Canadian food companies are falling behind competitors in other countries because they are failing to innovate, says a new report from the Conference Board of Canada.

“When it comes to innovation, the Canadian food industry is content to compete for a bronze medal,” says Daniel Munro, a researcher with the board’s Centre for Food in Canada.

“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.”

The report comes on the heels of another recent gloomy assessment of the food-processing sector by the Canadian Agri-Food Policy Institute. It warned that despite being an agriculture powerhouse, Canada is losing ground as a supplier of food products to the rest of the world and noted that the country imported $6.3 billion more in food products and beverages than it exported in 2011. Back in 2004, the deficit in food products was $1 billion.

The conference board survey found a reason for that — most Canadian firms in the food industry said they aren’t making it a priority to develop new products or find better ways of producing them.

The food industry, one of the largest employers in Canada, invests less in research than other manufacturing sectors, said Munro. At the same time, governments have reduced agriculture research and development spending during the last two decades.

“This combination of low investment in research and a low priority placed on innovation is contributing to Canada’s shrinking global presence,” Munro added. “Between 2000 and 2010, Canada’s share of global food and drink exports dropped from 4.2 per cent to 3.2 per cent before recovering in 2011, when the share rose to 3.9 per cent.”

Food & Consumer Products of Canada, which represents some large food companies, said the report “highlights the fact that there are some serious challenges facing our industry,” but insisted food manufacturers are “working hard to bring new, innovative product options to store shelves, though they continue to face challenges.”

Part of the problem is an out-of-date regulatory system, said spokesman Adam Grachnik.

This hampers attempts to find new markets for Canadian food products, and government also needs to provide “better support mechanisms for companies looking to develop new markets,” he said.

“We do believe that Canada has the opportunity to be a world leader in the manufacturing of food, beverage and consumer products because we have some of the best agriculture land in the world, fresh water, an educated workforce and a stable economy,” said Grachnik. “What we need now is a continued and strong push by the federal government to build on the inroads that have begun.”

The head of the Food Processors of Canada said better support programs are needed, but said the regulatory issue is more of a political matter.

“The whole notion that Canada has a regulatory problem arises from American businesses that want to photocopy American regulations and work from those,” said president of the Food Processors of Canada, Christopher Kyte.

Munro identified a number of ways to increase sales of Canadian foods abroad, including focusing on niche, emerging and fast-growing markets; improving co-operation between producers, processors and retailers to reduce wastage and improve food quality and safety; and boosting overseas market access through better trade agreements.