More choice. More Control. More Canada
The National Food Security Strategy
Within the last week the government of Canada has released a National Food Security Strategy. It is encouraging to see a more proactive approach to our food and beverage industry. If you follow what we share from SKUFood you would know it was very frustrating to see the government just point the finger at the large retailers and blame them for high prices. No doubt, the 5 big retailers have a role to play in controlling inflation and offering more Canadian products however we also need to focus on the root cause of higher prices and dependence on processed food from other countries.
We are going to take a break from our series on the role of your sales department to explore the release from the government as it should have an impact on our industry, throughout the value chain.
Overall impressions
The document which you can find here is comprehensive and it does explore some of the reasons we have experienced higher prices and challenges for our food and beverage industry.
We will share some direct quotes from the report which will all be within quotation marks and all information direct from the report will be in italics. One comparison that is helpful is Canadian food inflation compared to other G7 countries:
“Canada’s food price inflation since January 2020 (31%) has been consistent with other G7 countries: United Kingdom (39%), Germany (39%), Japan (31%), United States (32%), Italy (31%) and France (27%).”
Only France has experienced a lower food inflation than Canada. That being said we should be one of, if not the lowest, given our ability to produce food and the space and climate we have.
The next figures shared that were interesting were the breakdown of $1.00 spent on food and where it goes in the value chain:
- Farming 11%
- Processing 23%
- Wholesale 9%
- Transportation 7%
- Retailers 16%
- Energy and Utilities 7%
- Restaurants 28%
It would be interesting to see a comparison of these figures to other G7 countries to see if there are any big differences. We believe in Canada transportation and utilities can be higher but we don’t have any facts to support that.
The food service amount is always interesting as people complain about the price of food but they continue to shift purchases to the most expensive option which is restaurants. There is definitely a trade-off for convenience or perhaps even ability to cook at home.
The report does discuss consolidation in the retail sector which is true. 5 major retailers control a significant share of the market. One thing that is truly ironic here is that the data they use is from the USDA. If our own government has to rely on USDA figures to calculate market share in the Canadian food industry it makes a person wonder…Here is the share breakdown they include:
- Loblaw 28%
- Sobeys 19%
- Metro 11%
- Walmart 8%
- Costco 9%
- Other 15%
Source: Source: Market share in 2023, based on USDA Retail Foods Annual (2024)" Canada: Retail Foods Annual | USDA Foreign Agricultural Service
Using sales reported publicly we would see Loblaw and Walmart and Costco to be higher in the market.
The strategy also includes some information about processing capacity. They state, “The food, seafood, and beverage processing industry is the largest manufacturing sector in Canada, and a critical link between agri-food production and both domestic and global markets. It provides about 70% of all processed food and beverage products consumed domestically, while also being the largest purchaser of Canadian agricultural production, providing a strong foundation to expand value-added production for both domestic and export markets.”
We believe most people would agree that this is a major gap in our value chain. We produce a lot of raw materials but we do not have the capacity or perhaps capability to process them for domestic and international markets.
The strategy also includes some information about regulatory challenges, what other countries are doing, initiatives already in place and programs with indigenous peoples.
New initiatives
The new initiatives launched with the National Food Strategy should be the focus of people in the value chain. There are 4 key initiatives to improve our industry:
1. Ensuring Competitive Prices, Choice and Affordability
2. Processing Food Closer to Where it’s Grown to Lower Prices and Create new Jobs
3. Growing Fruits and Vegetables Year-Round to Reduce Dependency on Imported Food
4. Regulatory approaches that reduce costs and grow the economy while protecting health and safety
Let’s explore each one
Ensuring Competitive Prices, Choice and Affordability
“Objective: Reducing the price of food for Canadian families by addressing the factors that contribute to food price inflation, including retail and wholesale concentration, large transportation costs, supply chain inefficiencies, and unnecessary regulations.
Key Performance Indicators
· By end of 2026, agreement is reached with the Government of Ontario on an expansion of the Ontario Food Terminal, including federal funding
- By end of 2028, construction of two additional food terminals is underway
- By end of 2028, ten food hubs are established or expanded and demonstrate lower average prices for a standardized list of foods compared to major grocery retailers in the same service area
- By 2030, number of independent grocers who purchase from terminals or hubs increases by 15%
- By 2030, increase the proportion of local food sales by small and mid-sized producers by 25%
- Over 10% increase in number of Competition Bureau investigation”
This is interesting but not sure how practical it is. Yes, the concept makes sense where food producers have a place to bring products but there need to be people there to buy them. The Ontario Food Terminal works because there is a network of independent stores and food service who buy there. In other markets (perhaps with exception of Montreal and Vancouver), we just do not have independent stores. They will need to support the growth of this channel too or there will be no customers at the food hubs.
They also need to support local and small producers to become more sophisticated in selling. They can’t just produce more. They need to understand the market and learn what people want.
