A report published by Farm Credit Canada, updated in December 2012, titled Update on the North American Greenhouse Industry, states that the North American greenhouse vegetable industry operates in a dynamic market where growers must balance consumer demand for high-quality, low-cost vegetables with the need to keep their own operating costs in check.

Canada, Mexico and the U.S. will remain target markets for growers well into the future. The report states that Mexican competition challenges Canadian, and U.S. growers to compete against operators with advantages in labor costs, regulatory requirements and weather conditions. For example, in addition to high tech hydroponic greenhouses, Mexico's greenhouse vegetable industry also uses low-cost shade house construction, giving growers there a competitive advantage over field-grown production through improved water and pest management, an extended harvest and increased yields. Shadehouses are also more cost-efficient to operate than enclosed hydroponic greenhouse facilities.

With its recent rapid growth, Mexico's greenhouse vegetable production is now three times that of the rest of North America. But in recent years, greenhouse overbuilding in Mexico has led to the demise of some businesses. Overbuilding began as a result of previous government programs that provided grants for protected greenhouse vegetable construction. Some operators entered the sector without adequate production knowledge or marketing channels, and lacked realistic business plans or sufficient capital.

Canada's greenhouse vegetable sector has become a major player in the North American marketplace and now has a leading market in the U.S. Hydroponic greenhouse construction in the U.S. in on the rise, and much of that new construction is being done by Canadian greenhouse companies.

Canadian greenhouse companies have held firmly to their market even against competition. They have persisted through trade actions, energy crises, economic downturns, exchange rate fluctuations, food-safety issues and escalating input costs.

The Canadian greenhouse vegetable industry has succeeded because it is led by operators who, according to research by Zbeetnoff Agro-Environmental Consulting, are world leaders for several reasons. They effectively use integrated pest management and innovative greenhouse technologies as well as new technologies that improve their operations by increasing water and energy conservation. Canadian hydroponic greenhouse producers also grow superior quality specialty vegetables with higher flavor and color. And they have improved traceability and food-safety systems to meet the demand of today's buyers.

A review of Canadian, Mexican and U.S. vegetable markets points to the continued strong growth in demand for greenhouse vegetables, and likely at the expense of field grown vegetables. The increasing volume of greenhouse vegetable sales indicates that consumers are receptive to greenhouse products, and historical pricing patterns show that greenhouse produce continues to provide value that isn't always offered by field-grown alternatives. But it is also notable that hydroponic greenhouse production is, at least for now, limited in the number of crops that can effectively be produced, and at acceptable market prices.

The quality of field grown and low technology protected crops is good and continues to improve. But in what hydroponic greenhouses do produce, primarily tomatoes, cucumbers and peppers, they match the quality of even the highest quality field-grown products.

Production timing further differentiates greenhouse products in the marketplace. Greenhouses provide more protection and controlled growing environments than are possible in field grown conditions, which are susceptible to climate changes and other unpredictable weather conditions.

The hydroponic greenhouse sector is gaining a reputation for highly effective food safety protocols and outstanding reliability. For a growing number of food industry distributors and retailers, the costs associated with weather disruptions, food safety issues, customer requirements and recalls in field agriculture are simply too expensive. As a result, they're adopting zero-tolerance approaches to risk in their procurement strategies.

Still, the price for which greenhouse products can be sold in relation to the field-grown competition remains a determining factor for consumers, and although demand has increased, prices per kilogram or pound of greenhouse vegetables are declining as a result of stiffer competition from both imported and field-grown vegetable growers.

Over the last decade, the greenhouse sector has profitably employed marketing strategies such as increasing its product mix and developing year round supply relationships and alliances, leading growers and distributors to consolidate to service large retailers. Canadian greenhouse growers have taken significant steps in trialing new varieties, growing proprietary varieties and diversifying into new products. Consumers continue to show interest in organic greenhouse vegetable production and some are prepared to pay a premium for these products.

Local produce is increasingly well received, and even demanded by consumers and foodservice operators who perceive it to be better quality, and they are committed to supporting companies in their local communities. Today's smaller-scale greenhouse operations have significant opportunities to capitalize on this by supplying niche markets and regional populations that larger operations can't accommodate. Niche markets are increasing as growers implement marketing strategies focused on providing what consumers want: local origin, taste and color appeal, smaller sized produce and packaging and convenience.

Farm Credit Canada's report suggests that, in the near future, quality-driven production will be a requirement for all competitors. Increasing supply chain integration and building business-to-business relationships are proven methods of acquiring and keeping markets.

Several operations in British Columbia, Ontario and other Canadian provinces have opened facilities in the U.S. to increase their winter production, decrease shipping and energy costs and take advantage of the 'Grown in the USA' label. Distributors in Canada have and continue to contract with Mexican hydroponic growers to obtain greater volumes and increase their ability to offer products year round. This, in turn, allows them to further increase their presence in the U.S. market.