million.

Note:

i) these figures are based on only 12 cases.There are likely many more cases experi-enced by each of the companies whoparticipated in the study, and many morecompanies who did not participate, whowould have similar experiences. It is clear thatif these results were extended to the entiresystem, the costs would be much higher.

ii) it is impossible to estimate all the costsbecause of the deleterious effects of theregulatory system on the underlyingstructure of the economy. When suppliersare continually penalized for innovation,they reduce investment in Canada, theyundertake less research and development,and they do not provide Canadians withproducts that could improve their health.



A $13,435,680 $17,629,764 $31,065,720 39 98 137

B $69,557,634 $91,270,756 $160,829,819 201 508 709

C $2,799,100 $3,672,868 $6,472,025 8 20 29

E $41,204,353 $54,066,710 $95,271,910 119 301 420

F 1 $1,092,981 $1,434,167 $2,527,170 3 8 11

G $31,676,589 $41,564,758 $73,241,998 91 231 323

H $8,696,874 $11,411,692 $20,108,745 25 64 89

J $14,824,104 $19,451,599 $34,276,007 43 108 151

K1 $3,147,881

L1 $12,602,334

TOTAL $200,013,720 $240,502,314 $440,519,799 529 1,338 1,869


85Conclusions and Recommendations

• Lack of commercialization opportunity fuelsthe decline of the sector. The lack of a modernadministrative and procedural infrastructure torespond effectively and efficiently to marketdemand creates a disincentive to commercializefood innovation in Canada and add value to theeconomy. At a time when Canada’s traditionalmanufacturing sector is in decline due to globaleconomic shifts and currency fluctuations, astrong food processing sector that is properlyincented to innovate in Canada could stem thetide of plant closures and job losses that areendemic to the wider manufacturing sector andappearing with greater frequency within the foodindustry as well.

• There is no evidence that the lags are the resultof measures to help improve the health andsafety of Canadians. The lags identified in thestudy do not relate to food safety componentsbut rather are the result of poor administrativeprocesses and lack of a framework for decision-making. This contributes additional costs anduncertainty to food suppliers, adds to the timeand cost for Canadians to obtain potentiallyhealthier products, and reduces investment inthe food industry.

The conclusions of this study are not new nor are theyconfined to this particular set of regulations. Manyother studies, including on other aspects of HealthCanada’s and CFIA regulations, from plant healthproducts to seed regulations, have drawn similarconclusions, for well over two decades.

Instead of adapting to today’s needs, the system hasbecome a growing burden on the Canadian industry,effectively dampening innovation and economic pros-perity, and cheating Canadian consumers and usersof inputs from access to the products that wouldallow them to improve their lot.

Canadian food law expert Ron Doering2 noted thatHealth Canada has discussed and consulted on the“improvement” and “modernization” of the regulatorysystem for years, through initiatives such as: SmartRegulation; Blueprint for Renewal: Transforming Canada’sApproach to Regulating Health Products and Food; Blueprintfor Renewal II: Modernizing Canada’s Regulatory System forHealth Products and Food; Towards a Regulatory Modern-ization Strategy for Food and Nutrition; and the newestManaging Health Claims for Foods in Canada: Towards aModernized Framework. Although the consultationsseem to move in the right direction there is littleevidence of any significant results. It is time to stepup the effort to reform the system.


RecommendationsThe following are recommendations:

• Establish the political will to urgently reformCanada’s food regulatory system. Appoint anexecutive at the highest level of government tooversee and champion the process.

• Re-write the legislation to incorporate:

• clear objectives so that regulators are givenguidance on what the public wants from itshealth regulatory system;

• an objective in the legislation to promoteefficiency in the food system, as Australia/New Zealand has; and

• the maximum length of time for regulatorsto make decisions and a requirement forthem to be accountable to Cabinet whenthe time line is exceeded.

The Cabinet Directive on Streamlining Regulationwas published in April 2007. This Directivereplaces the Government of Canada RegulatoryPolicy with a purpose to work “with Canadiansand other governments to ensure that its regu-latory activities result in the greatest overallbenefit to current and future generations ofCanadians”. This Directive applies to the devel-opment and amendment of regulations underthe authority of all federal departments andagencies. Along with protecting the health andsafety of Canadians, under the Directive, thegovernment must “create regulations throughinclusiveness, transparency, accountability” andpublic scrutiny and “require timeliness” and“promote a fair and competitive market economythat encourages entrepreneurship, investment andinnovation”. This Directive may help to improvethe environment for developing regulations andseems to be heading in the right direction butmay simply result in more consultations.

• If the legislation were amended, the regulationswould also need to be re-written to be compliant.The following are recommended improvementsto the regulations:

• Pursue administrative approval approachesfor food additives and health claims ratherthan lengthy regulatory amendments aftersafety has been assessed.

• Adjust the heavy reliance on the pre-marketassessment process and fully explore the useof regulatory procedures in other countriesthat do not have excessive requirements orhave tiered requirements, and assess howthey can be adopted to be used in Canada.This would relieve many of the regulatoryimpediments mentioned in this report.

• Given the regulatory system is so reliant onpre-market assessments, it requires a clearand transparent process and applicationrequirements. Substantial changes in admin-istrative procedures need to be made tospeed up and improve this process at HealthCanada, for example:

• Develop a comprehensive submissionguide for applicants to follow in devel-oping a submission (Draft GuidanceDocument – Management ofPre-Market Submissions is currentlyin the consultation phase).

• Hold meaningful pre-submissionconsultations with applicants with theintent of ensuring that applicantsunderstand the process and completetheir submissions with the right infor-mation for efficient decision-making.

• Adopt the legislated Australia/New Zealand policy that requiresregular communication with applicantsat each stage of the decision process.

87Conclusions and Recommendations

• Ensure efficiency by accepting crediblescientific reviews from other jurisdictionsas part of an application and/or utilizethird-party experts when resourceswithin Health Canada are limited.

• Hold regulators accountable for meetingtimelines. As already indicated, werecommend the legislation be amendedto hold the government accountable.This should become part of normalperformance evaluation withinHealth Canada.

• Develop performance indicators andconduct a self-assessment based on thoseindicators. Make Health Canada’sperformance on timelines and othermeasures public.

• Publish application decisions (positiveor negative) so that the industry canlearn from these experiences. Thiswould also ensure that decisions aremade consistently.


2 Doering, R. (2008). More Talk, No Action: Yet Another Health Canada consultation on health claims in announced. Food in Canada. January/February 2008.

Prepared for Food & Consumers Products of Canada by the George Morris Centre.

Report Authors: Kate Stiefelmeyer, Larry Martin, Maria KlimasGeorge Morris Centre

Guelph, Ontario

Fall, 2008

For more information contact Food & Consumer Products of Canada416-510-8024 www.fcpc.ca

Funding for this project was provided in part by Agriculture and Agri-Food Canada (AAFC) through the AgriculturalAdaptation Council’s CanAdvance Program. Opinions expressed in this document are those of Food & ConsumerProducts of Canada and not necessarily those of AAFC.

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