LIVING HIGH OFF THE HOG
By Steven Biggs
Contributing Editor, Country Guide Magazine
Spring 2008
HOGTOWN. THE NAME
STICKS. Many Canadians attribute it to Bay Street’s financial
district, home of bulls and bears. Or they link it to the city’s knack
for hogging the national spotlight. Few think of it as what it really
is, a proud name that reflects how much this city owes to its food
industry.
Better known for its bazaar of ethnic restaurants, Toronto is also a buzzing hive of food processors. In fact, it’s the second-largest food processing centre in North America, trailing only Chicago.
Toronto itself is home to 400 food processors, and when the surrounding
region is included, this number jumps to 1,600. It’s big, and it’s got
impact. Making a wide array of products from baked goods and processed
meats to food supplements, sauces and condiments, plus a world of
specialty ethnic foods, this cluster of businesses also supports other
entire industries, including packaging, warehousing, and distribution
operations.
What made Toronto — the financial capital of Canada — a food processing
hub? Historically, location, trade policies, and ample labour combined
to shape Toronto into Hogtown. Centrally placed within Canada and North
America, with good transportation, it was often chosen as a Canadian
base by subsidiaries of foreign firms.
Those same
factors are still driving food processors today. Toronto now sits within
an affluent and cosmopolitan regional market of six million people, and
within a one-day drive of 150 million consumers. Along with this, it is
a North American hub for trucking, rail, and air transport.
But… in an
era of global trade and branching transportation networks, Toronto knows
it needs to make some smart choices so its location still matters.
What makes Hogtown a hub?
Chocolate, bread, muffin mix, crackers, gum, confectionaries, canned
soup, meats, cheese, and countless specialty foods: This is only a taste
of the goods produced in the city. Yet Michael Wolfson, food and
beverage sector specialist with the City of Toronto, believes that the
city gave birth to this hub by accident, not through any co-ordinated
plan.
Planned or
not, Toronto is a major decision-making centre in Canada’s food
processing industry. Half of Canada’s top-ranked food and beverage
manufacturers are headquartered in the city, including Campbell Company
of Canada, Cadbury Schweppes, Cargill Foods, Fiera Foods Company, Kraft
Canada Inc., Maple Leaf Foods Inc., Nestlé Canada Inc., Unilever Canada
Limited, Weston Bakeries Limited, Wrigley Canada. It’s the who’s who of
the processed food world.
Plus, half
of the food processing jobs in the province of Ontario are in Toronto,
miles away from any farm. The food processing industry is the city’s
second largest employer, employing over 30,000 people — 12 per cent of
the industrial workforce — with annual sales of over $17 billion.
Where’s
the hub going? Up, based on 60 per cent growth over the past 10 years,
compounding from a steady annual average growth rate of four to five per
cent, although growth is even faster in the sub-sector of smaller
specialty food processors, which is leaping ahead at double the average
rate.
Now, there
are looming limits to the industry’s growth, and to its market for farm
crops and livestock.
Lots of
consumers, but are they workers?
“The food
processing industry is a high-tech industry,” says Jane Graham,
executive director of Alliance of Ontario Food Processors (AOFP).
Skilled workers are the foundation of any high-tech industry using
automated equipment and processes.
The
problem is, there aren’t enough skilled workers for Ontario food
processors. A study by her organization found that the food processing
industry isn’t even on the radar screen among high school students as a
career opportunity, despite being the region’s second-largest employer.
In response, her organization is studying post-secondary level training
specifically for the sector, coupled with an awareness campaign for
students.
To help address the shortage of qualified labour, the City of Toronto has partnered with the Toronto District School Board to organize specialized language training for workers in the industry. This training will go beyond food-industry jargon to cover basic English-language skills, something critical but often missing in an industry with a very high proportion of employees who are new to Canada. Coupled with a city initiative to help employers develop good human resources policies and practices, the hope is that there will be less employee turnover, partly based on opportunities for employees to move upwards within a company.
