By Jayson Myers
Food processing is the single largest manufacturing sector in Canada – and it is even more important in the Prairies. With sales amounting to $124 billion in 2021, the industry accounts for more than 17 per cent of the total value of goods sold by Canadian manufacturers. It’s 37 per cent larger than transportation equipment manufacturing and 72 per cent larger than petroleum refining, the next two largest manufacturing sectors in the country.
Across the Prairies, food processors realized sales of $32 billion in 2021, just over a quarter of the Canadian total. Food products account for almost 26 per cent of total manufacturing sales in the Prairies. That’s 69 per cent more than petroleum refining, 75 per cent more than chemical production, and twice the size of metal fabricating and machinery manufacturing combined! Food manufacturing is an important business, especially for Western Canada!
It’s also a rapidly growing business. While total manufacturing sales across Canada increased by three per cent between 2019 and 2021, factory-gate sales of food products jumped by more than 16 per cent. Growth has been even stronger across the Prairies. Prairie manufacturing has expanded more rapidly than across the country as a whole, increasing 11 per cent between 2019 and 2021; for its part, food manufacturing shot up by just over 31 per cent, nearly twice the national figure.
Sales growth in the food processing industry in Western Canada has come from a combination of productivity improvements and higher prices. Factory-gate selling prices for food products rose by 13 per cent between 2019 and 2021.
Employment in the industry declined. On average 35,347 employees were working in Prairie food manufacturing in 2021 – 2,379 fewer than in 2019. That means productivity (real output per worker) has risen by more than 24 per cent over the past two years. That’s much stronger performance than the 13 per cent overall rate of productivity improvement achieved by Prairie manufacturers.
Productivity improvements have accounted for just over three-quarters of the growth we’ve seen in sales and for all the 17 per cent increase in production volume in Prairie food manufacturing since 2019.
Food manufacturing outperforms in Manitoba
Food product manufacturers in Manitoba realized $6.2 billion in sales in 2021. The industry is the largest of all manufacturing sectors in the province. Food processing accounts for 30 per cent of the value of all goods produced and sold by Manitoba manufacturers. It’s big enough to be on par with sales from the province’s chemical, machinery, and transportation equipment sectors combined!
Food manufacturers’ factory-gate sales have grown throughout the pandemic. They were 27 per cent higher in 2021 than in 2019, compared to eight per cent growth in overall manufacturing sales in the province. Accounting for industry price increases, production volumes have risen about 12 per cent over the past two years.
Manitoba’s food processors employed 10,103 workers in 2021. That’s 704 fewer than in 2019. However, they increased productivity by about 20 per cent. Like the Prairie average, productivity improvements have accounted for three-quarters of the sales growth and for all the increase in manufacturing output in Manitoba’s food processing sector over the past two years.
Strong growth near the industry average in Saskatchewan
The value of food products manufactured and sold by Saskatchewan manufacturers amounted to $5.7 billion in 2021. Food processing accounts for 29 per cent of total manufacturing sales in the province. That’s almost as much as the wood products, chemicals, metal fabricating, and machinery manufacturing sectors combined.
Factory-gate sales of food products increased by 21 per cent between 2019 and 2021, just a little faster than the 20 per cent growth rate for all of Saskatchewan manufacturing.
Employment in the province’s food manufacturing sector averaged 4,707 workers in 2021, down 112 positions from 2019.
Meanwhile, productivity in the sector increased by almost 10 per cent. Those productivity improvements accounted for about half the growth realized in sales as well as for the entire seven per cent increase in output volumes realized by Saskatchewan food processors over the past two years.
Alberta in the lead
Alberta manufacturers produced and sold about $19.9 billion of food products in 2021. Food processing accounts for 29 per cent of all manufacturing sales in the province. Comparable statistics are not available for all industry sectors in Alberta, but as a comparison, sales by food manufacturers amount to almost three times the value of the products sold by the province’s chemicals sector last year.
Factory-gate sales by Alberta food manufacturers have grown throughout the pandemic, increasing 36 per cent between 2019 and 2021. That compares with an 11 per cent growth rate for Alberta’s entire manufacturing sector over the same period.
Despite strong sales growth, there were 1,563 fewer people working in Alberta’s food processing sector last year than in 2019. Employment in the industry averaged 20,538 workers in 2021.
On the other hand, productivity improvements have been significant. Food manufacturers in Alberta increased output per worker by almost 30 per cent between 2019 and 2021. Those productivity improvements accounted for all the 20 per cent growth in output volumes and for more than 80 per cent of sales growth achieved by Alberta food product manufacturers over the past two years.
Outlook for growth
Across Canada, food manufacturers are facing stiff headwinds in the form of supply chain disruptions, pricing volatility, and labour shortages. Those challenges have been aggravated by the pandemic and are unlikely to end any time soon. In fact, labour shortages will intensify as more workers will retire rather than enter the sector over the next decade. Further hefty productivity improvements will be essential for food manufacturers to compete and sustain production levels, let alone grow.
Prairie food manufacturers face the very same challenges, but they are taking quicker action to boost productivity than their counterparts in other provinces. Food processors across Canada have increased output per worker by about 10 per cent since 2019 – less than half the rate of improvement realized by food manufacturers in the Prairies.
The more rapid adoption of advanced technologies is a major differentiating factor. The latest data reported by Statistics Canada for 2019 show that 58 per cent of Prairie manufacturers have implemented advanced technologies compared to 52 per cent of all manufacturers across Canada.
Prairie manufacturers lead the country in the adoption of advanced processing, business intelligence, and quality control technologies, as well as emerging technologies like integrated industrial IOT, additive manufacturing, and biotechnologies. That bodes well for the future.
Agriculture and Agri-Food Canada has recently published an analysis of strategic technology trends that will shape the future of the entire food industry in Canada – from farm to fork.
The report flags five key trends for the sector, all of which present new opportunities for food manufacturers. They include:
1) Enhanced nutrition in the development of new forms of protein and meat alternatives, value-added nutritional ingredients, food products based on personalized genetic characterizations, and fortified foods based on new bioactive compounds;
2) New processing and production technologies, including processes that reduce food waste, 3-D food printing, new nutrient extraction methods, genetic engineering, and bacteriophages that ensure food safety and reduce contamination;
3) Packaging technologies that enhance traceability, shelf-life, food safety, and anti-tampering while reducing environmental waste;
4) Enhanced food safety technologies including processes enabling rapid detection, supply chain traceability, contaminant elimination, improved quality assurance, and new types of personal protective equipment; and
5) AI-enabled technologies to improve supply chain resilience.
Prairie food manufacturers are well positioned to take advantage of these emerging opportunities. Faced with continuing labour shortages, they’ll need to double down on innovation, automation, and productivity improvements, which is exactly the formula they will need for future success.
Jayson Myers is 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.