By Frédéric Bouchard and Denys Goulet
Here in Canada, there are limited distribution options for agrifood businesses. The grocery market is dominated primarily by five large retail distributors, making it challengingfor small Canadian suppliers to attract attention and place their products. If companies want to become financially and operationally sustainable, growth isn’t simply an option, it’s an imperative.
The challenge of how to grow is one that agrifood companies have wrestled with for a number of years. In Quebec — where, according to the Institut du Québec, 9.4 per cent of GDP comes from agrifood — a number of companies have addressed the unique challenges posed by the Canadian market and shown that their organizations are capable of national and international growth.
The experience of agrifood businesses in Quebec led PwC to release the second edition of Saveurs in Winter 2017 — a report that shares the perspectives of a number of Quebec-based agrifood industry CEOs. The insights gathered from these CEOs reflect a keen knowledge of what it takes to succeed in the Canadian food and beverage industry today:
> Growth without compromise
“Survival depends on growth,” says Exceldor CEO René Proulx, but organic growth can only take companies so far. Mergers and Acquisitions (M&As) can be important growth tools if companies recognize that growth for the sake of growth isn’t enough; M&As should also create value. Companies need to evaluate this value, in addition to whether a target aligns with its corporate culture and long-term strategic plan. Culture clashes can easily cause M&As to fail, regardless of identified operational compatibilities.
> The power of knowledge
In the food and beverage industry, success is often driven by an unparalleled knowledge of consumer interests and evolving trends. The explosive growth of a number of companies focused on organic, environmentally responsible and local food products is a prime example. “More and more, consumers are holding companies that take a holistic approach in high regard,” explains Marie-Josée Richer, co-founder and vice-president, Marketing, Prana BioVegan. “If the consumers are there, business will follow.”
> Innovation beyond products
To achieve long-term success, Canadian companies must continue to innovate and remain agile enough to adjust to new market challenges as they arise, such as the opening of a previously regulated market. “You just have to keep on reinventing and differentiating yourself,” explains Jean Gattuso, president and COO of Lassonde Industries. When thinking about innovation, Canadian agrifood businesses also need to look beyond their products. Innovations in production processes, distribution channels and communications mechanisms can also help companies establish a more sustainable path to growth.
> Quality over the bottom line
Regardless of a company’s growth strategy, Canadian suppliers should maintain a steadfast focus on product quality if they want to succeed long term. For new entrepreneurs or small companies looking to grow, Pat De Marco, president of Viau Food, offers a simple, if difficult to execute, piece of advice: “Make sure you have a quality product that stands out from the competition.” A high-quality product should be a basic building block when it comes to creating a platform for growth.
> Responding to the growth imperative
The reality is that growth and successare never guaranteed. However, if agrifood companies understand their customers, provide high-quality products, constantly focus on innovation, and don’t compromise their culture as they grow, they will be in a strong position to excel.
Frédéric Bouchard is a Montreal-based Corporate Finance partner with PwC Canada and Denys Goulet is a Valuation,Modelling and Disputes partner within PwC Canada’s Montréal and Québec City offices. They can be reached at [email protected] and [email protected] To read more about growth in Quebec’s agrifood sector, explore the latest edition of Saveurs (www.pwc.com/ca/food), PwC’s publication featuring interviews with agribusiness leaders.
This article appeared in the print issue:January/February 2017 edition, Ask the Expert section