Food
processing remains a strong industry despite plant closures
Mar 12, 2014 Romina Maurino, The Canadian Press
TORONTO – Despite a
number of high-profile plant closures in recent months, the food processing
industry in Canada is becoming more competitive and those efforts are likely to
bear fruit in the form of jobs, according to a new study.
Western University’s
Ivey Business School says its study found that the most commonly cited reason
for closures was that a plant was no longer competitive and, in many cases,
production was being consolidated at another location.
But when new plants
open, they are often larger and incorporate new technology that drives down
costs, it found.
Recent high-profile food
plant closures in Ontario, such as the Kellogg operation in London and the
threat of closure that loomed over the Heinz plant in Leamington before it was
saved by a last-minute deal, raised concerns in a province that had watched its
auto and steel industries decimated by the recession.
While auto manufacturing
has improved, a string of closures that also included Smucker’s and Lance
Canada Ltd, has led many to question the future of food processing in the
province.
But the Western study,
co-authored by David Sparling, said that between 2008 and 2014, the 105
closures in the province have been balanced by 105 openings and plant investments.
That means that while
plant closures resulted in job losses, the industry overall did not experience
a net decline in employment.
“The food industry
typically has had lots of small plants and lots more retail,” he said.
“The new footprint for
globally competitive manufacturing tends to be larger plants and probably
located close to workforces as well as markets and transportation corridors.”
Hamilton, Brantford,
London, Toronto and Windsor, Ont., are all large centres that have big
workforces and the ability to service a larger company, he said.
“We’re probably going to
lose more small plants in some small centres, (but) that said, the food
industry also has a huge number of small companies and … a lot of them are
starting up in rural centres, where people … want to extract some more value
from farm product.”
Cities like Hamilton and
Brantford, which were hit hard as manufacturing changed, are seeing new
opportunities with a Ferrero Rocher plant in Brantford and a Canada Bread
operation in Hamilton, said Sparling, who is the chair of Agri-food Innovation
at Ivey.
When looking to set up
new plants, he added, companies did consider whether there were people in the
area who already understood manufacturing and were looking for work.
“The food industry doesn’t
tend to pay quite as much as things like automotive and steel, so there’s a bit
of an adjustment that way, but they are still good manufacturing jobs,” said
Sparling.
Food processing, like
other manufacturing in Canada, was hit hard by the recession, the high loonie,
increased foreign competition and higher input costs.
But it has also been
impacted by an increasingly competitive retail market for grocery stores, which
“are operating at razor-thin margins and they’re just not doing as well as they
have been in the past,” Sparling said.
“That means they’re
really unreceptive to increase costs coming to them, so that puts all kinds of
pressure on food manufacturers to figure out how can we get interesting
products that consumers would care about to retailers without imposing any
additional costs.”
The study, titled The
Changing Face of Food Manufacturing in Canada: An Analysis of Plant Closings,
Openings and Investments, found that there were 143 plant closures announced
between 2006 and 2014, resulting in projected losses of almost 24,000 jobs.
The industry went
through a particularly challenging period in 2007 and 2008, when 48 closures in
the country outnumbered the 27 openings and plant investments. Ontario was the
hardest-hit province, while Quebec was more successful in balancing openings
and investments with closures.
But revenue continued to
increase during that period and employment recovered more quickly than at other
manufacturers.
Closures were also
offset by investments from both foreign and domestic companies, with Canadian
firms making slightly higher investments and the majority of activity coming
from smaller firms.
“The overall picture is
one of an industry that went through tough times in the mid 2000s but in recent
years has been looking more positive in spite of continuing challenges,” the
report said.
“It is also an industry
that is more ready to compete than it was in 2006.”
To continue to grow the
sector going forward, the report highlighted the need to create an attractive
investment environment, reduce energy costs, to support and facilitate trade
and to provide incentives for companies to choose to set up shop in Canada and
upgrade technology.
Food companies also
voiced concern about labour supply issues in the future, as they worried about
meeting the growing need for skilled labour and said they could benefit from
greater use of apprenticeships and training programs.
The food processing
industry produces more than 70 per cent of the food Canadians buy and, with
revenue of more than $88 billion in 2011, it’s the second-largest Canadian
manufacturing industry and Canada’s largest manufacturing employer.
