Want to compete? Think big, report advises food processors

Tuesday, February 7, 2012

by DAVE PINK

A just-released report on Canada's food processing industry is encouraging individual companies to become bigger, better, more competitive and more innovative soon, or risk losing market share on a local, national and global scale. 

"It's not just about getting big, but growing to a level that best meets the demands of the market," says Bob Seguin, the executive director of the Guelph-based George Morris Centre. "This has been a challenge in Canada for some time. We need to have a scale of size to match the competition." 

The report, Improving Productivity in Canada's Food Processing Sector Through Greater Scale, was prepared jointly by the George Morris Centre and the Toronto-based Institute for Competitiveness and Prosperity. It calls on the entire food-production sector and government to explore innovative ways to expand and improve, and to abandon the policies that inhibit efficiency. 

"The challenge is not just to go big, but to compete in the market," says Seguin. "Firms will have to be of a certain scale or they're in for a tough slide because they can't compete. They will need to invest in innovation, and technology and in the people running their facilities." 

And there's nothing wrong with thinking big, says James Milway, the executive director of the Institute for Competitiveness and Prosperity. "There has to be an awareness that big is good, or at least that it's not bad. When large producers decide to amalgamate there often seems to be a great hue and cry. There shouldn't be. That's part of the solution," he says. 

"The reality is that larger facilities are more productive, more innovative and they pay higher wages." 

As things now stand, there are 296,000 Canadians working in an industry that processes and distributes meat, fruits and vegetables, dairy products, bakery products and confectionary. In all, the industry accounts for $89 billion worth of shipments annually. But compared to the United States on a per capita basis, the Canadian industry has half the employees and less than half of the sales revenue, the report concludes. 

From the perspective of the nation's farmers, the processing and distribution systems can't be allowed to become a bottleneck that stifles trade and diminishes profits to the growers. "If our food producers are producing at a volume that exceeds the local market then they'll be looking for help on a national and global level to move that product," adds Seguin. 

But, warns Milway, there are no easy and obvious solutions. "There is no silver bullet. There is no one thing we can point to and say, 'Ah ah.' There is just a lot of little things we can be doing to keep moving in the right direction." 

Among them, he says, is the recruitment of better educated business managers into the food production sector – people who understand the benefits of technology and understand how to apply it.  

Above all, says Milway, Canadians and Canadian government have to shake off their love affair with the maxim that small is better. "We shouldn't be so much in love with small business that we want to stay small. If we're going to get great in Canada it will be to the extent that our small firms become big firms. 

"Let's accept that we have a solid foundation and let's see how high we can take this. Let's see if we can transform this and see if we can take it around the world. Let's think big and not be so content with what we've got."

The George Morris Centre is a national, independent, economic research institute that focuses on the agriculture and food industry. The centre’s areas of research include trade, regulation, cost of production, food safety, market analysis, agricultural research, environment, competitiveness and corporate strategy.

The Institute for Competitiveness and Prosperity is an independent not-for-profit organization established in 2001 to serve as the research arm of Ontario’s Task Force on Competitiveness, Productivity and Economic Progress. The Institute is supported by the Ontario Ministry of Economic Development and Trade. Research published by the Institute is aimed at raising public awareness and stimulate debate on a range of issues related to competitiveness and prosperity. BF