Canada’s makers of food and consumer products are warning of more job losses and plant shutdowns as the ratification the new North American free-trade deal stalls and domestic costs of doing business rise.
Food and Consumer Products of Canada (FCPC), a trade group that represents the largest manufacturing sector by employment, says in a report based on responses from its members that domestic roadblocks – onerous regulations and slow sales – are also hampering the sector’s ability to profit from export opportunities.
FCPC chief executive Michael Graydon said export agreements take on a new importance amid a flat domestic market marked by grocery store consolidation, which has reduced the number of major food sellers to five.
“We’re positioned so incredibly well to grow from an export position. But the lack of stability domestically is really having a negative impact on capital investment in this segment,” said Mr. Graydon, who described the delays and political squabbles that have prevented the ratification of the United States-Mexico-Canada Agreement as “worrying.”
According to the report released Wednesday:
- the costs of farm products and transportation have risen faster than the prices food makers are able to charge for their goods;
- Canada has become a net importer of food and beverages, despite a low dollar that favours exporters and reduces costs for domestic producers;
- and the rise in food sales has failed to keep pace with the growth in the Canadian economy.
“Canada is not a favourable environment for innovation in food, beverage, and consumer products manufacturing,” the report said.
Among the barriers the report lists “burdensome” government regulations and high costs faced by manufacturers for promoting their products in an ever-consolidating market of retailers.
Mr. Graydon said grocery retailers are using their market dominance to unilaterally cut the prices they pay to food suppliers and raise the costs of shelf access by 22 per cent over the past four years. These higher costs are stifling the development and availability of new food products and eroding profit margins, he said.
“The majority of new products on the shelves have come from somewhere else,” he said. “If you were to walk into a grocery store in the U.K. or the United States you would see a very different lineup, unique taste profiles, a broader array of packaging.”
Food, beverage and other related companies account for more than 300,000 jobs – almost 17 per cent of all manufacturing positions. These companies contributed $29-billion to Canada’s economy in 2017 and bought 40 per cent of the country’s agricultural output, the FCPC says.
The long list of headwinds food makers face means consumers pay higher prices and the companies are forced to close factories or move to more business-friendly countries.
In recent years, the list of Ontario food plant closings includes H.J. Heinz in Leamington, Kellogg in London, Smucker’s in Dunnville and Lance Canada in Cambridge.
Packaged meat giant Maple Leaf Foods Inc. said on April 8 that it will spend US$310-million on a new factory in Indiana that will make burgers and sausages from soy beans and other plant-based protein sources. U.S. governments and utilities will contribute US$50-million to the project. Mississauga-based Maple Leaf, which did not respond to two requests for an interview, paid US$120-million in 2017 for Seattle-based Field Roast Grain Meat Co., a 200-employee company that makes sausages from grains and vegetables.
That is not to say Maple Leaf is not also investing in Canada. In November, it announced plans to build a chicken-processing factory in London that will employ 1,450 people. The company will spend $605-million on the project and is getting $35.5-million from the Ontario government and $20-million from Ottawa.
Mr. Graydon said he was not surprised by Maple Leaf’s expansion into the United States, especially given the government incentives. “Canada is still a small market, and Maple Leaf is a very big North American producer. A big part of their market would be in the U.S. market anyways.”
Canada has reached trade deals with Europe and the Pacific Rim countries as it tries to diversify its export base and reduce its dependence on the United States. But the United States remains Canada’s biggest trading partner and is key to the success of exporters, despite a tit-for-tat tariff dispute ignited by U.S. President Donald Trump. This means the uncertainty hanging over the USMCA trade deal compounds the woes food makers face at home.
“I don’t think we fully understand if Trump were to rip it up what we would revert to," Mr. Graydon said. "That lack of certainty is really discouraging.”