Alberta’s food-processing industry faces a grim future without a “disruptive intervention,” says an agri-food industry veteran.
“Current approaches toward innovation and growth — particularly in the food industry here in Alberta — are not working,” said Jerry Bouma of Toma & Bouma Management Consultants.
“If we seek success and want to grow this industry, we’re going to have to do things differently.”
Alberta’s food-processing industry has been lagging behind other sectors for over 20 years, said Bouma, who spoke at the Conference on Food and Innovation in late May.
“Our industry — food and agriculture — is definitely second tier in Alberta. It’s way down there relative to energy,” he said. “It’s sort of an afterthought, a poor country cousin. No one’s excited about agriculture and food.”
In 2004, the government of Alberta launched a strategic plan that was meant, in part, to ramp up food production in Alberta. The mantra became 20:10 by 2010 that meant “we’re going to achieve a $20-billion value-added sector next to a $10-billion production sector by the year 2010.”
That didn’t happen, said Bouma.
“We thought 2:1, how hard can that be?” he said. “Back in 1995, the ratio was about 6:6 – $6 billion farm production and $6 billion food processing. In 2015, it’s about $12.5 billion to about $12.5. The ratio hasn’t changed at all. It’s still 1:1.”
And though it may look as though the outputs on both sides have doubled, Alberta’s “real growth is probably less than 15 per cent” once population growth and inflation are factored in.
“Relative to our population growth and economic growth, we’ve gone backwards.”
In Canada, food manufacturing is the No. 1 employer and top contributor by GDP, at $103 billion in 2012, said Cornelia Kreplin, executive director of sustainable production and food innovation for Alberta Innovates Bio Solutions (AI Bio).
But only 40 per cent of agricultural commodities produced in Canada are converted into value-added products, she said. That number is much lower in Alberta.
“Three-quarters of what Ontario produces is actually value added in terms of exported product,” said Kreplin. “When we take a look at Alberta’s performance, most of what we export is dominated by agricultural commodity sales.
“We do have an opportunity to increase food manufacturing in Western Canada.”
In 2012, AI Bio contracted the Conference Board of Canada to review opportunities in Alberta’s food-processing sector. Its review found “Alberta’s food business motivation to innovate is, in many cases, much less than motivation in B.C. and Quebec.”
That was a wake-up call for Alberta’s food sector, said Bouma.
“We’re in this province thinking we’re leaders in entrepreneurship with a can-do spirit, yet this firm comes along and tells us that, within the food sector, we’re not even average. We’re at the bottom, relative to our provincial counterparts.”
And why is that?
Well, said Bouma, food manufacturing is a “tough, tough business.”
“The food business, from a business perspective, is not very enticing,” he said. “It’s terribly competitive, the margins are tight, and it’s so easy to copy.”
Look at thriving Alberta food businesses — such as Heritage Foods, Big Rock Brewery, and the Little Potato Company — and you find “intense personal drive and differentiation were the key success factors.”
“They were led — and in many cases, founded — by a very driven individual who exemplifies leadership and tenacity that you’ll find nowhere else,” said Bouma. “And in almost all cases, they’ve either developed a new product line or introduced a new product category that clearly differentiates them.”
But these companies are already going “flat out” to keep up with growth.
“Those companies that are best placed and best suited for exponential growth are, in fact, maxed out, and it’s hard to attract the managerial and the business talent to enable that.”
A new framework for food innovation could fix that, said Bouma.
Presented at the conference, the proposed Food Research Project Framework is based on the “model of innovation” that led to the creation of the Internet — the U.S. government’s Defense Advanced Research Projects Agency.
“What makes it different from what we’ve done so far? It’s built on capability and proactivity — getting the right people led by a vision and a mandate,” said Bouma. “It’s focused on the market: Where’s the growth opportunities? What are the companies that can really grow with the right kind of management teams and structures?”