Behind Maple Leaf Foods’ bold call to become carbon neutral

By Sylvain Charlebois

Maple Leaf Foods is not just pretending to be environmentally friendly, it is trying to be a trailblazer in the wild kingdom of proteins. The company has just adopted science-based targets that will help it become the first major agrifood company in the world to be carbon neutral. Clearly motivated by the carbon tax and our collective acknowledgment that our planet needs help, the not-so-modest agrifood company is showing what environmental stewardship in agrifood should look like in the 21st century. It’s so un-Canadian to be first, to set a world standard, especially in agrifood. But the plan deserves credit. Maple Leaf Foods is going from being a Canadian iconic brand to a global player in proteins.

Coupled with this latest move is Maple Leaf Foods’ plan to change its structure, in the way it operates and serves markets. Maple Leaf Foods recently announced that it would create a separate division internally to develop its plant-based business, fully committing to vegetable proteins. Considering its announcement earlier this year that it is building a $300m plant in Indiana to support its plant-protein strategy, a change to its structure makes sense.

It was an interesting move for a company whose sales, for the most part, have historically been in Canada. It’s vegetable protein business does not even exceed $100m today, but is expected to grow significantly in years to come, and not just in Canada. In other words, this is where Maple Leaf Foods expects a good portion of its top-line growth to come from. Attaining plant-based product sales across the globe is Maple Leaf Foods’ gamble, and it is likely a wise one. The company owns the Canadian market – not much room for growth anymore – which is why it now needs to play a much broader game. And, most importantly, this new rejuvenated market focus will help make the company reach its target for carbon neutrality.

Now, Maple Leaf Foods, as one of the largest meat processors in the country, is not giving up on meat. Au contraire: it has reinvested in its meat operations to become more efficient. A new state-of-the-art chicken plant in is being built right now in London, Ontario. But the meat market these days is marred by abnormal erratic market conditions and unpredictable food safety risks.

In recent weeks, Chinese embargoes on Canadian pork have hit Maple Leaf Foods shares hard. Maple Leaf Foods’ latest quarterly results fell far short of expectations. Now that China is buying Canadian pork again, Maple Leaf Foods can breathe, but geopolitical risks remain. And food safety is making the meat business less attractive every day. Food recalls affecting meat in Canada are rampant. So far this year, we have seen over 800 Canadian-made meat products recalled by the Canadian Food Inspection Agency. That’s almost 3 products a day, on average. Consumers are not easily affected by recalls, especially Canadians. But an accumulation of food safety snags will take a toll on consumers’ perception of risks.

Maple Leaf Foods is becoming a completely different company. Its governance, its focus, everything is changing. When you look at their performance and how the company is managed, its recent decision to become carbon neutral should not come as a surprise to anyone.

Agrifood companies, especially Canadian ones, have a long tradition of being commodity-driven, with an emphasis on production technology, high volumes, and quality consistency. The fact that the agrifood sector is inherently a low margin business doesn’t help either. In the context of global hyper-competitivity, the ability to understand customer needs and adapt to a wider variety of customer situations will become crucial. In other words, Maple Leaf Foods, which has a been a supply-side obsessed company, is adopting a demand-chain management framework for its food products. It’s market emphasis is very different now. It is no longer about processing commodities and cutting costs, but more so about the continuous evaluation of perceived benefits by consumers. Market expectations are different, and therefore, Maple Leaf Foods is adapting.

The company is a well-known brand for Canadians, and it’s been like that for decades. What’s most interesting is that Maple Leaf Foods is clearly showing its will to listen to consumers, not necessarily just its customers per se. This transactional nuance for Maple Leaf Foods is not trivial. It sells its products to retailers like Loblaws, Sobeys and Metro, and not to consumers directly. Ads and merchandising ploys are all we have really seen from Maple Leaf Foods over the years. Focus groups and marketing research at the company meant that, for example, some products would be made natural only if the infrastructure permitted. This was the dominating paradigm back then.

Now, things are clearly different. In a demand-chain management environment, everything is on the table. When consumers become as critical to the company’s transactional relationship as its actual customers, a company’s structure changes and benefits, provided that the marketplace also changes. And that’s exactly what is happening at Maple Leaf Foods. The company’s goal to become carbon neutral should not be a surprise to anyone.