As big food brands struggle, Canada has a golden opportunity
Feb. 10, 2018 - The bloodbath in foreign-owned, large-scale food manufacturing in Canada continues.
In recent weeks, we’ve learned that two plants employing almost 600 highly paid workers are closing: Dr. Oetker in Grand Falls, N.B., and Campbell in Toronto, Ont.
Estimates suggest that Canada has lost more than 30,000 similar positions in food manufacturing in a decade. This is not new.
Both cases have common denominators: Both plants were ancient, outdated and in dire need of a retrofit. However, the foreign-owned companies opted instead to consolidate assets and have products manufactured at more modern facilities. In other words, they never intended to modernize the existing Canadian plants.
The use of better automation and robotics could have helped, but instead the facilities were left to rot and die a natural death.
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-day standards of food safety and product advancement.
So, don’t be surprised to see more of these types of closures since we’re now paying for years of foreign control in this sector.
Brands are now worth more than the human capital working in their facilities across the country. It’s not personal; it’s business.
Big food brands, often seen as symbols of out-of-touch food corporations, are becoming an endangered species. Every week stores mark down those brands — think household names like Chef Boyardee, Chips Ahoy, Wheaties, etc. — to attract customers to their private-label products.
Not only are store-owned labels cheaper, but customers, especially millenials, are moving away from major brands. They’re increasingly looking for organic, multicultural foods — hardly concepts mega-enterprises have been associated with, at least until recently.
The pace of this demographic shift is spectacular. We’re seeing more consolidation in food processing around the globe because consumers in the Western world are looking for something different, organic and local. Many of the brands we all know don’t appeal to people looking for what are known as value-based brands.
This pressure is leading to seismic shifts in the sector.
Overseas, Keurig Green Mountain, the maker of coffee pod machines, is planning to purchase the Dr. Pepper Snapple Group in a massive US$18.7 billion transaction.
The portfolio of the new company will include products varying from coffee to soft drinks. But the deal is really about competitiveness at the retail level, and allowing major brands to remain competitive.
The appeal of big brands has ruled grocery aisles for decades, but it’s slowly becoming an afterthought. Margins must be better managed and merchandising strategies will need to be reinvented. Consequently, becoming bigger and more resourceful is key.
Overly reliant on foreign brands
Most Canadians may be unaware that the food-processing sector is the second largest manufacturing industry in Canada in terms of value of production, with shipments worth $112.4 billion last year and employing over 250,000 people.
It’s a big sector that’s flown under the proverbial radar for decades.
This is why the sector just created an industry association Food Beverage Canada — so processors have a voice. Without a vibrant manufacturing sector, Canada’s agri-food sector cannot prosper.
Growing grains and raising livestock is helpful for rural economies and small- to medium-sized businesses. As Canadians, it's what we know best. But given how our world is changing, it’s no longer enough.
Food manufacturing has a multiplying effect on growth, which cannot be emphasized enough. For years, we have been reliant on foreign brands to offer job opportunities in small communities.
Most of these brands, however, are American. The Canadian brand has never been fully exploited in the food value-added sector, a missed opportunity indeed. But the needle is slowly moving in our country, recognizing that food processing needs to find its home-grown mojo.
The Agri-Food Innovation Centre at the University of Saskatchewan opened this year 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 ag-tech companies, which focus on providing more value-added products to the market, both domestically and abroad.
Quebec now has a new market access program to support companies looking for new markets.
It’s no longer just about spreading money to different sectors across the agri-food continuum. Growing the sector and generating significant economic activity throughout the country are becoming priorities for most stakeholders in both 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. Looks like someone is finally getting the message.
Sylvain Charlebois is Professor in Food Distribution and Policy at Dalhousie University.
This article was originally published on The Conversation, an independent and nonprofit source of news, analysis and commentary from academic experts. Disclosure information is available on the original site.
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