by Sylvain Charlebois
Troy Media

In its recent budget, the Newfoundland and Labrador government announced it will introduce a tax of 20 cents per litre on sugary drinks, starting on April 1, 2022. This a first in Canada.

So far we know very little about how the tax would work, which products would be affected and how revenues from the tax would be used by the government.

However, when a government commits to taxing a food product – or any product for that matter – it needs to proceed with extreme caution.

Many countries have taxed sugary beverages, with some degree of success. Mexico has become a well-documented soda tax case in recent years. Its per capita consumption of soft drinks is among the highest in the world, and it has high rates of obesity and diabetes.

A recent report from Mexico’s Sánchez Romero Supermarkets looked at the market three years after the tax was implemented. It noticed that the probability of becoming a medium or high consumer of soft drinks in Mexico had decreased because of the tax. And the probability of becoming a low consumer or non-consumer had increased. Those are encouraging results.

The study, which received a lot of media attention, led many public health experts to support the sugar tax concept simply based on a belief that it will discourage consumption.

The reality is a little more complicated.

We’ve seen cases where demand for soft drinks has gone up even with a sugar tax. A recent study on how France and Hungary are coping with their soda taxes was quite telling. France found a minor decrease in sugar-sweetened beverage sales after tax implementation but overall soft drink sales increased. In Hungary, a decrease in sugar-sweetened beverage sales lasted just two years, followed by an overall increase in sugar-sweetened beverage sales.

Studies into the impact of taxes on sugar-sweetened beverages often look at soft drinks in isolation. But analysts have suggested that once a sin tax is implemented in a country, consumers are tempted to buy other non-taxed food products to get their sugar fix. Sale diversions at retail are rarely considered.

According to the Lancet, since the sugar tax was implemented in Mexico the obesity rate in the country has gone up rather than down. And Mexico still has the highest carbonated soft drink consumption per capita in the world, more than seven years after the sugar tax was implemented in 2014.

Studies have also noted that price elasticity for soft drinks barely matters. Prices will fluctuate all year round due to weather, promotions and category management practices. A tax won’t necessarily make these products more expensive at retail.

Given how high margins are in this category, price isn’t a factor for most consumers in countries with a soda tax. The sugar tax is simply just absorbed by the supply chain.

We should dread the moralistic state that uses sin taxes to punish consumption. We’ve seen it with alcohol, cannabis and cigarettes. We’ve come to accept that these products should be taxed for one reason or another. But these products aren’t food.

It’s hard to see how this can end well for consumers or taxpayers. If sugar can be taxed, a revenue-hungry government could also tax sodium and even fat. Some of the most natural food products have high sugar, sodium and fat content. Some dairy products, meats and even natural juices, for example, could be part of a government hit-list.

Another dark side of sin taxes is how the funds are spent. Funds generated from sin taxes are often ill-directed, supporting a government’s problem of the day. Funds end up in some bureaucratic black box and are often used for other means than originally planned. Many countries have promised to use revenues from sin taxes on preventive medicine programs, awareness campaigns or health care generally. It either rarely happens or the accountability is just not there.

Most public health experts will desperately want to believe in the effectiveness of a sin tax on food, but the evidence is weak at best. Most studies suggesting a decrease in consumption of taxed products have flawed samples.

Education may be the most powerful tool we have.

Soft drink consumption per capita in Canada has decreased in recent years – without a sugar tax. An increasing number of Canadians have moved away from sugar-sweetened drinks due to effective awareness campaigning.

Empowering consumers with more information can only lead to altered behaviours and choices.

If Newfoundland and Labrador pursues a sugar tax, it’s certainly not to get its people to lead healthier lifestyles. Based on what has happened elsewhere, the government should be honest and state that this is very much about paying its bills.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

Recognizes that manufacturing – including farmers – are the anchor to the entire food supply chain

by Sylvain Charlebois
Troy Media

A new coalition led by the Retail Council of Canada (RCC) has presented a roadmap to peace within the food industry. It’s a positive step forward for the food production industry and consumers.

For years, grocers have unilaterally imposed fees on their suppliers, with questionable excuses. While grocers maintained a hard line to protect margins, food manufacturers and farmers – often family-owned and operated – were squeezed financially.

RCC, which represents Canada’s major grocers, always opposed any form of intervention and maintained no changes were required.

That all changed recently.

RCC and its alliance of stakeholders suggest an industry-led code of conduct, without public regulations. The model mirrors the Code of Conduct for the Credit and Debit Card Industry in Canada and the Fruit and Vegetable Dispute Resolution Corp. These bodies operate without any government intervention.

The alliance includes several other interest groups in the food supply chain, like farmers, processors and independent retailers. Almost 40 trade groups reportedly support this model, including 19 farming groups and 15 food processing groups.

