Setting the table for a homegrown value-added food sector
The bloodbath in foreign-owned, large-scale food manufacturing in Canada continues. Canadian value-added food producers need to fill the gap.
In the past few days, we've learned that two foreign-owned plants, employing almost 600 highly-paid workers altogether, are closing: Dr. Oetker in Grand Falls, N.B., and Campbell Soup Co. in Toronto. Canada may have lost 30,000 or more similar positions in food manufacturing in a decade, so it's not a new shift.
In both recent cases, the plants were ancient and in dire need of a retrofit. Instead, the companies opted to consolidate assets and have products manufactured at more modern facilities, primarily in the United States. They never intended to reinvest to modernize the plants. The use of better automation and robotics could have helped, but instead the facilities were left to rot.
Ontario and other provinces have countless aging plants, owned by foreign companies, and in need of a significant influx of capital to remain in compliance with modern standards of food safety and product advancement. So don't be surprised to see more such closures.
Canada is now paying for years of foreign control in the food manufacturing sector. It's not personal, it's just business.
Major brands, often seen as symbols of out-of-touch food corporations, are becoming an endangered species. Every week, major brands, historically more expensive than private label food products, are marked down. Price points are much cheaper due to more attractive prices on store-owned labels. As well, many consumers, starting with millennials, are moving away from major brands.
More and more people are looking for organic, multicultural foods - hardly concepts mega-enterprises have been associated with, at least until recently.
The pace of this shift is spectacular. We're seeing more consolidation in food processing around the world because consumers in the western world want something different, natural and local. Many well-known brands don't resonate with people looking for value-based brands.
Keurig Green Mountain, the maker of coffee pod machines, plans to purchase the Dr Pepper Snapple Group in a massive $18.7-billion transaction. The portfolio of the new company will vary from coffee to soft drinks. This deal is really about allowing major brands to remain competitive.
Brand equity, which has ruled grocery aisles for decades, is becoming an afterthought. Margins must be better managed and merchandising strategies need to be reinvented. Consequently, it's important to become bigger and more resourceful.
Most Canadians don't appreciate that food processing is the second largest manufacturing industry in Canada, in terms of value of production, with shipments worth $112.4 billion last year and employing more than 250,000 people.
This massive sector has flown under the radar for decades. As a result, the sector has just created Food & Beverage Canada to give processors a voice.
Without a vibrant manufacturing industry, Canada's agri-food sector can't prosper. Food manufacturing has a multiplier effect on growth.
Growing commodities helps rural economies and small to medium-sized businesses. It's what Canadians know best. But given how the world is changing, it's no longer enough.
For years, we've been reliant on foreign brands to offer job opportunities in small communities. Most of these brands, however, are American.
Canadian value-added food brands have never been fully exploited. That's a missed opportunity. But things are slowly shifting as Canadian food processing finds its mojo. The Agri-Food Innovation Centre at the University of Saskatchewan has just opened, to support the sector's will to diversify and launch new businesses. Many incubator and accelerator programs in Toronto, Montreal, Halifax and elsewhere have been launched to create agri-tech companies, which focus on providing more value-added products to the market, domestically and abroad. Quebec has a new market access program to support companies looking for markets.
It's no longer just about spreading money across the agri-food continuum. Scalability and the capacity to generate significant economic activity throughout the country are becoming priorities for stakeholders in government and industry.
Becoming a world-class agri-food giant involves building an ample food processing sector. We also need to provide the sector with ways to mitigate against higher wages, restrictive trade rules and fluctuating currencies.
But it's apparent that many Canadians are finally getting the message, even as large foreign players pull out.