Report: Canadian food industry falling behind in innovation

Ottawa, Ont. – A new study from the Conference Board of Canada’s Centre for Food in Canada says that our food industry is falling behind when it comes to innovation. As a result, it says, Canada is losing ground in the global export market for food and beverages.

The report, Competing for the Bronze, Innovation Performance in the Canadian Food Industry, says that most food companies don’t believe innovation is a priority. “When it comes to innovation, the Canadian food industry is content to compete for a bronze medal,” says Daniel Munro, principal research associate. “Canada’s food processors are not increasing — in fact, they are barely maintaining — global market share in the face of competition from established and new players.”

In the Centre for Food in Canada Industry Survey food companies were asked what would determine their success over the next five years. Only one third of respondents said that process or product innovation would be very or extremely important, while one quarter said that input innovation would be very or extremely important.

The report points out that research intensity in the food industry as a share of GDP is lower than both the business sector and the rest of the manufacturing sector. At the same time, public R&D spending in the agri-food industry has declined in the past two decades, while private funding has not made up the shortfall.

As a result, it says, Canada’s share of global exports of food and beverages declined from 4.2 per cent in 2000 to 3.2 per cent in 2010, before recovering to 3.9 per cent in 2011. Meanwhile, countries like China and Brazil are rapidly increasing their share of the market.

To help remedy the situation, the Conference Board recommends eight actions for business and government:

• Food businesses should gain domestic and international market share by creating new products for emerging and fast-growing markets.
• Small and medium enterprises should look to niche markets to increase their profits.
• Large retailers should increase their use of customer data to ensure their product innovations meet consumers’ demands.
• Retailers and food manufacturers should work together to clarify retailers’ expectations on product volumes, shelf fees, and food quality and safety to cut product innovation development wastage.
• Governments should promote more competition and export market access. More innovation could be stimulated by transitioning sheltered subsectors to fair but competitive environments.
• Governments should implement proposed changes to the Food and Drugs Act in a timely fashion to accelerate innovation in healthy food and food safety, and consider further changes to reduce regulatory barriers to food innovation while ensuring health and safety.
• Government funding for R&D should be better aligned with innovators’ financial needs.
• Governments should adjust regulation and use financial incentives to support and stimulate healthier and more environmentally sustainable food innovation.