The approach is incredibly inclusive.

The federal working group charged with submitting a final report in July has received the proposal.

Just a few weeks ago, another code of practice proposal was presented to the working group by Food, Health & Consumer Products of Canada, with the support of Sobeys, the number two grocer in the country. The principles were very much the same, except this proposal suggested the involvement of public authorities.

Both the United Kingdom and Australia implemented similar codes years ago. It was argued then that compliance could only be assured by getting governments involved. Since only provinces can provide oversight on these matters in Canada, a buy-in from all provinces is critical.

So two views are being presented to increase our country’s food autonomy by recognizing manufacturing as the anchor to the entire food supply chain.

Since many farmers produce finished products, food manufacturing includes them.

The question is no longer whether Canada will have a code of conduct to support farmers, food manufacturers, and independent grocers. It’s more a matter of what it will look like and who’s responsible for oversight.

This supply-chain issue may be seen as irrelevant to Canadians, but it’s not. This is very much about realigning a power imbalance that has been prevalent in the industry for years, and that imbalance favours grocers.

More discipline and predictability related to market conditions will give more authority to food manufacturers and farmers. Such measures will also likely give space to more diversity, excitement and innovation in food retailing.

Loblaw or Walmart may very well think they know what consumers want and need. But with consumers seeking value, and product attributes changing regularly, an efficient code will ultimately give more power to consumers.

Independent grocers could also get a chance to compete against larger operators.

Setting up the right model in Canada won’t be easy. The system needs to be transparent and effective. As much as industry wants to self-regulate, it has some embarrassing baggage it needs to consider.

Given what happened in recent years with the bread pricing scandal, for example, it’s unclear if Canadians have an appetite for more self-regulatory arrangements.

While industry needs an effective code, Canadians need to trust it to not feel cheated at their favourite grocery store.

We must remember that a code of conduct isn’t just about helping the industry; it’s mostly about creating a moral contract between the public and the food industry. A new code should be about serving Canadians and our economy, not just the latter.

The support of provinces, with some federal co-ordination, would be needed. And given their sizable markets and strong track records for appreciating our food supply chain’s integrity, Ontario, Quebec and British Columbia should be influential voices.

But more government involvement could come with unwarranted headaches. With governance, we need to move with extreme caution. Once we create more governance, the industry will need to live with it. Change, however necessary and however small, will always be challenging. If governments are involved, and the model is ill-designed, implementing changes could be a nightmare.

But ultimately, it’s a win for everyone that a federal working group is looking at the issue and that many stakeholders are already providing potential solutions.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

by Maurice Tougas
Troy Media

Are you familiar with John Cena?

If not, good for you; he’s not really worth knowing about.

For the uninitiated, John Cena is a former professional wrestler. According to the World Wrestling Entertainment website, he’s a 16-time WWE champion, author and ‘actor’ (quotes are mine).

To quote directly from the website: “After gaining the respect of his peers by stepping to The Olympic Hero, Cena went supernova as the fire-spitting Doctor of Thuganomics, eventually reaching the peak by upending JBL for his first WWE Championship at WrestleMania 21.”

If you don’t understand any of that, don’t worry. It’s all nonsense.

The bottom line is that Cena is a freakishly muscled wrestler/actor in the Dwayne ‘The Rock’ Johnson mode. He is also a snivelling, simpering coward. Yes, I said it. Come and get me, John, he said, knowing full well John Cena will never read this.

Cena last week issued a grovelling apology for an alleged insult. Now, grovelling apologies are routine amongst the celebrity classes. There isn’t a week where a celebrity doesn’t say something instantly labelled racist/sexist/homophobic/transphobic or a combination of all four, who then issues a clearly-not-written-by-them apology to the Twitter mob.

Cena found himself in one of those situation recently. His crime?

He angered China. No, not Chyna, the former WWE wrestler (who is dead, anyway). And not china from your grandmother’s curio cabinet. The real China.

Here’s the story. Cena is starring in a new film called F9, the latest instalment in the bafflingly popular Fast and the Furious movie franchise. (If you’re unfamiliar with the Fast and the Furious franchise, essentially it is about a bunch of good guys and bad guys find an excuse to race around the world in fast cars. That’s basically it.)

Cena was promoting the movie in Taiwan, where he made the following unpardonable statement: “Taiwan is the first country that can watch” the film.

Did you catch the offending term? Maybe Taiwan isn’t the first country to see the film?

No, Cena’s crime was calling Taiwan a country.

Now, you and I may think Taiwan is a country, because it is. Twenty-three million people live there. They have their own passports. It’s the 22nd largest economy in the world. Sounds like pretty good bona fides to claim nationhood.

