Threads Has Not Taken Off Because It Is Not a Game Changer

When it comes to plant-based alternatives, Canadians have never had so many options — and nowhere is that choice more abundantly clear than in the milk section of the dairy aisle.

To meet growing demand, companies are investing in new products and technology to keep up with consumer tastes and differentiate themselves from all the other players on the shelf.

“The product mix has just expanded so fast,” said Liza Amlani, co-founder of the Retail Strategy Group.

She said younger generations in particular are driving growth in the plant-based market as they are consuming less dairy and meat.

Commercial sales of dairy milk have been weakening for years, according to research firm Mintel, likely in part because of the rise of plant-based alternatives — even though many Canadians still drink dairy.

The No. 1 reason people opt for plant-based milk is because they see it as healthier than dairy, said Joel Gregoire, Mintel’s associate director for food and drink.

“Plant-based milk, the one thing about it — it’s not new. It’s been around for quite some time. It’s pretty established,” said Gregoire.

Because of that, it serves as an “entry point” for many consumers interested in plant-based alternatives to animal products, he said.

Plant-based milk consumption is expected to continue growing in the coming years, according to Mintel research, with more options available than ever and more consumers opting for a diet that includes both dairy and non-dairy milk.

A 2023 report by Ernst & Young for Protein Industries Canada projected that the plant-based dairy market will reach US$51.3 billion in 2035, at a compound annual growth rate of 9.5 per cent.

Because of this growth opportunity, even well-established dairy or plant-based companies are stepping up their game.

It’s been more than three decades since Saint-Hyacinthe, Que.-based Natura first launched a line of soy beverages. Over the years, the company has rolled out new products to meet rising demand, and earlier this year launched a line of oat beverages that it says are the only ones with a stamp of approval from Celiac Canada.

Competition is tough, said owner and founder Nick Feldman — especially from large American brands, which have the money to ensure their products hit shelves across the country.

Natura has kept growing, though, with a focus on using organic ingredients and localized production from raw materials.

“We’re maybe not appealing to the mass market, but we’re appealing to the natural consumer, to the organic consumer,” Feldman said.

Amlani said brands are increasingly advertising the simplicity of their ingredient lists. She’s also noticing more companies offering different kinds of products, such as coffee creamers.

Companies are also looking to stand out through eye-catching packaging and marketing, added Amlani, and by competing on price.

Besides all the companies competing for shelf space, there are many different kinds of plant-based milk consumers can choose from, such as almond, soy, oat, rice, hazelnut, macadamia, pea, coconut and hemp.

However, one alternative in particular has enjoyed a recent, rapid ascendance in popularity.

“I would say oat is the big up-and-coming product,” said Feldman.

Mintel’s report found the share of Canadians who say they buy oat milk has quadrupled between 2019 and 2023 (though almond is still the most popular).

“There seems to be a very nice marriage of coffee and oat milk,” said Feldman. “The flavour combination is excellent, better than any other non-dairy alternative.”

The beverage’s surge in popularity in cafés is a big part of why it’s ascending so quickly, said Gregoire — its texture and ability to froth makes it a good alternative for lattes and cappuccinos.

It’s also a good example of companies making a strong “use case” for yet another new entrant in a competitive market, he said.

Amid the long-standing brands and new entrants, there’s another — perhaps unexpected — group of players that has been increasingly investing in plant-based milk alternatives: dairy companies.

For example, Danone has owned the Silk and So Delicious brands since an acquisition in 2014, and long-standing U.S. dairy company HP Hood LLC launched Planet Oat in 2018.

Lactalis Canada also recently converted its facility in Sudbury, Ont., to manufacture its new plant-based Enjoy! brand, with beverages made from oats, almonds and hazelnuts.

“As an organization, we obviously follow consumer trends, and have seen the amount of interest in plant-based products, particularly fluid beverages,” said Mark Taylor, president and CEO of Lactalis Canada, whose parent company Lactalis is the largest dairy products company in the world.

