Over the past several articles we have looked at consumer trends, the key drivers of our national food strategy, and how they are affecting the various food and beverage sectors, or “business units” as I prefer to refer to them.
I now want to step up a bit and apply some traditional types of strategic planning analyses to the entire Canadian food sector, or Canada Food Inc. as I refer to it. These analyses are a PEST Analysis, a 5 Forces Analysis, and a SWOT Analysis. I will stay at a fairly high level on these, because I am not an expert in all areas, but I do think that if the “Management Team” of Canada Food Inc. were to take this on, many benefits would ensue. And maybe that Management Team could be the Chairs of the various Sector Value Chain Roundtables that exist on a national level, but they would need to work together as a team to accomplish this.
So what is a PEST Analysis? Well, it looks at what is happening in the macro-environment that may impact our industry, and it includes political/regulatory factors, economic factors, social/demographic factors, and technological factors, and I would say that today there is a second E, namely environmental factors resulting from climate change, increasing population, and the resulting impacts.
Some of the Political/Regulatory factors that are/could affect our food industry are: the level of government intervention in the economy; the increasing number of international trade agreements; lower levels of trade protection and regulations specific to the food industry; and how the evolving environmental status and resulting regulations will impact.
There are some possible impacts from all of these, both good and bad. The new international trade deals could result in our industry’s ability to export more processed products to export markets, both developed and developing markets. However, this could be offset by a larger number of imports from those markets. Again, this says that we must understand the global markets, whether the E.U., East Asia, South Asia, wherever, and figure out where we have opportunities and where there are key challenges from imports. This will vary from sector to sector, but we all need to understand what those differences are and why they exist so that we can put focus where it needs to be with strategic support from all of Canada Food Inc.
The treaties may also lead to more global harmonization of regulations related to food, such as what has happened with the Global Food Safety Initiative (GFSI). But there will also likely be an increased demand for global traceability of products and their attributes. So there are some pluses and some minuses in the political/regulatory area. We need to ensure that the largest sector of the economy benefits.
As to Economic factors, the leveling of growth rates in developed markets and increasing growth rates and higher levels of disposable incomes in developing markets will also have some effects. This, coupled with increased investment in production infrastructure in developing economies, will put more pressure on Canadian food companies and may lead to more plant closings and moving of production to developing economies, and we have already seen some of this.
We are, I hope you will agree, past the major impacts of the 2008 recession, but it did have its impact on Canada Food Inc., with plant closures and consolidations leading to production moves to, for example, the U.S., and less investment both in plants as well as machinery and equipment upgrades.
So, again, there are both pluses and minuses associated with the Economic area, but in my mind, it speaks to finding ways to improve productivity within the Canadian food sectors and creating incentives to invest in Canada, and I do mean throughout the entire sector’s value chains.
As to Social/Demographic factors, the consumer trends I have spoken of, particularly the Foodies, the Healthies, and to some extent, the Greenies, are leading to some extent to a differentiation approach to product development, and a building trend towards premiumization. This could lead to a somewhat more secure domestic market and more trade opportunities if we can get the Canada Brand recognized as meeting those market demands. In general, the consumer focus on more health consciousness, the environment, food safety, and so on will continue to grow with the aging of the boomers and the emergence of the millennials. Plus, the increasing ethnic diversity in Canada will lead to more specialty items, and is a huge factor for the entire food industry.
So, I think the evolving social and demographic factors can be seen, overall, as an opportunity for Canada Food Inc.
The Technical/Environmental factors are, I believe, generally in our favour. We have a strong food science and agronomy infrastructure in our universities, technology centres, and in food companies. That can be a big plus for us in terms of improving the innovation that can be applied to food products, our ability to improve productivity along the production value chains in each sector by improving margins, reducing waste, etc. In addition, this will be a key factor in improving our performance in the environmental and social responsibility areas. But, we must focus on making the “innovation value chain” from university researchers, to commercialization organizations and suppliers, through to food processors and retailers/foodservice operators, or our skills in these areas will not be fully utilized.
However, there is a growing mistrust among consumers of new technologies related to foods, GMOs for example. To offset this, we need to make a stronger effort to educate consumers on these new technologies and explain them in such a way that they are accepted; something we don’t do enough of at this time.
I would say that the technical and environmental factors are strengths for our industry that we can better capitalize on within the image of the Canada Brand for food and beverages.
So, overall, I think the PEST Analysis reflects somewhat favourably on Canada Food Inc.
In the next article I will talk a bit about the 5 Forces impacting our sector.
Gary Fread is president of Fread & Associates Ltd., consultants to the food industry. He has spent 25 years in management positions in the food processing industry, with a background in sales, logistics, purchasing and technical areas. He has worked with Procter & Gamble, Campbell Soup and Morrison Lamothe, and is the past president and CEO of the Guelph Food Technology Centre. He is active in many food industry associations and organizations, serving on the boards of several. Contact him at [email protected]