Manitoba’s food-processing sector could take a $100-million nose-dive by 2020 if challenges faced by two of its three biggest players — pork and potatoes — aren’t addressed soon.
That’s the worst-case or “business-as-usual” scenario laid out in a recent study by the Rural Development Institute (RDI) at Brandon University. Researchers gathered data from Statistics Canada and perspectives from industry leaders on the current and future state of food and beverage processing in the province.
The best-case or “effective-action” scenario sees the entire food-processing sector grow by nearly three-quarters of a billion dollars over the same time frame.
It can go either way, according to Food and Beverage Processing Industry – Growth Pathways to 2020 depending on what happens to “the big three” within the sector — pork, potatoes and canola.
The three commodities together account for 55 per cent of all annual sales in Manitoba’s food- and beverage-processing industry, or just over $2.58 billion in 2011. More than half those sales were exports.
The outlook for canola processing looks good, although it’s not expected to expand much beyond 2020, said Gillian Richards, RDI research associate and the lead researcher of the study.
“Canola is trucking along fairly nicely, in terms of tonnage, and processing at 100 per cent more or less capacity, and they seem happy,” she said. “They don’t have a shortage of stuff to process or a shortage of people to sell to.”
But pork and potatoes face significant challenges.
Sales of pork alone are projected to decline by $260 million in annual sales if no solution is found to end processors’ problems associated with operating at undercapacity, the report says.
Richards said the problems facing the industry run deeper than the moratorium on new hog barn construction imposed by the province. “It’s more complicated than that,” Richards said, adding that lack of investor confidence and financial support for reinvestment in hog barns construction is part of the sector’s difficulties too.
A business-as-usual scenario for potatoes is far more bleak, with sales declining of as much as 63 per cent anticipated between 2011 and 2020.
The worst-case or “business-as-usual” scenario projected for potatoes is a drop in annual sales of $270 million per year to 2020, the report says.
Potatoes problems relate to overall industry contraction from declining french fry consumption. Manitoba plants also are not as cost efficient as plants in other jurisdictions due to high cost of raw product compared to the U.S., the report said.
“Leaders in this area are saying dramatic changes are afoot,” said Bill Ashton, director of the RDI. “The clock is ticking on this one.”
It would be far worse if Manitoba’s food-processing sector wasn’t diversified, Ashton said.
Losses in pork and potatoes are offset by an uptick in growth in canola processing from $545 million in 2011 to $784 million by 2020, plus anticipated further growth of other types of food and beverage processing.
“This economy is supported, as it has been in the past, because of its diversification,” he said. “That’s what’s saving it. Instead of a $100-million loss, it could potentially be a $400-million or $500-million loss.”
The flip side of it all is that effective industry-government collaboration could turn this right around.
There’s potential for Manitoba’s food and beverage industry to be worth nearly $700 million more by 2020, if action is taken now, he said.
“The good news is, effective action now can result in growth across the industry, from $4.7 billion in 2011 to $5.4 billion by 2020.”
That means greater effort put into collaboration and common vision found between government and industry, the report says. “Effective action would also include greater effort to find growth potential in niche and specialty products for both export and serving the Manitoba market.
“We’re suggesting a strategic plan needs to work toward a solution,” Ashton said.
“There’s a difference between finding a solution and working toward a solution, versus simply arguing about what the issue is, and what your positions are on issues.”
Overall, Manitoba’s food- and beverage-processing industry sales were $4.7 billion in 2011, making a major contribution to the economy by accounting for 28 per cent of all manufacturing revenue in Manitoba, 15 per cent of all exports, and employing 12,000 people.
The report also projects outlooks for all other aspects of Manitoba’s food-processing sector, including other meats, vegetables, dairy and grain processing, dividing these into two subcategories including bulk ingredients and finished processed products.
Companies in these two categories generated 45 per cent of all food- and beverage-processing sales in Manitoba in 2011, exporting 20 per cent of its production with the remaining sales serving the Manitoba market. About 35 per cent of sales were supply-managed sectors.
The majority of these companies “target markets described by opinion leaders in terms of ‘Buy Local-Buy Manitoba,’ ‘made with natural ingredients’ and ‘specialty and niche markets,’” the report says. Startups in these types of businesses could add another $74 million in sales. But this area of food processing remains largely population dependent, the report cautions.