The facility was a milk processing plant for six decades, until Lactalis Canada began renovating it in 2022. It now manufactures not only the new brand, but also the company’s existing Sensational Soy brand, and is the company’s first dedicated plant-based facility.

“We’re predominantly a dairy company, and we’ll always predominantly be a dairy company, but we see these products as complementary,” said Taylor.

It makes sense that major dairy companies want to get in on plant-based milk, said Gregoire. The dairy business is large — a “cash cow,” if you will — but not really growing, while plant-based products are seeing a boom.

“If I’m looking for avenues of growth, I don’t want to be left behind,” he said.

Gregoire said there’s a potential for consumers to get confused with so many options, which is why it’s so important for brands to find a way to differentiate themselves, whether it’s with taste, health, or how well the drink froths for a latte.

Competition in a more crowded market is challenging, but Taylor believes it results in better products for consumers.

“It keeps you sharp, and it forces you to be really good at what you’re doing. It drives innovation,” he said.

This report by The Canadian Press was first published Sept. 15, 2024.

Economists anticipate that Canada’s annual inflation rate in August fell to its lowest level since March 2021.

Ahead of Statistics Canada’s consumer price index set to be released on Tuesday, economists polled by Reuters are expecting the report to show prices rose 2.1 per cent from a year ago, down from a 2.5 per cent annual gain in July. The forecasters also anticipate inflation remained flat on a month-over-month basis.

“Unless there’s something lurking out there that we’re not aware of, it looks like we’re headed for a pretty favourable reading,” said BMO chief economist Douglas Porter.

RBC economists Nathan Janzen and Claire Fan said in a report last week that those expectations would put the headline inflation rate just a hair over the Bank of Canada’s two per cent inflation target.

“Most of that August slowing is expected from a pullback in gasoline prices, but the (Bank of Canada’s) preferred core CPI measures are also expected to trend lower, with the closely-watched three-month annualized growth rate easing from an average of 2.6 per cent in July,” the RBC economists said.

The continued progress on slowing inflation comes as the central bank has signalled a willingness to speed up cuts to its key lending rate if circumstances warrant.

The Bank of Canada reduced its key lending rate by a quarter-percentage point earlier this month — the third consecutive cut — to 4.25 per cent. Governor Tiff Macklem said the decision was motivated by falling inflation, noting if the CPI moving forward “was significantly weaker than we expected … it could be appropriate to take a bigger step, something bigger than 25 basis points.”

On the other hand, Macklem said if inflation is stronger than expected, the bank could slow the pace of rate cuts.

Inflation has remained below three per cent since January and fears of price growth reaccelerating have diminished as the economy has weakened.

Porter said despite progress on the inflation rate, it’s still “not in a place where it’s a compelling argument that the bank has to go even faster.”

He forecasts the central bank will cut its key lending rate by a quarter-percentage point at every meeting until July 2025, bringing it down to 2.5 per cent by that time. That prediction also comes after data released last week that showed Canada’s unemployment rate rose to 6.6 per cent in August from 6.4 per cent in July.

However, Porter said it’s possible the bank could speed up its rate cutting cycle if inflation continues easing.

“If we’re going to be wrong, it’s that we’re going to get to 2.5 per cent even more quickly and possibly lower than that,” said Porter.

“There is a case to be made that if the economy were to weaken further, there’s little reason for the bank to keep rates in what they consider to be the neutral zone. They could go below that.”

Shelter costs have remained the main driver of inflation as Canadians face high rents and mortgage payments. Porter noted that when factoring out housing costs, inflation in both Canada and U.S. is hovering slightly above one per cent.

“So really, the only thing keeping Canadian inflation above two per cent is shelter and it does look like shelter costs are probably going to fade,” he said.

“It looks as if rents are starting to moderate. They’re not necessarily falling, but not rising as quickly. And of course with interest rates coming down, ultimately the big kahuna here, mortgage interest costs, will recede as well.”