But China says Taiwan is part of China, and the Chinese Communist Party – the most powerful organization in the world – takes these matters very seriously. The world has tiptoed around this issue, not wanting to irritate China, particularly in light of the fact that, according to reports, China has 2,000 ballistic missiles pointed at Taiwan.

John Cena doesn’t want to irritate China, either. He really, really, really doesn’t want to irritate China.

After his supposed blunder in calling Taiwan a nation, Cena posted a video apology. To make sure it got to the right people, he released it on Weibo, a Chinese social media network. And he spoke in Mandarin.

“I made a mistake,” Cena snivelled. “Now I have to say one thing which is very, very, very important: I love and respect China and Chinese people.

“I’m very sorry for my mistakes. Sorry. Sorry. I’m really sorry. You have to understand that I love and respect China and Chinese people.”

The only thing that would have made that more obsequious is if he was bowing humbly.

But why would John Cena care if China doesn’t like him? Could it have anything to do with $$$$$? Or maybe ¥¥¥¥¥?

China is a massive market for Hollywood slop. In 2020, China took over as the world’s biggest movie box office. If the producers of F9 want to recoup the film’s $200-million budget (movies have to make a least double their budget to make a profit), they’re going to need that sweet, sweet yuan.

And if that means the heroic, hyper-muscled star of the film has to grovel to the communist rulers of the most oppressive, most dangerous country on Earth, then get down on your knees, John, and say you’re sorry.

Sorry, sorry, sorry.

by Sylvain Charlebois and Amy Hill
Troy Media

Canadian food and beverage manufacturing plays a key role in supporting farmers and the rest of the food supply chain.

The second largest manufacturing sector, food and beverage, contributed $26.5 billion to Canadian gross domestic product (GDP) in 2020. Just 10 manufacturing sectors – including food manufacturing – contribute 80 per cent of manufacturing’s total portion of GDP.

In the last decade, few new food plants have opened and there have been significant closures. Nevertheless, food manufacturing was the second largest manufacturing sector in Canada after transportation equipment in 2020.

And food manufacturing still managed to grow its GDP contribution from 13.18 per cent in 2010 to 13.47 per cent in 2020.

All this has happened despite the sector lacking investment, suffering thin margins, facing additional grocers’ fees and dealing with aging facilities. So the food and beverage manufacturing sector in Canada is resilient.

But for Canada to become a global force in food processing innovation, the industry needs to be broadly recognized through better, more supportive policy.

And, as we’ve seen through the COVID-19 pandemic, domestic manufacturing is critical to Canadian security, including food security.

A new report by Dalhousie University uses 24 variables to examine the Canadian food and beverage manufacturing industry and the context in which it operates.

Data examined the state of the industry in 2010 and 2020, and was used to forecast industry outcomes in 2030, should it continue the current trajectory. All data came from publicly available sources.

Investment, labour concerns

Labour and greenfield investments are significant market concerns. Canada has had a small number of large companies operating broadly across the country, but that number has been shrinking over the past 10 years, with approximately 20 new national facilities opening in the recent decade compared to approximately 4,000 in the U.S.

Manufacturing is also experiencing a labour shortage, but there are concerns that the shortage is due to working conditions and unattractive wages. Wages, in constant dollars, have increased by 16 per cent over the past decade, two per cent above the 14 per cent inflation of goods and services.

Hourly food manufacturing wages remain below the average for the goods-producing industries.

Food manufacturers may be pressured to increase wages to retain skilled workers and attract new workers. Women and underrepresented minorities also present labour opportunities that the sector hasn’t fully realized.

Alongside labour challenges and aging infrastructure, a lack of greenfield investments is stunting innovation in food manufacturing and hampering upgrades to old facilities and technology.

Rising costs, thin margins

Grocers’ fees and rising input prices are eroding thin margins. Fees by grocers aren’t new, but they’ve increasingly been used since mid-2020 to structure supplier-grocer relationships.

The price of food products at the factory gate has been steadily increasing but might be eroded by measures such as grocer’s fees.
Factory gate prices rose by 27 per cent, while prices at the farm gate rose by 25 per cent over the same period.

Machinery and equipment prices have increased by 36.1 per cent over the past decade and will continue to do so.

Home renovations and regional lockdowns in 2020 impacted construction and put upward price pressure on building new facilities.

On a positive note, as players such as Google and Amazon enter the transportation market, advances in delivery may benefit food manufacturers and reduce costs.

Technology and waste

Technology and environmental concerns will be important over the next decade.

Investments are required to support the digitization of food manufacturing and have been on the horizon for some time, but most Canadian food manufacturers haven’t transitioned.

