By Gary Newbury
The Canadian food supply chain plays a pivotal role in ensuring a steady and reliable flow of staple and seasonal food products from “farm to fork” for Canadians. As a global producer, our ability to be a reliable trading partner is firmly wedded to seasonal flows and predictable supply. Any disturbance creates reputational risk.
Our food supply network is a complex system with a multiplicity of activities and links that came under significant pressure during pandemic restrictions; it continues to face an array of challenges impeding efficiency, sustainability, and ability to adapt to changing economic, environmental, and societal circumstances, and evolving customer tastes.
In order to make a significant change in food’s supply chain performance, we really need to look at the full network and stakeholders beyond the perfunctory view of what we buy (forecasting, sourcing and transmission of requirements), how we transport it (often across vast distances and with different modes, including sea, rail, road and sometimes air) and hand it off to the next link in the chain.
There are many challenges facing the industry including transportation constraints (costs and temporal capacity), increasing climate change events (floods, fires et al.), food safety, cybersecurity, loss prevention, inflationary pressures, consumer shifts (changing priorities and reputational risks), technological shifts, the need for process repeatability and protection of our country’s reputation. To re-engineer the efficiency of today’s supply chain network several critical challenges require urgent attention:
Labour shortage and local production capacity constraints and adaptability
Labour shortages emerged as a formidable challenge during the pandemic that were exacerbated by demographic shifts and changing workplace dynamics. The agricultural and food processing sectors remain heavily invested in manual labour. This makes operations highly vulnerable to ongoing changes in rural populations, migrant worker availability and the perspective of younger, highly qualified workers.
Local production capacity constraints further compound such issues. The reliance on imported food products makes the supply chain susceptible to disruptions caused by global events such as trade disputes and cross border transportation challenges (alongside our winter weather challenges). If the industry was to focus on enhancing domestic agriculture production and local processing facilities, it is possible for Canada’s food security to become much more resilient.
Oligopolistic market structure
The Canadian food marketplace is dominated by a handful of large, powerful corporations and a less-than-stridentCompetition Bureau. This has led to an uneven playing field favouring the big brand processors and retailers. This market structure stifles competition and product innovation, limits consumer choices and hinders market access for small producers and new retail entrants (e.g., Aldi), as suggested by the Competition Bureau Canada Report (June 2023).
This market structure can drive pricing power disparities which can adversely affect both producers and consumers.
Lack of collaboration and innovation across food supply chains
A shortfall in either of these areas pose significant barriers to our adaptability and resilience. Collaboration across farmers, processors, distributors, retailers and research institutions are crucial for addressing waste (more than 40 per cent of production ends in landfill – a serious industrial level challenge, as well as an opportunity) and inefficiencies, as well as driving innovation in process, technology and/or product portfolio.
The absence of meaningful collaboration (i.e., supply chain partners working together on eliminating waste, inefficiencies and driving continuous innovation) results in missed opportunities for greater productivity, consumer choice and long-term profitability for the industry.
To address these fundamental complexities, a multifaceted approach is essential:
- Invest in local labour pools and focus on “local to market” production
Encourage youth engagement in agriculture and the food supply chain through educational programs, internships and mentorship initiatives – make the “farm-to-fork” supply chain enticing.
Develop immigration policies which facilitate entry of skilled agricultural labour to ensure workforce sustainability and adaptability.
Support and invest in technological hubs focused on automation, AI and precision farming to provide resilience and lowered cost structures.
Invest in R&D to optimise local production techniques, such as vertical farming and hydroponics, as well as crop yield improvements.
- Marketplace structure
Review, strengthen and enforce anti-trust regulations to create a more competitive market to shift to a more balanced equilibrium.
Provide support and incentives for start ups and SMB food production and processing businesses to compete effectively with the big food dominant brands. Canada needs more domestic processing capacity, wholesalers and more independent food retailers to achieve higher levels of economies.
Facilitate sharing of intermediate pooling in storage and distribution resources so big and small producers can experience similar per unit costs for their distribution activities.
Create marketplaces and direct-to-consumer/drop ship platforms to enable direct connections between producers and consumers locally, regionally, and nationally to improve competition and choice.
- Collaboration and innovation
Create industry-wide platforms for knowledge and idea exchange, and collaborative problem solving, similar to bodies other countries have in which technology businesses and retailers solve industry challenges collaboratively, rather than “going it alone” missing the opportunity to share learnings and perspectives.
Develop innovation hubs within regions which focus on production, processing and distribution performance improvements holistically.
Support initiatives which bring together stakeholders from across the food supply chain to ideate and collaborate on performance improvement, capacity flexibility and resilience to aid policy makers in making informed investments in domestic food supply chain innovation.
Create robust relationships between academia, government agencies and operators within the food supply chain to drive innovation at industry, activity and operational level.
The Canadian food supply chain is facing a complex set of challenges which can not be addressed in a linear/simplistic manner. The drive to sustainability and resilience marches on, and time is being burned. Addressing imbalances across labour pools, enhancing local production capacities (scaling) and flexibilities (optionalities), tackling marketplace concentration and driving innovation, are the strategic steps to building a more robust, reliable and adaptable food supply chain.
Looking holistically at the end-to-end food supply chain, the industry is likely to be able to see significant opportunities as it drives for increased consumer choice, flexibility in the face of disruption, and long-term profitability. However, time is against the industry. It is important to recognize that much more progress is needed to be made over the next two years by industry leaders, government (through regulatory reviews) and consumer advocates.