What do customers want when they buy Canadian wheat? Cereals Canada and the Canadian International Grains Institute (Cigi) recently commissioned an internationally renowned market research firm, LMC International, to answer this question.
Why should you care about the answer? Because it will impact your future bottom line. And because your checkoff dollars may be going to go to support the industry’s response.
One of the foundational findings in the LMC report is that Canadian wheat faces a significant freight disadvantage when compared with the rest of the world. This is not a surprise. Canada does not have a Mississippi River system. We don’t have our production areas clustered within trucking distance of our ports like Australia or the Black Sea region. It is 1,700 km from the middle of Saskatchewan to either the West Coast or Thunder Bay. We can’t change our geography.
We know that Canada will almost always be at a freight disadvantage and therefore a step behind in price-sensitive markets. This means our wheat has to compete on more than just price.
LMC found that the Canadian wheat brand is known for superior protein content and quality, consistency and cleanliness (small dockage and a small amount of “other” grain). This is especially true for Canadian Western Red Spring (CWRS) and durum wheat.
Customers paying more for a branded product is the good news. But while our reputation as a consistent supplier is strong, it has taken a hit in recent years. Consider the transportation crisis of 2013-14. Canada simply cannot afford to see this crisis recur.
The countries where Canadian wheat is differentiated (or branded) are important to a farmer’s bottom line. These include long-standing customers like Canada, U.S. and Japan for CWRS or North Africa for durum. The Canadian value chain needs to take the steps necessary to ensure that we keep these customers happy. This is another point emphasized in the LMC research. Current action includes steps that have resulted in a recovery of CWRS gluten strength and measures that will keep this key quality parameter at levels that good customers have come to expect.
The LMC report also tells us that these strong traditional markets for Canadian wheat and durum are not growth opportunities. So if the Canadian wheat industry wants to grow — and we all want to see growth — we are going to have to do more than just preserve today’s customers.
The growth opportunities are in West Africa, South America, south Asia and Mideast. The market research noted particular opportunities for Canada in West Africa and South America. Today Canadian wheat is not well differentiated in these markets so Canada has some work to do before the growth potential can be realized.
Additional branding of Canadian wheat will happen in a number of ways. We can find new uses for some of our traditional high-valued wheat classes. For example, can CWRS enhance lower-protein wheat to deliver the quality of flour that West African markets demand? Can we better differentiate other wheat classes in new markets? For example, South America is receptive to Canadian Prairie Spring (CPS). How do we build the strong brand of consistent quality for CPS in South America, as we have for CWRS in Japan?
All parts of the value chain need to work together to answer these key market development questions. The work has already begun.
Team Canada (producers, industry, Cereals Canada, Cigi, and CGC) will be visiting West Africa this fall to help develop our brand through the new crop missions. The answer to the question “what do customers want?” delivered by LMC will form the backbone of the development of strategic research objectives for the value chain.
The ultimate goal of sustainable growth for the cereals industry won’t happen overnight. Accomplishing this goal requires commitment from every part of the value chain — crop development companies, exporters and farmers. The first steps on this path have already been taken.
Cam Dahl is president of Cereals Canada