In 2010, consumers were thought to be the main cause of food waste, but this has been found to be untrue. Numbers from 2020 indicate that food processing and manufacturing account for 37 per cent of food waste.

This needs to change. Food waste often ends up in landfills and creates emissions equal to putting an additional 12 million cars on the road in Canada each year.

Regrettably, direct federal financial support for food and beverage manufacturers has been limited, possibly because most support typically comes from provincial governments.

It may also be that food and beverage manufacturing’s strong GDP performance makes it seem that government support is unnecessary.

But the pandemic’s spotlight on the food supply chain has changed things.

Government should also consider policies that support the industry and ensure Canadian food security. While financial support may not be realistic now, policy is an important tool for governments.

For example, suppliers have long called for a code of conduct between grocers and suppliers to deal with grocers’ fees. The new draft code from Sobeys and Food, Health and Consumer Products of Canada (FHCPC) provides a framework for a government version.

There are some serious questions to consider about the relationship between industry and the federal government, and between suppliers and Canada’s large grocers.

Partnerships are needed if the industry is to continue to provide food security to Canadians and if Canada is to address some of its biggest challenges in the next few years – including climate change.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University. Amy Hill holds a Bachelor of Science (Marine Biology/Oceanography combined) and a Masters of Marine Management degree from Dalhousie University.

by Franco Terrazzano
Troy Media

If you think the federal government’s so-called historic spending on a national child-care scheme is big, wait until you hear how much the government is spending to cover its debt interest costs.

In its 2021 budget, the Justin Trudeau government is promising to spend $30 billion over five years on a national child-care program. That’s a tonne of money considering we couldn’t afford it pre-pandemic.

But it’s still five times less than what the feds will have to pay in debt interest charges over that period, which will total $153 billion by 2026. That’s nearly $4,000 per Canadian. And instead of that money going towards health care or lower taxes, it’s going into the pockets of bond fund managers.

Assuming the feds can hold the line on budgeted spending – a generous assumption given the government’s track record – the deficit by the end of 2025 will still be $30 billion. The interest charges that year will be $39 billion. That means the borrowing to make up the budget gap couldn’t even cover the interest payments.

On top of this interest, taxpayers will have to eventually pay back the $1,000,000,000,000 – one trillion – debt tab.

It’s no wonder economists’ spidey senses are tingling from this debt-fueled spending spree.

The University of Calgary’s Jack Mintz noted that Finance Minister Chrystia Freeland “is rolling the dice that never-ending deficits will be manageable.” Mintz added that “just a one-point increase in interest rates would then increase the annual deficit by close to $5 billion.”

In the few months since the fall economic statement was released, the private sector has revised its 10-year government bond rate forecast up about half a percentage point. What happens if low interest rates inch up?

Mintz isn’t the only expert raising concerns.

“Are we really going to make this assumption that interest rates are going to stay static for the next 10 or 20 years?” said David Rosenberg, chief economist and strategist at Rosenberg Research, on BNN Bloomberg. “I just find so many people have short memories against what happened in the 1970s into the 1980s, and then all the tough choices and the hardship to get our fiscal situation back into some mode of stability.”

Former finance minister Paul Martin knows a thing or two about tough choices. After all, he cut government spending by about 10 per cent during his mission to erase the federal deficit in the 1990s. He also knows a thing or two about the dangers of debt binges.
“The debt and deficit are not inventions of ideology,” said Martin during his budget speech in 1995. “They are facts of arithmetic. The quicksand of compound interest is real.”

The provinces also learned their lesson the hard way.

“When [Ralph] Klein became premier, government debt daily snatched money away from patients and students due to escalating interest costs,” said government finance expert Mark Milke in his book Ralph vs. Rachel. “Between 1985 and 1993 in Alberta, the cost of interest on Alberta’s growing debt was $7.2 billion, equivalent to two full years of what the province spent on health care just a few years previous.”

Saskatchewan had to come to terms with its deficit addiction by enduring “a lot of pain,” according to former finance minister Janice MacKinnon who closed 52 hospitals across the prairie province.

“We left a fiscal situation in Saskatchewan until it was a crisis and so we had to make dramatic cuts to fundamental programs and raise taxes to get out of the situation,” said MacKinnon.

The moral of the story is that the best time to put out a fire is before it spreads. But by betting the house that interest rates will stay low forever and nearly doubling Canada’s debt in a few short years, Budget 2021 is adding fuel to the fire.

Franco Terrazzano is the Federal Director of the Canadian Taxpayers Federation

by Dr. Sylvain Charlebois
Troy Media

Spend, spend, spend – that’s the strategy. And green is the colour of choice.

The environment is front, left and centre in the latest federal budget. Everybody is getting something to get more environmentally focused – well, almost everybody.