With the U.S. Federal Reserve set to meet on Wednesday, Janzen and Fan said they expect the American central bank to announce its first rate cut in four years.

“Gradual but persistent labour market softening and slowing inflation make it clear that current high interest rates are no longer needed,” they wrote.

“We think governor (Jerome) Powell’s comments will likely stay on the cautious side — hinting at future rate cuts without committing to a pre-determined path to allow for more flexibility in future decisions.”

—With files from Nojoud Al Mallees in Ottawa

This report by The Canadian Press was first published Sept. 15, 2024.

The Canadian Press. All rights reserved.

MONTREAL – Passengers with plans to fly on Canada’s largest airline can breathe a sigh of relief after Air Canada said Sunday it has reached a tentative agreement with the union representing more than 5,200 of its pilots.

The news of a preliminary deal with the Air Line Pilots Association came shortly after midnight on Sunday when the airline issued a press release just days ahead of a potential work stoppage for Air Canada and Air Canada Rouge.

The tentative deal averts a strike or lockout that could have begun on Wednesday, with flight cancellations expected before then.

“The new agreement recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline,” the carrier said in the statement.

It said Air Canada and Air Canada Rouge will continue to operate as normal while union members vote on the tentative four-year contract.

It said the terms of the new deal will remain confidential pending a ratification vote by the membership, expected to be completed over the next month, and approval by Air Canada’s board of directors.

ALPA issued a statement after midnight Sunday, saying if ratified, the tentative agreement will generate an approximate additional $1.9 billion of value for Air Canada pilots over the course of the agreement.

First Officer Charlene Hudy, chair of the Air Canada ALPA MEC, says in a Sunday statement, “The consistent engagement and unified determination of our pilots have been the catalyst for achieving this contract.” She added that progress was made on several key issues including compensation, retirement, and work rules.

The airline said customers who changed flights originally scheduled from between Sunday and Sept. 23 under its labour disruption plan can change their booking back to their original flight in the same cabin at no cost, providing there is space available.

In the lead-up to Sunday’s deadline to issue notice of a stoppage, the two sides said they remained far apart on the issue of pay, which was central in the negotiations that had stretched for more than a year.

The pilots’ union argued Air Canada continues to post record profits while expecting pilots to accept below-market compensation. It had also said about a quarter of pilots report taking on second jobs, with about 80 per cent of those doing so out of necessity.

The airline had said it has offered salary increases of more than 30 per cent over four years, plus improvements to benefits, and said the union was being inflexible with “unreasonable wage demands.”

Air Canada and numerous business groups had called on the government to intervene in the matter, including the Canadian Federation of Independent Business and the Canadian and U.S. Chambers of Commerce.

“The Government of Canada must take swift action to avoid another labour disruption that negatively impacts cross-border travel and trade, a damaging outcome for both people and businesses,” said the chambers and the Business Council of Canada in a statement Friday.

The union had called for the opposite approach, with Association President Capt. Tim Perry issuing a Friday statement asking Ottawa to respect workers’ collective rights and refrain from getting involved in the bargaining process. He said the government intervention violates the constitutional rights and freedoms of Canadians.

For his part, Prime Minister Justin Trudeau had said it’s up to the two sides to hash out a deal.

Trudeau said Friday the government isn’t just going to step in and fix the issue, something it did promptly after both of Canada’s major railways saw lockouts in August and during a strike by WestJet mechanics on the Canada Day long weekend.

He said the government respects the right to strike and would only intervene if it became clear no negotiated agreement was possible.

Air Canada had already begun preparing for a possible shutdown, saying its cargo service had stopped accepting items such as perishables and indicating a wind-down plan for passenger flights would take effect if a notice of a strike or lockout was issued.

The tentative deal averts travel disruptions for the 670 daily flights on average operated by Air Canada and Air Canada Rouge, and the travel of more than 110,000 passengers.

This report from The Canadian Press was first published Sept. 15, 2024.

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