Processing Food Closer to Where it’s Grown to Lower Prices and Create new Jobs
“Objective: Process more food domestically to make Canada more self-sufficient and drive economic growth.
Key Performance Indicators
· From 2027 to 2035, the GDP of the food processing industry, which currently grows at an average of 1.6% per year, will grow at an average of 2.75% per year.
· Increase the proportion of processed food consumed in Canada that was domestically produced from 70% to 80%.”
I think we would all agree we need to do a better job processing food in Canada. By better we mean more of it and food that people in Canada and around the world want to consume.
One area that is not addressed is export and this is where it can play a key role. We need to get better at understanding what consumers around the world want and what we can produce for them. Not more maple syrup in our can. What do they want, that we can make. There is no mention of this which seems to be a major gap.
There are a lot of $$ to support this initiative which is great. We do have to growth of all processors to get them to the next level.
Growing Fruits and Vegetables Year-Round to Reduce Dependency on Imported Food
“Objective: Increase the production and efficiency of fruits and vegetables grown year-round so Canada becomes less dependent on imports
Key Performance Indicators
· Double Controlled Environment Agriculture production value sold to the Canadian market from $774 million in 2024 to $1.55 billion in 2032
· Reduce our dependence on imported crops that can be grown through controlled environment agriculture by 20% by 2032
· Reduce labour and energy costs of controlled environment agriculture production by 10%-20% by 2032”
We know our climate is a challenge and greenhouse strawberries are the shining star to reduce our dependence on US producers. The greenhouse industry is a major exporter to the US and we are in a very challenging trade negotiation with them right now. Not sure anything can be decided in this sector until we know if greenhouse products will be part of a free trade agreement.
It does take time to figure this out and it is interesting the resources at AAFC were cut significantly. Not sure if they will rely on outside resources to support research as it is expensive and slow.
Europe is the leader in this area and there are a few examples but not many of opportunities. It is an opportunity but one that will take a lot of time and money.
Regulatory approaches that reduce costs and grow the economy while protecting health and safety
“Objective: Lowering costs, while protecting health and safety, through removing regulatory barriers and improving service standards
Key Performance Indicators
· Eliminate CFIA and Pesticides Regulatory Directorate (PRD) approval backlog by end of 2026
· Reduce average time for future approvals at both CFIA and PRD by at least one third”
This is a tough one. We know our regulatory environment adds costs but it also adds confidence at home and around the world. In a time when the US is reducing their oversight we need to be careful. We also need to be sensible. Restrictions for animal proteins across provincial borders should be related to population, not provincial borders. It is about risk which is related to population size. There is a lot more work to be done here but it requires changes in legislation which is complicated and slow.
Reducing approval time is a good thing. It costs money to wait.
There are a few statements in this section about government procurement supporting local production and processing. Sounds good but we want to see more action here. This requires work from government, distributors and producers/processors. Huge opportunity but work to be done.
It is good to see the focus on food and beverage. This is a good start but there is much more work to be done.
We did not detail the investments they are making but they are substantial and probably the biggest ever in Canada. Producers and processors need to dive in to see what is there for them.
I do have travel coming up to Toronto, Guelph and Winnipeg so if you want to connect or have an event in any of these locations give me a call or send me an email.
Peter
SKUFood Recipes for Success Podcast
In this episode of SKUFood Recipes for Success, Peter is joined by Amy Proulx of Niagara College Food and Beverage Innovation Centre. They explore what it really takes to move from concept to commercialization in today’s competitive food and beverage landscape. From formulation to scale-up, the journey from idea to shelf requires more than a great concept, it demands technical expertise, regulatory understanding, and a clear path to market.
We dive into the critical role of food science in building products that are not only innovative, but also safe, consistent, and commercially viable. From ingredient functionality and shelf-life stability to navigating regulatory requirements and label compliance, this conversation unpacks the often unseen work that underpins successful CPG products.
This episode offers a behind-the-scenes look at how founders and brands can better leverage technical resources to de-risk innovation and accelerate growth. Whether you’re refining a formulation or preparing for scale, the insights shared highlight how disciplined development and strong science can turn great ideas into products that succeed in market.
If you would like to be a guest send us a note. We are always working on the upcoming episodes.
Empire reports results
We always want to remind producers and processors they need to follow the results of their customers. Their performance can have a significant impact on your performance. You also have a role to understand them and support their initiatives.
Empire (Sobeys, FreshCo, Farm Boy, Longo’s, Safeway, Thrifty Foods and Lawtons) continue to deliver positive results. Despite the huge write down for e-commerce mistake they are profitable and show positive sales results.
With the focus on Canadian food and beverage we wanted to share a program we have developed with Alain Bosse, the Kilted Chef. We partner to share insights about Canadian food and beverage at conferences and events. We talk about where products come from, share insights about some hidden gems and of course Chef Alain has great tips for using the products at home. This is designed to be entertaining and engaging. Not just for food industry audiences, it works for everyone.