While taxpayers won’t get a break any time soon, the federal government’s footprint in our economy will grow substantially over the next few years.

However, these are not normal times. Despite record deficits, most Canadians will see this budget as a parenthesis, buying time before things get back to some sort of normalcy. Someone will have to pay for all this but it doesn’t seem to matter right now.

The federal government delivered very much what most people were expecting in the April 19 budget – and the agri-food sector is getting its due share.

The carbon tax had become a problem for farmers who had little or no option to reduce emissions. With a carbon tax likely going up to $170 a tonne by 2030, drying grains will get increasingly expensive since little alternative technology exists.

But the budget supports the use of green technologies for farmers, with $50 million set aside for the purchase of more efficient grain dryers for farmers across Canada.

It’s money better spent in this way than buying $12-million eco-freezers for Loblaws, a decision last year that became a farce. Farmers have fewer choices than grocers when it comes to reducing their carbon footprint.

Farmers already had access to programs to support the purchase of greener energy but the federal government clearly wanted to make a statement with the grain dryer funding.

Broadband internet is also getting more funding. Increasing capacity to allow for more efficient communications in remote areas should be a priority, especially with COVID-19 creating the need for more telecommuting.

Canada is a vast land that needs all the improvements in communications connections it can get. More investment for farmers and people who seek a country lifestyle is welcomed.

But the budget did miss one massive target.

Over the last few months, the federal government has been incredibly generous with farmers in the supply management systems: they will receive more than $2.7 billion over several years in compensation for hypothetical losses incurred by trade deals with Asia, Europe and the United States.

However, according to internal government documents, processors are set to lose over $300 million a year with an influx of more imported products sold in grocery stores.

For 2021-2022, food processors impacted by trade deals are to get $1 million. That’s it.

Farmers within the supply management systems can always recalibrate quotas, allowing them to stay in the system or retire. But food processors will simply lose market shares to competitive products from elsewhere in the world. This will be seen by processors, especially in the dairy sector, as a pure insult.

Once again, the federal government didn’t forget many Canadians who have been left behind by the pandemic, which is good news. The budget will provide $140 million to top up the Emergency Food Security Fund and Local Food Infrastructure Fund to strengthen our food security.

While most economists agree that consumers will start spending again as soon as they can, a growing consensus is that we’re looking at a K-shaped recovery. While some will do well, others will suffer. Supporting not-for-profits and food banks should be a priority.

Over $20 million will also be spent eliminating interprovincial trade barriers, which disproportionately impact regions outside Ontario and Quebec. It’s a nice thought but this issue is complicated. Depending on who is in power in Ontario and Quebec, only time will tell if trade within our country will become easier than it is with other countries. It’s a pipe dream for now.

Finally, the budget signalled the government’s intention to negotiate lower credit card transaction and interchange fees. This will help food retailers, restaurants and other small businesses. These businesses have been largely forgotten by the government in the last 14 months.

However, lowering credit fees will be as challenging as getting rid of interprovincial trade barriers. It’s another pipe dream but at least the government’s heart is in the right place.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University

by Dr. Sylvain Charlebois
Troy Media

Nobody wants to hear about higher taxes. It’s an unpopular and counterintuitive notion to those who believe taxation is a call of death for economies looking for growth.

But the world is different now, which is why United States Treasury Secretary Janet Yellen’s call for a minimum corporate tax to stop the so-called race to the bottom is an interesting one.

The G20 corporate tax average went from 33 per cent in 2000 to roughly 27 per cent in 2020. For Organization for Economic Co-operation and Development (OECD) countries, the average went from 33 to 23 per cent.

Over the last two decades, depending on who was in charge in any given country, the temptation to lower corporate taxes and increase foreign direct investments at times has been overwhelming.

What the U.S. is proposing is a 21 per cent minimum federal corporate tax rate, coupled with eliminating exemptions on income from countries that don’t enact a minimum tax to discourage offshoring of jobs.

Given the slim margins, the food industry has certainly been influenced by fluctuating corporate tax rates in recent years. Restaurant Brands International is essentially a Canadian company because of a tax inversion play to create a holding company that includes Burger King, Popeyes and, of course, Tim Hortons. When Donald Trump lowered corporate taxes in the U.S. while president, the urge to go south only grew.

But now the world appears to be of the mind that it’s time to think more broadly. The European Union and Canada are willing to discuss the issue.

However, an agreement among industrialized countries might not be easy. Corporate tax rates vary widely from nine per cent in Hungary and 12.5 in Ireland, to 32 per cent in France and Germany, to 31.5 per cent in Portugal. The combined corporate income tax rates in Canada and the U.S. are at 26 per cent. Rate differentials are substantial and the revenue base for governments to be sacrificed are significant.

