Food manufacturers’ contribution poorly recognized

A new report says food manufacturing in Canada needs 
more attention from government if it is to achieve its potential

Open cans of mushrooms.

Canada’s food-manufacturing industry shouldn’t be lumped in with agriculture when it comes to this country’s food policy development, a newly released study from the Ivey Business School says.

It’s the second-largest manufacturing sector, the leading employer and through the recent recession “proved to be remarkably resilient in both revenue and employment compared to other manufacturing industries,” notes the report by David Sparling and Erin Cheney.

“This is an industry that Canada has been able to count on for both GDP and jobs,” it adds. “While it may not be as exciting as high technology and aerospace, in a recession being steady and unexciting is something to get excited about.”

Yet it doesn’t get the attention it deserves from government.

“Although food manufacturing is important to Canada’s economy and farmers, it has received very little focus from policy-makers,” the Ivey report points out. “Attention needs to come, not only from agriculture and agri-food departments, but also from economic development, trade and industry-focused ministries. Food is intrinsically linked to agriculture, but the business of food is first and foremost a manufacturing and marketing industry.”

Government must give the sector the respect its economic position has earned it, the report continues. “Policies and resource allocations for food manufacturing should not be integrated with, and masked by, primary agriculture’s business risk management policies, which continue to be the primary focus of provincial and federal agri-food policy.

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The report said government policies must encourage exports with trade agreements and assistance to make food companies become more globally competitive and export ready. “Exports can also be supported through government trade programs and by creating regulatory regimes that are aligned and co-ordinated with those of major trading partners.”

The Ivey report was prepared in collaboration with the Canadian Agri-Food Policy Institute which is studying the state of the sector. In a recent analysis, CAPI pointed out that the food-manufacturing and beverage sector ran up a $6.8-billion trade deficit in 2013 largely led by increased wine and salsa imports and the closure of many foreign-owned food plants.

Chris Kyte, president of Food Processors of Canada, praised the efforts of CAPI and the Ivey Business School to shine a spotlight on the food industry. “We look forward to working with policy-makers to grow this industry to higher levels of performance.”

The report said food manufacturing could be a powerhouse industry for Canada with its access to farm products, large markets, transportation networks and a consistent track record. Economic conditions are moving in favour of the Canadian food-manufacturing industry, with the world slowly recovering from the recession and the Canadian dollar drifting lower.

“If Canada is to continue to reap the economic and employment benefits of a healthy food-manufacturing industry, government must take notice and act,” the report said.

One challenge facing the sector is its inability to improve its productivity in recent years “and that creates concerns over the ability of food manufacturers to compete in the long term,” the report noted.

The industry has been trying to reorganize “to be a strong player on the global stage and retain its competitiveness.” Between 2006 and 2014, 143 Canadian food plants closed resulting in projected losses of almost 24,000 jobs. Yet overall net employment in the industry remained the same. Ontario was hardest hit by closings while Quebec’s picture was more positive.

The report describes the closures as evidence “of an industry in transition rather than one in decline,” says David Sparling, chair of Agri-Food Innovation at the Ivey Business School. “Almost 90 per cent of closures occurred in multi-plant companies, largely the result of companies reorganizing and consolidating production in fewer large plants to achieve greater scale and efficiency. The results are leaner operations, higher productivity and stronger companies better equipped to compete.”

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