Food In Canada

Under threat

May 1, 2019   Kristy Nudds

Despite recent government funding announcements, Canada’s food and beverage processing and manufacturing industry still have serious concerns over the future of the industry’s competitiveness.

In last month’s column, I highlighted how the federal government is sending mixed messages in terms of food production — it wants to meet the nutritional needs of Canadians, but is struggling to shed its legacy as a producer and exporter of agricultural commodities. Investment needs to be strategic, allowing the Canadian food processing industry to grow, be profitable, and increase food security.

A recently released report by the Food and Consumer Products of Canada (FCPC) shows that the food processing and manufacturing sector in Canada has been underperforming relative to other manufacturing sectors, and highlights unique challenges — many of which cannot be addressed simply by providing funds to upgrade equipment.

Using data from a customized survey of FCPC member companies, Statistics Canada and additional third-party public sources, the FCPC Industry Competitiveness and Sustainability Study assesses the financial performance, investments in innovation and infrastructure, as well as growth, employment and perception of industry challenges provided by survey respondents. The results point to a bleak future unless identified challenges are addressed.

According to the report, farm products and the price to transport them have been increasing faster than what food manufacturers can charge for their own products, and despite the low Canadian dollar value, Canada is a net importer of FPC goods from the U.S., As a result, the sector is growing an average of 1.45 per cent, far below the 2.12 per cent annual growth in Canada’s GDP.

The net profit margins for food manufacturers were also found to be among the lowest in the manufacturing sectors, which doesn’t bode well for future investments. The FCPC cites decisions by Heinz and Campbells to abandon manufacturing in Canada in favour of expansion in the U.S. as examples.

Any financial growth achieved is company-specific, the result of company mergers rather than real “organic” growth, the report says.

The report says “Canada is not a favourable environment for innovation in food, beverage, and consumer products manufacturing.” Respondents overwhelming agreed that Canada is too expensive due the “high everyday cost of doing business with retailers, high listing fees, high relative costs to manufacture new products, and a burdensome regulatory environment, which reduces the ability and incentives for companies to launch new products and increases the uncertainty surrounding investing in Canada.” Even when innovations are brought to market, they are not made in Canada; in 2017, 83 per cent of new SKUs were neither developed nor manufactured here.

Further confounding the industry’s willingness to invest in innovation are the many uncertainties around trade and exporting. The Canada U.S. Mexico Agreement (CUSMA), which many had expected would be finalized by now is not expected to be signed until later this year or early next year, and China keeps growing the list of Canadian agricultural products it will not accept.

As FCPC points out, food and beverage manufacturing accounts for 16.7 per cent of Canada’s total manufacturing jobs and purchases 40 per cent of Canada’s agricultural production.

It’s an election year, and every political stripe in the race needs to understand what’s at stake. It’s critical that the industry be proactive in getting the challenges outlined in this report on the policy agenda.


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