Conversations about subsidies are also necessary. Levelling tax rates is one thing but countries also tend to offer sweet subsidies to attract investments. Maple Leaf Foods opted to build a new plant in Indiana after being offered a generous public subsidy exceeding US $50 million.

Taxing companies that make profits even if they don’t have a physical presence in a country – like Google, Amazon, Facebook and Apple – has been a goal of OECD countries for years. Yet talks about global taxation schemes have always stalled, essentially because fiscal policies are often seen as highly guarded instruments that governments have at their disposal to influence their economies.

Complying with any international guidance on tax rates would mean letting go of some fiscal sovereignty. Moreover, the politics of changing tax regimes in some countries, including Canada, would be a huge undertaking.

Still, in the post-COVID-19 era, we should expect more global policy co-ordination. The pandemic has made many governments and, frankly, most of us realize the obvious. Health, economic and environmental risks know no borders, and methods to mitigate these risks merit a more holistic view.

Countries can pursue nationalistic agendas on a variety of issues but our collective consciousness, specific to how some decisions impact other parts of the world, now has a different frame of reference.

For the food sector, Canada has seen its share of nearshoring or onshoring in recent months. Kraft Heinz is reinvesting in Montreal, building a new plant for its ketchup brand. AB InBev announced recently it was going to brew Corona and Stella Artois beers in London, Ont. Lovingly Made Ingredients, a United Kingdom-based vegetable protein manufacturer, opened a new facility in Calgary. European giant Roquette opened the world’s largest pea protein plant in Portage la Prairie, Man., a few months ago.

After years of seeing many food manufacturing jobs disappear in Canada, this new wave of investments is certainly welcome.
A global push for more carbon pricing and a better appreciation for the inherent risks in the supply chain are likely enticing companies to rethink how and where manufacturing plants ought to be built.

This new systemic way of thinking is giving Canada a competitive advantage. Corporations already appear to be assessing risks very differently. It’s time for governments to catch up.

The generations severely affected by the pandemic will perceive risks differently than citizens who have been largely spared COVID’s wrath. Citizens who pay a lot of taxes will expect governments to set up mechanisms not only to mitigate clear and present dangers, but also future ones from abroad.

Whether it’s about setting up a minimum corporate tax rate among OECD countries or something else, our selfish ways of governing are no longer viable given the global risks we must manage.

Yellen’s effort is a good one, even if it doesn’t amount to much of anything. Harmonized global policy thinking is needed more than ever.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

by Dr. Sylvain Charlebois
Troy Media

We learned recently that McCain Foods has upped the ante in TruLeaf Sustainable Agriculture and its wholly-owned subsidiary GoodLeaf Farms, Canada’s largest commercial vertical farming operation.

McCain has invested $65 million in GoodLeaf, making it the single largest shareholder in the venture. The idea is to create a national network of sustainable vertical farms that will bring fresh produce to several urban markets in the country.

These are exactly the type of projects we need in Canada.

GoodLeaf has come a long way from its humble beginnings in an abandoned school in Bible Hill, N.S. It now operates a fully-automated 45,000-square-foot facility in Guelph, Ont., and is looking to expand its operations nationally, with McCain’s support.

These are highly capital-intensive projects and getting a private sector leader in partnership is nothing short of a coup. The company has the technological experience and expertise to do well.

McCain brings to the table far more than just cash. The company is probably one of Canada’s best agri-food vertical integrators. It understands supply chain economics very well. The potato industry in Canada is amazingly well-co-ordinated, mostly due to McCain’s leadership. From farm to fork, farmers, distributors and even food service, including players like McDonald’s, all work together to improve efficiency and quality.

Last year, McCain had to deal with a 300-million-pound glut of potatoes due to the closure of thousands of restaurants. More than 75 per cent of fries are consumed through food service. Most of the glut was rerouted or repurposed within months, and 12 months later, the industry is back on its feet.

While milk was being dumped everywhere, the potato industry regrouped and got it done. It was an impressive feat.
McCain’s ability to work the food chain will help GoodLeaf. Since these projects are about generating business in a high-volume, low-margin environment, risks can be high. Dealing with grocers is never easy but understanding the stock-keeping unit (SKU) game and what happens in grocery stores will be critical. These partnerships are key for Canada’s ongoing pursuit of more food autonomy.

Food autonomy is about moving the needle on domestic production. It’s not about food sovereignty, which fosters the desire to produce and regulate everything within our borders. An autonomous food system is about building production capacity in an open economy.

Investing in controlled-environment agriculture (CEA) is about optimizing growing conditions for any crops, throughout the year, regardless of weather patterns. CEA technologies have come a long way to include hydroponics, aeroponics, aquaculture and aquaponics.

