MRO Magazine

Growing your food business in Ontario

Everyone loves food, and for this reason, the food industry is filled with many opportunities to innovate.


Food

February 2, 2022
By Maryam Farag


Industries

PHOTO © ANNASTILLS / ADOBE STOCK

If you’re thinking about start- ing a business, the food industry is a good option for investment. Why? The main reason is that it’s a basic need. Also, many people lack time to prepare food themselves. Finally, food-related businesses are less likely to experience financial trouble than other businesses.

However, the past two years have been rough on the whole world, including the food and beverage manufacturing sector. Production disruptions, labour shortages, reduced demand from restaurants and social distancing measures have hindered the industry since spring 2020.

Nonetheless, these circum- stances do not change much about the fact that agri-food processing remains the second largest manufacturing industry in Canada, accounting for 17 per cent of total manufacturing sales.

According to a Business Development Bank of Canada’s (BDC) report, Food and Beverage Industry Outlook: How changes in the economy affect Canadian food and beverage manufacturers, the processing industry is an essen- tial part of the Canadian food supply chain.

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It purchases about 40 per cent of Canadian agricultural production, and sells over 70 per cent of its output to Canadian retailers and food service providers.

This industry still has strong growth potential, especially at a time when we are looking to diversify and strengthen the economy in a downturn. As worldwide population is pro- jected to rise to 10 billion by 2050, there are opportunities for man- ufacturers to supply the growing global demand for food.

“In fact, our report anticipates a robust 15.6 per cent growth in the food and beverage sector domestically over the next five years. Such growth will impact exports, which currently account for 30 per cent of manufacturing sales, predominantly to the United States,” said Rowda Mohamud, Senior Busi- ness Advisor, BDC Advisory Services.

“When major grocery chain shelves were emptied and stores were unable to replenish imported products, like pasta sauce, flavoured carbonated drinks and packaged frozen food, consumers voted with their wallets. Forced to eat at home during lockdown, Canadians helped trigger a 20 per cent increase in year-over-year grocery store sales from November 2019 to November 2020, despite a 27 per cent decline in manufacturing.”

At the same time, demand for food services shifted to retailers. Overall, the industry declined 5.2 per cent to mid-2020, but had already recovered to pre-pandemic levels by the fall of 2020. Not to mention that food pro- cessing is the largest manufacturing industry in most provinces; Ontario and Quebec account for most of Canada’s production with 42 per cent and 24 per cent, meaning that, those interested in expanding operations

in Canada, should look at Ontario, as it is fertile ground for growth.

According to Invest Ontario, Ontario’s food and beverage manu- facturing sector is the third largest in North America, with manufac- turing revenues of more than $48 billion. The sector has more than 3,000 establishments in the prov- ince, employing over 104,800 people, including global companies, such as Coca-Cola, Nestle, PepsiCo, Kel- logg’s, Unilever and Kraft Heinz, and homegrown companies like Maple Leaf Foods, Dare Foods Limited and Weston Foods.

Thinking about committing to Ontario when opening your food business? Here are some things to consider:

1 – TALENT

Ontario’s primary advantage is its people. The province has a publicly- funded network of 22 universities and 24 colleges. As a result, 70 per cent of Ontario adult workers have post-secondary education, more than any other country in the Organ- isation for Economic Co-operation and Development.

In addition, in manufacturing, the province has a 9.5-year average on- the-job tenure (compared to 5.5 in the U.S.), which translates to lower transi- tion and training costs.

2 – COMPETITIVE COSTS

Ontario has low corporate tax rates, therefore, small-and medium-sized manufacturers can save on their after- tax R&D expenditures.

3 – ACCESS TO GLOBAL MARKETS

Ontario’s food and beverage manufac- turers benefit from trade agreements with 50 countries around the world, including CETA and CUSMA, and is close to many U.S. hubs.

4 – GEOGRAPHICAL LOCATION

Products can reach the U.S. market, as Ontario’s transportation network includes four international and 300 regional airports, and many border crossings. It also has one of the most internationally connected airports in the world.

However, given the global pandemic, some businesses are struggling financially, especially farmers. Ontario has launched programs recently to help with funding processors who need support.

• Provincial and federal COVID- 19 financial supports for farmers: provides a summary of federal and provincial support programs for Ontario’s producers.

• Canadian agricultural partner- ship: offers cost-share funding to support farmer, processor, other businesses, sector organizations and strategic partnerships.

Evolving food demand, labour shortages and a need to keep invest- ing in new technology presents both challenges and opportunities for businesses operating in this sector. However, the recovery and potential future growth of Canada’s food and beverage industry is on the track of getting stronger.