Thursday, February 7, 2013

Canadians facing tough competition


Canadian food manufacturing are losing ground to U.S. competitors, according an analysis and commentary by Kevin Grier of the George Morris Centre.

The Canadian dollar has risen, making imports cheaper and exports more expensive.

Canadian wages used to be a dollar less per hour than in the U.S.; now they are $3 an hour more.
Productivity is slipping. Canadian plants market $383,000 per employee; in the U.S. it’s $500,000.

Canadian companies are in a profit squeeze, unable to pass on all of the increased costs for raw materials. That leaves them less money to invest.

Grier sees two basic options – the Maple Leaf Foods Inc, route to build large new plants that can match the U.S. competitors. Maple Leaf has built a huge bakery and has a huge meat-processing plant under construction, both in Hamilton; it is closing older, smaller plants.

The other option “is one of delivering added value or innovation to buyers,” says Grier.

“Ultimately it is individual companies that compete within the opportunities or constraints
presented by provincial or federal fiscal and regulatory parameters,” says Grier after noting that industry-wide data show our trade deficit for value-added foods went from $1 billion in 2004 to $6.3 billion in 2011.

“Canada’s fiscal and regulatory parameters have also come under greater scrutiny in light of the
par dollar.,” he writes.

“In the last five years, federal and provincial governments tried to show their
commitments to food industry competitiveness through grants and loans. Alberta’s ALMA
program and the federal government’s AgriProcessing Initiative are two examples.

“Given the results so far, it suggests that federal and provincial governments need to put their efforts
elsewhere.

“Questions regarding the impact of fiscal and regulatory impacts on competitiveness
need to be answered, or better yet, at least asked,” says Grier.