There are several ways to grow crops effectively and safely. GoodLeaf uses hydroponic techniques to produce sustainable, safe, pesticide-free, nutrient-dense leafy greens, very much what a growing number of consumers are looking for.

Vertical farming also knows no limitations when designing a supply chain. To reduce logistical requirements and increase product quality and freshness, vertical farms can be built in cities, in suburbs, anywhere. Growing microgreens or produce generates no smell, unlike livestock.

The potential is substantial, especially for a country like Canada where produce price volatility has historically given consumers sticker shock.

According to NielsenIQ numbers, vegetable prices over the last 12 months have increased by almost 11 per cent. Some products, like tomatoes and cauliflower, have seen higher increases.

When healthy food is perceived as financially out of reach, some consumers will walk away and their nutrition will suffer.

With climate change, CEA and vertical farming can become humanity’s best friend, no matter where you live in the world.

Conventional outdoor agriculture has also come a long way but it remains highly vulnerable to a variety of uncontrollable factors.

So the McCain-GoodLeaf partnership is a step in the right direction. We have access to clean water, clean energy and affordable land in Canada, compared to other places. All the main elements are there for this growth.

But $65 million is still a very modest sum compared to what we’re seeing elsewhere in the industrialized world.

AppHarvest, an agri-tech company operating one of the world’s largest CEA facilities in Morehead, Ky., became a publicly-traded company in the fall.

The transition provides AppHarvest with more than $600 million of unrestricted cash, which will primarily be used to fund operations and the building of many other facilities around the United States.

With climate change affecting crops in Florida, Arizona and California, coupled with the emergence of better soil and plant science, agri-tech clearly has the attention of many investors. The pandemic just made the issue even more obvious. America has now over 50 major vertical farming operations, with more to come.

We have much to do in Canada to catch up. But this new McCain-GoodLeaf venture should be a good case study.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

by Dr. Sylvain Charlebois
Troy Media

According to the United Nations, 2021 is the International Year of Fruits and Vegetables. Many couldn’t care less about a proclamation from a global agency that has been criticized over the years as being inner-looking and out of touch.

Some of this criticism is certainly warranted but depending on the topic, these campaigns can bring a healthy load of success and change.

The year 2016 was the International Year of Pulses. At the time, consumers were starting to mentally correlate food choices with environmental stewardship.

Context helped shine some light on Canada’s most overlooked crop: pulses.

Slowly, Canada’s becoming a super vegetable protein powerhouse and consumers are buying in. In 2020, plant-based sales grew 31 per cent in Canada, even amid the pandemic.

The focus on fruits and vegetables this year can assist the UN’s ambitions to advocate for the importance of healthy diets and lifestyles through sustainable food systems.

Our fight with COVID-19 went from keeping safe to achieving immunity in the last month or so. Collective immunity has been top of mind for many people, given our acute focus on how vaccines are being rolled out.

The best medicine, virus or not, is sound nutrition. One of the major pieces to building a strong immunity system is eating more fruits and vegetables. If one country needs to be reminded of that, it’s certainly Canada.

In 2021, despite volatile prices, 41 per cent of Canadians intend to increase their consumption of fruits and vegetables. Last year, it was 46 per cent. Canadians did buy more fruits and vegetables at retail in 2020, but they have bought more of other food categories as well.

According to NielsenIQ, vegetable sales in Canada have risen seven per cent in volume and 13 per cent in dollars since vegetables became more expensive. Fruit unit sales were up five per cent and seven per cent in dollars.

Restaurants aren’t a significant market for fruits, so lower percentages there aren’t surprising. In volume, Quebec, Ontario and British Columbia all saw sales up in volume by eight per cent for vegetables and six per cent for fruits.

The lowest increase for both categories was in the Maritimes, at two per cent for vegetables and only one per cent for fruits. Those figures are disappointingly low.

Most products experienced tremendous growth in retail sales in 2020. Tomatoes were the most popular produce in 2020, as sales grew almost 28 per cent in dollars. Since some people were still looking for convenience, bagged vegetables grew 25.8 per cent in the last 52 weeks.

In fruits, oranges saw the biggest increase in sales at 21.9 per cent, followed by cherries and lemons.

Dollar sales of both celery and peaches dropped in 2020 but this is likely because these products’ price points were much lower than in 2019.

Highly-publicized recalls also have impacted some categories in the last year, mainly for peaches and lettuce. Numbers suggest onions dodged a bullet in 2020 as they too were subject to a recall.

But given what happened to the food-service industry in the last 10 months, these numbers may just be a mirage.

People cooked more often at home and that required more produce being bought at the grocery store. Unit sales for tomatoes, for example, only grew six per cent. Almost one Canadian in five started a home garden in 2020 and many grew tomatoes, but still. In general, the numbers aren’t impressively high with many restaurants closing.

