Some thoughts on value chains and roundtables
In recent articles I’ve talked about using the Value Chain Roundtables as the basis for developing a Canadian national food strategy and how that might work. Well, I’d like to make a few comments about the use of the roundtables for this work, and about the definition of value chains.
First, the roundtables’ membership is somewhat skewed to industry associations, although many of the roundtables do have some individual company members as well. In particular, the Food Processing Industry Roundtable (FPIRT) has a lot of company members. This is important if we are to make progress on strategy. The producer sectors are probably well represented by their associations. But the question becomes why would companies want their executives to spend the time to participate in the roundtables? Well, I think it should be clear. It is another means of making their companies more profitable and putting them in growth mode by helping their sector of the industry, and the entire food sector, become more profitable and grow.
Second, I spoke to the participation of the deputy ministers of agriculture and food from all of the provinces as acting as the “Board of Directors” for Canada Food Inc. Again, why would the provincial governments want these senior officials to spend the time on this? Well, the agri-food sector broadly is likely the largest economic sector of the Canadian economy. If I’m a politician and I can find a manageable means of growing such an important economic sector, I think I would want to do that. Yes, deputy minister, participate! Help us improve the province’s economy.
It seems to me that when I read on the Agriculture Canada website the approach that the roundtables are directed to take, it is a good fit with economic growth and is a natural setting for strategy development.
Third, how do we define a value chain? When I look at the membership of the various value chains, it is clear that they cover the growth and production aspects of the chains pretty well. That is, there are both primary and further food processors, growers and agriculture input industries to a certain extent as well. That is pretty good in that it probably adds up to about 50+ per cent of the Cost of Products Sold (COPS) to retailers. What about the rest of the cost? Well, it relates to inputs that are also significant to the sector’s success. Those include things like packaging (20 to 30 per cent of the COPS on average), energy (both electricity and natural gas), transportation and warehousing (the entire logistics sector), the machinery and equipment sector, and of course, labour. I believe that to get the maximum from developing and executing a strategy, all of these areas have to be included to some degree. They are key value chain elements.
And then there is the whole innovation value chain that includes not only the product developers who are key, but also academics who are always seeking new approaches to improve effectiveness, costs, or environmental performance and the commercialization centres. They, too, should be represented somehow.
The environmental impact of the agri-food sector must also be considered, and that could bring another element into play. How do we ensure less soil and water loss and contamination? Less greenhouse gas emissions? Less bio-waste generally and use more for bioenergy perhaps? And on and on. Is our paper packaging industry doing its best environmentally all the way back to the forestry industry (and by the way I do think it is)?
Anyway, I do think it is possible to create a true full value chain approach. It would just take our commitment to make it happen and to follow through on the strategies that emerge. I know we CAN do that. Let’s do it!
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]
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