Improving Productivity in Canada’s Food Processing Sector
By George Morris Centre
Features New Technology ProductionInvestments in Scale, Innovation, and Technology Needed to Help Canada’s Food Processing Industry Ac
February 7, 2012 – If Canada’s food processing industry is determined to realize its full economic potential it will need to achieve greater size of its facilities and companies.
February 7, 2012 – If Canada’s
food processing industry is determined to realize its full economic
potential it will need to achieve greater size of its facilities and
companies. With greater scale of operations, our food processors would be able to improve their cost performance and invest in areas like technology and R&D necessary for greater innovation.
That is the key conclusion from a joint study, Improving Productivity in Canada’s Food Processing Sector through Greater Scale released by the George Morris Centre (GMC) and the Institute for Competitiveness & Prosperity (ICP).
Canada’s food processing industry – comprising companies in meat, vegetable, and fruit processing as well as bakeries, confectionery, and dairy processors – is an important part of the Canadian economy accounting for 296,000 employees producing $89 billion worth of shipments annually. The industry represents the single largest market for Canadian agricultural products.
However, like most of Canada’s industries, it trails US counterparts in productivity – the economic value created per worker. GMC and ICP researchers assessed the impact of size on the productivity gap, concluding that our propensity for smaller facilities and firms were a key factor in their under investment in innovation. More specifically their economic analysis showed that:
Canadian food processing facilities have half the number of employees and less than half the sales revenue of US facilities with major differences found in all sectors of the food processing industry
Larger facilities are more productive – value added per employee for establishments at the 75th percentile is twice the level for the median establishment
Investment in machinery and equipment in Canadian food processing facilities trails the US; for every dollar invested per worker in the US, Canadian facilities invest only 62 cents.
The analysis showed that Canada’s largest food processing facilities are more productive than our smaller ones. The largest quarter of facilities generate about twice the value added per worker as the average sized facility. This is the result of spreading costs over larger volume, having more sophisticated management practices, and investing in more up-to-date machinery and technology.
The report concluded with three recommendations. First, Canada needs to continue its efforts at opening borders to international trade. This will expand the markets available to our producers and help them gain size and scale. While we have free trade with the United States, our lack of adequate border infrastructure is a constraint. Second, the federal and provincial governments need to rationalize our agricultural product marketing regulations.
Policies like supply management in some products restrict the ability of Canadian food processors in those markets from achieving a national scale at present. Finally, there needs to be greater recognition by governments, industry, and the public on the benefits of large-scale producers.
The report emphasized that this is not a big-versus-small debate, but rather a more balanced recognition of the contribution to innovation and prosperity by greater scale in our manufacturers’ operations.
For the complete report READ MORE
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