Figures from NielsenIQ suggest we may not be buying and eating more produce, as our minds may have yet to focus on healthy eating. Since March 2020, it has all been about baking, snacking and indulging to simply overlook the awfulness of the pandemic, if only for a while.

As suggested by Canada’s Food Guide, fruits and vegetables are vital components for achieving quality of life and a stronger immune system amid the pandemic.

Also, recalls and highly volatile retail prices spook consumers all the time, which is why many consider produce the most vulnerable section of the grocery store.

Declaring 2021 the International Year of Fruits and Vegetables is both timely and important.

vAs more governments investigate food autonomy as a priority in the post-COVID era, building awareness of the value of consuming produce will be parallel.

Building capacity through controlled-environment agriculture in Canada can only make our produce supply chains less vulnerable to macro-factors like currency and bacterial outbreaks.

We also desperately need to take care of our immune systems, and as soon as possible. Reminding us of the importance of eating enough produce benefits everyone.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

by Dr. Sylvain Charlebois
Troy Media

It was certainly a year to be forgotten for the food service industry. Statistics Canada numbers told us this week that food service sales dropped a whopping 32 per cent from the fourth quarter of 2019 to the same period in 2020.

The food retail/service ratio, a key metric to assess how important food service is in our lives, also saw a significant shift in the fourth quarter of 2020. Before the pandemic, about 35 per cent of all the money spent on food in Canada was in food service and restaurants.

In quarter two of 2020, it went below 20 per cent, the lowest level in decades.

It’s back up to 24.3 per cent but that’s still a very low percentage compared to before the pandemic.

Across the country, the sector registered fewer than 20 bankruptcies since August.

But many restaurants have simply closed or given up on their business. COVID-19 has ripped away the dreams of many entrepreneurs and chefs. It’s heartbreaking.

Even worse, a large number of new Canadians, who have brought more innovation and wealth into the sector over the last several years, have had to close shop. A lot of them were family businesses. It’s happening around the world, including in Canada.

But COVID-19 may offer the food service industry an opportunity to experience a great reset. Like many sectors, food service has had to adapt, pivot, convert and change over the last 12 months to survive. It has been incredible.

While the industry will come out of the pandemic with scars, the future presents a great opportunity to redefine its purpose in our overall economy.

Even with the pandemic’s end in sight, it’s unclear if people will be comfortable going out and about, patronizing their favourite restaurants again.

It will take time before most Canadians stop fearing the virus. The fear must be managed carefully by restaurant operators.
While many establishments have disappeared, the gap created by the massive exodus will provide room for more innovation.
New recipes, new cuisines, new ingredients, new tastes, new ways of serving, new restaurant designs and more.

Canadians, coming out of their kitchen-intensive pandemic days more food literate, will have different expectations. The need for more creativity will spark innovation for years to come.

Perhaps it won’t happen at the very beginning of the post-pandemic era, when pent-up demand will get people out no matter what. But soon after, Canadians will expect more.

The way the competitive landscape is defined by operators will also change. As a result of the pandemic, the supply chain is much more open and democratized. Many companies can sell online – and not just food. Prepared meals and meal kits are being delivered at a record pace.

With e-commerce becoming a legitimate strategic option for a growing number of operations, farmers, farmers’ markets, and processors can and are selling directly to consumers.

Kraft Heinz, of all companies, is operating three ghost kitchens in Canada. Imagine, a multinational consumer goods company delivering meals to consumers. Profits aren’t the aim – rather, it’s about understanding the ever-changing customer.

Loblaws, through its PC Chef app, is in the meal kits business as well, prepared by well-established restaurants in some parts of the country.

The pandemic has altered the rules for everyone, including restauranteurs.

Market access and consumers’ expectations will make things interesting. A combination of both always leads to more innovation.

On the human side of the equation, the sector will need to find a way not only to attract more talent but also to offer people a chance to build careers. Salaries and how workers are compensated need urgent attention.

During COVID-19, the no-tipping agenda was brought back into focus. Tipping is known to be discriminatory and can only benefit the few. The experience, and the meal itself, is the product of many people’s work, not just the server.

To make the sector more attractive, and for equality’s sake, the practice of including the tip in prices, like we see in many parts of the world, will need serious consideration.

It’s time for a great reset so the sector becomes a place of choice for a growing number of people who have lost their professional positions due to COVID’s wrath.

It’s unclear when Canadians will be back out in full force and once again spending at least 35 per cent of their budget on food consumed outside the home. It could take a few years, perhaps more.

But as with everything, humans will bounce back – and a different food service industry will surely be ready.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.