Canadian Food Business
WITH THE HELP OF STRONG EUROPEAN EXAMPLES, LOCATION-BASED CLUSTERS ARE BRINGING COLLABORATION AND INNOVATION TO THE FOOD INDUSTRY
Text by Lindsay Grummett
Food is a vital part of the Canadian economy. So much, in fact, that in 2007 more than 70 per cent of the food purchased in Canadian stores was produced domestically. Beyond Canadian borders, the global food market was valued at $4.2 trillion (USD) last year. The global marketplace offers promising opportunity for companies with innovative products and ideas, but breaking into the food industry can be next to impossible without support.
Location-based food clusters are geographic concentrations of interconnected companies and institutions that can become a source of competitive advantage. Michael Porter, a professor at Harvard Business School and an authority on the subject of clusters, describes the key elements as educational institutions, transportation infrastructure, investors, suppliers as well as logistical and human resources.
Traditional food clusters are based around a particular commodity, but as the importance of food innovation grows so does the need for a collaborative environment inclusive to the wider food industry. For this reason, location-based clusters are sprouting up across the globe as regions, provinces, states and countries ban together to enhance their role in the domestic and international food markets.
International Model of Excellence
“Food Valley is probably the best recognized food cluster in the world for its innovation practices. They have established a system in which there is very strong collaboration between industry, government and the academic institutions,” says Luis Garcia, the chair of the Institute of Food Processing Technology (IFPT) at Conestoga College.
Food Valley is a location-based food cluster in the Netherlands that supports and encourages food innovation. The organization’s aim is to stimulate the innovative power of the Dutch agri-food cluster through a demand-driven combination of enterprise and knowledge.
The organization is helpful to the Dutch agri-food sector in many ways like connecting business to knowledge-based resources such as universities and research institutes and also promoting knowledge development of its members by offering seminars like “Legal aspects of collaboration” and “Aging people and food.”
“They have figured out how to make it easy for the three sectors to collaborate and develop new products and technologies,” says Garcia. “It’s an ideal environment especially for small companies to start up their business with new products.”
Garcia says Food Valley is on the forefront of disruptive innovation for the food industry.
“They come up with ideas that are not just outside the box, they disrupt the system,” he explains.
Ontario organizations are working to replicate aspects of this location-based food cluster in order create a more collaborative and results-driven industry.
Location-based Clusters
The Ontario Food Cluster is members-based organization that seeks to attract foreign investment and business opportunities into Ontario’s food processing sector.
“The group is made up of 10 municipalities that have a strong representation from the food sector in their economy,” says Brad Hammond, a development officer for the City of Woodstock and the current chair the Ontario Food Cluster.
Developed only three years ago, the Ontario Food Cluster is a relatively new organization. Although its current focus is on investment and business growth, it also offers opportunities for businesses to connect with the government and researchers since the University of Guelph and the Ministry of Agriculture Food and Rural Affairs are also members of the group.
“Food Valley is a much more mature version of what we have here in Ontario,” says Hammond. “We have a lot of the same components; we just haven’t linked them all together yet. We’re quite focused on the FDI (foreign direct investment) side of things and we’re not sure where we fit into linking universities to companies.”
In October, Hammond and associates from the Ontario Food Cluster travelled to Germany for Anuga, a leading world food fair. Hammond said they met with approximately 70 companies and discussed opportunities for investment in Ontario. “We’ve got to convince them the advantages of being in Ontario rather than another jurisdiction,” says Hammond.
The Ontario Advantage
Ontario’s food and beverage sector is comprised of more than 3,000 food and beverage companies and is expected to grow to a $40 billion industry by the end of 2013. The agriculture, agri-food and beverage sector is also the province’s number one employer.
The food industry adds significant value to the provincial economy with more than 130,000 people working directly in agri-food processing, manufacturing or wholesaling and almost half a million working in related sectors like food service and retail. In addition to a strong workforce, Ontario also has one of the lowest corporate tax rate in North America adding additional incentives for businesses to locate in the province.
Location-based clusters allow for easy information sharing and promise a steady flow of communication throughout the network. This structure works well for businesses and food innovation companies looking to expand the use, production and impact of foods.
“Of course, we now live in a more virtual world and communication is so easy, but having the resources at hand does make a difference,” says Luis Garcia of the IFPT. “It encourages the creation of new companies and new research institutes.”
