By Jayson Myers
The numbers speak for themselves. Food processing is a major contributor to the economic prosperity of all Canadians. It is the largest manufacturing sector in the country. Food manufacturers produce and ship around $108 billion worth of product annually – that amounts to 15 per cent of all sales by Canadian manufacturers. When input costs are netted out, food processing accounts every year for just over 14 per cent of the total value added by Canada’s manufacturing sector and 1.5 per cent of Canada’s Gross Domestic Product – the total value generated by the Canadian economy as a whole.
More than 238,000 people are directly employed by food processing companies across Canada. What’s more, in addition to helping put food on the table for Canadian families, the sector generates over $35 billion in export revenue, with offshore sales going in large part to the United States, China, and Japan.
It’s a dynamic industry. Sales have increased by 21 per cent over the last five years, growing twice as fast as for the Canadian manufacturing sector as a whole. Sales are up by 36 per cent over the past decade. In fact, food processing is the only manufacturing sector in Canada to have recorded continuous sales growth over the past twenty years.
The strength of the sector is also reflected in job growth. There are five per cent more people working in food manufacturing today than in 2008, just before the last recession. In fact, while employment in Canadian manufacturing has fallen by eight per cent or by about 128,000 jobs over the past ten years, more than 11,000 net new jobs have been created in the food processing sector. The number of people employed in food processing has increased by almost eight per cent over the last five years alone.
Demand for high quality value-added food products is growing by leaps and bounds around the world. As Canada’s Agri-Food Economic Strategy Table reported last year, growing middle classes around the world are demanding higher-quality products, while socially conscious consumers want foods with specific qualities, such as being locally sourced and sustainable.
Canada is incredibly well positioned to service the world’s burgeoning demand for food, but there are clouds on the horizon. Canada’s food manufacturers need to be ready to take advantage of new opportunities. They need to deploy new technologies in order to develop new and more custom products, improve quality and efficiency, secure and trace supply chains, and attain the degree of agility that will allow them to respond to changing market conditions and consumer demands.
Yet, our food processors invest less than any other manufacturing sector in Canada in new machinery, equipment, and technology in relation to total sales. And, rates of capital investment have been falling since 2015. Little wonder then that food manufacturing lags behind other industries when it comes to adopting advanced technologies. Earlier this year, Statistics Canada reported that only 50 per cent of food processing companies across the country deploy any sort of advanced or emerging technology in their operations. Fewer than a third are using advanced digital or automation technologies in their processing activities. Less than 14 per cent use digital technologies to maintain the integrity or efficiency of their supply chains. Only 1.3 per cent use biotechnology.
As industry experts have said many times before, “in a very short time, players who do not embrace automation, digitization and other technological advances will simply become non-competitive.”
If food processing is important for the Canadian economy as a whole, it is even more important for the prairie provinces.
Manitoba manufacturers produced more than $5 billion of processed food products in 2018. That’s about a quarter of the province’s total manufacturing output. Over half of the food products processed in Manitoba ($2.6 billion) were exported. Sales are on track to increase further this year, as are jobs in the sector. In 2018, 10,000 people worked in Manitoba’s food processing industries.
In Manitoba, this year, manufacturers say that they will be investing more than $260 million in new food processing facilities. That’s on top of the $345 million invested in 2018. Investment in new machinery and equipment is slated at $235 million in 2019, about four times the amount invested five years ago. Food processing will account for more than 55 per cent of all capital investment made by Manitoba manufacturers this year.
In Saskatchewan, sales by food processing companies topped $4.9 billion in 2018, with exports amounting to $3.0 billion
(62 per cent of the total). Food processing accounted for about 27 per cent of all manufacturing output in the province. Sales are expected to grow by more than six per cent this year, as are the number of jobs in the sector. In 2018, 4,300 people were employed in Saskatchewan’s food processing industries, 14 per cent more than five years ago.
The story is much the same in Saskatchewan. While capital spending estimates in new facilities are unavailable, food manufacturers in that province are looking to invest more than $60 million in machinery and equipment in 2019, up 37 per cent from five years ago.
Alberta also boasts a thriving food processing sector. Sales in 2018 amounted to $14.1 billion (about 18 per cent of total manufacturing output in the province), and sales growth this year looks like it will top five per cent. Over 40 per cent of the food processed in Alberta is sold in international markets. More than 22,000 people work in Alberta’s food manufacturing sector. That’s up by almost 25 per cent since 2014.
In Alberta, food manufacturers intend to invest over $450 million in plant and equipment this year, more than double the amount they invested five years ago, and five times more than the level of investment prior to the 2008/2009 recession.
Maybe it’s the opportunity that Prairie manufacturers see in food processing, but the sector is definitely bucking the trend when it comes to investing in both plant expansion and the deployment of new machinery, equipment, and technologies.
Prairie companies manufacture 22 per cent of all processed food produced in Canada. This year they will account for 42 per cent of all capital spending in food processing plant and equipment across the country.
According to the Agri-Food Economic Strategy Table, Canada has the potential by 2025 to become one of the top five competitors in the world in agri-food, recognized as the most trusted, competitive, and reliable supplier of safe, sustainable, high quality agri-food products, and innovator in value-added products to feed the dynamic global consumer market. We will have a leading digital and technology-based supply chain and stand out as the world’s favoured protein provider.
That’s no small goal. But it is eminently achievable if we can build on our strengths in agriculture, fisheries, and especially our value-added food processing sector, strengthen our regulatory, logistics, and technology support infrastructure, and take advantage of the opportunities that new technologies and market changes have to offer.
Prairie manufacturers look like they are well on the way.
Jayson Myers is the CEO of Next Generation Manufacturing Canada – the country’s advanced manufacturing supercluster. An award-winning business economist and leading authority on technological change, Myers has counselled Canadian prime ministers and premiers, as well as senior corporate executives and policymakers around the world.