This type of location-based co-operation within the food sector can lead to strengthened food research, reduced business costs as well as increase productivity allowing businesses to compete on a local, national and global scale.
City of Guelph
Within the province are even more localized clusters and the University of Guelph is playing a key role in its city and around the province. Guelph has distinguished itself as a pocket of agricultural activity in Ontario by supporting sustainable innovation sectors like agri-food and bio-sciences. This internationally recognized cluster includes 43 research centres and programs, 38 food and agri-business associations and has attracted more than $350 million in private investment since 2003.
“This really is the centre for agriculture in Ontario and more and more for the country,” explains John Melichercik Director of University of Guelph’s Agriculture and Food Laboratory. “Federal government and provincial government agencies that look after food and agriculture as well as many private sector organizations have located themselves in Guelph – largely because food and agriculture is one of the strengths of the University of Guelph.”
The University of Guelph’s success in the agricultural realm can be attributed in part to its 125-year relationship with the Ontario government. In that time the two establishments have worked together to support Ontario’s agriculture and food sector as well as safe food practices.
The University of Guelph also has close ties to Wageningen University and Research Center, a school that has a leading role in Food Valley’s agri-food research and innovation. This food-based connection between the schools has helped form additional industry relationships between Food Valley and members of the Ontario Food Cluster.
Hammond visited Food Valley after is trip to the Anuga food fair and spent two days with companies, the university and the regional marketing groups to learn more about the collaborative environment that makes them so successful. “In this small part of Ontario, we have all the key players that are needed to develop a similar system. We need to learn from Food Valley and how they created this movement toward collaboration.”
Learning Curve
Ontario’s food cluster is still relatively new by international standards, but it is becoming stronger as more institutional supports like Conestoga’s IFPT are added. This facility opened in 2011 and was developed as part of an initiative by the Alliance of Ontario Food Processors who saw a need for more knowledge development in careers like food processing, machine operating and machine maintenance. The institute has diploma and apprentice programs as well as courses for supervisors currently in the field. It also has a state-of-the-art food processing facility with three production lines that cost approximately $5 million and is used specifically for training purposes.
“One of the challenges [in Ontario] is how academic institutions and industry interact. There needs to be not only stronger ties between both sectors that are based on trust and collaboration,” says Garcia, “but also, industry needs a more agile, quicker response which they don’t always find at universities.”
In Food Valley, fundamental agri-food research is performed at the university and separate knowledge institutes respond to the needs of industry. Garcia believes the IFPT could play a central role in the latter category as long as industry collaboration continues to grow.
Food Valley also aids food innovation with its Innovation Link that is used to connect small- and medium-sized businesses with researchers or expertise. This has had a profound impact on some of its partners like FZ Organic Food. The company was looking to reduce the amount of rejected potato chips during processing and connected with TOP Consultancy through Innovation Link. The group offered key advice that led to significant improvements to the company’s production process.
“When you’re investing in quality, food safety and innovation, independent advice is extremely valuable,” says Björn Andringa, Managing Director at FZ Organic Food. “It also enables you to look at your own production and process through a more critical lens.”
The food cluster has also developed some simple ways to foster collaboration between industry and academic.
For example, the Impulse building at Wageningen University and Research Center has a restaurant and meeting rooms for researchers and industry to meet. “They provide a venue for the meetings to happen and encourage face-to-face interaction that will end in stronger collaboration,” says Garcia.
The university also allows companies and knowledge institutes to access its CAT-AgroFood research facilities which include state-of-the-art laboratories and the latest technology. Businesses can reduce spending by using these shared facilities that are essentially pay-per-use and include no fixed operating costs.
Food Valley’s simple yet strategic activities make collaboration a cornerstone of the food industry in the Netherlands. The location-based cluster shows how partnership can produce results and create a stronger and more profitable business environment.
Collaborative Momentum
A 2013 report released by Agriculture and Agri-Foods Canada says that the competitiveness of the food sector depends on its ability to remain profitable and viable over the long term with regards to its competitors in relevant markets.
The Food Valley model shows the benefits of collaboration and how it can lead to success and advancement for its individual members. Location-based clusters create the best environment for collaboration and innovation, but it’s up to the individual groups to take action.
“We need to change our mindsets. We need good leadership and for the major players to come to the table and work together” says Garcia. “You don’t need to start with 3,000 processors. You can get started with five or 10.”