Being located in Toronto could become more attractive if expertise in
recruiting, hiring, orientation, and training can give companies a
competitive edge.
Location also means cost
“Companies
do like Toronto, all things being equal,” Toronto’s Wolfson says.
However, things aren’t always equal — things like the cost of land and
taxes.
Here too,
however, Toronto is developing new strategies, with a government that is
aware — even if it’s citizens aren’t — the food processing is vital to
the region. A renewal pilot project in the city this year saw the
construction of new food processing facilities. In a bid to foster more
industry and to increase tax revenue, newly constructed plants are being
taxed based on the pre-construction value of the land.
Over time
the taxes are increased until, after 10 years, the company pays tax on
the full value of the land and the plant. Based on the successful pilot,
the program will be rolled out across the whole city later this year.
Wolfson thinks it’s a win-win deal: The city’s tax base grows, and
companies have a 10-year window of lower taxes to focus on important
issues like innovation.
Toronto goes courting
Is Toronto a good partner? According to Wolfson, it’s trying to get
better. A recent push to improve cross-divisional communication within
the bureaucracy has brought about a concierge service: Wolfson’s
department partners with food companies setting up plants in the city,
helping pilot the myriad applications through possible red tape and
communication breakdowns.
Toronto
isn’t only courting existing food processors, it’s going after aspiring
entrepreneurs too. Together with the Toronto Food Business Incubator
(TFBI), a non-profit organization that provides training and startup
facilities for food entrepreneurs, the city
runs workshops to help would-be food entrepreneurs get started,
providing insight into the industry, regulatory requirements, and
contact information.
The city
also has its own sort of dating service for the food industry. The
city’s food and beverage team arranges for out-of-country food buyers to
visit the city, co-ordinating meetings at which processors can showcase
their products.
Does location really matter?
Is location relevant now that there is free trade? Will the food
processing sector face the decline seen in some other manufacturing
sectors in Canada? Wolfson downplays the idea that free trade will harm
the sector. On the contrary, he sees it as favourable to Canadian food
processors. As a former broker in the food industry, his experience is
that Canadian companies are well-regarded in the United States as being
more innovative, co-operative, flexible, and accommodating. He cites the
example of the Loblaws President’s Choice line of products being made in
Canada by innovative food processing companies — then being exported to
the United States by Loblaws. Many U.S. retailers sell the entire
line-up of innovative, well-packaged products.
Traffic
congestion is a problem for any location. It isn’t specific to Toronto
alone. It affects the whole of the Golden Horseshoe region stretching
from Niagara Falls to Oshawa. And it’s not just road capacity: Border
delays, too, can slow shipments. While Toronto’s status has its roots in
a favourable location, better worldwide transportation means that this
problem cannot be ignored.
Slow
traffic especially hurts food processors promising just-in-time
shipments. One small thing that Wolfson has been able to do is
facilitate changes at the border: Agriculture and Agri-food Canada has
responded to requests for more border capacity, allowing more
trucks to clear the border.
The
secrets of their success
A key
stumbling block is what Wolfson calls the “Colonel Sanders mentality,”
referring to the secrecy surrounding the recipe for its Kentucky fired
chicken. Especially among small and medium-sized processors, it’s an
industry leery of sharing a successful formula, so
nobody works together. Even though these small and medium-sized
processors comprise two-thirds of the food processing companies in the
city and are often among the fastest growing, there is no effective
association for them and they have no voice in government. Wolfson
contrasts this with the automotive industry, which is highly effective
at lobbying and getting publicity.
“If you’re
not getting involved, don’t complain.” That is the advice of
entrepreneur ShaSha Navazesh, founder of ShaSha Bread Co. bakery and the
Artisan Bakers’ Quality Alliance, a group representing artisan bakers.
The problem as he sees it is that there are associations for many foods
such as eggs and chickens at the farm level — but no overarching
association for small food processors. He blames it on what he calls a
“scarcity mentality.” People retreat in times of scarcity — but then in
times of plenty still behave as if there’s not enough to go around.
The food
industry falls under the auspices of the Ontario Ministry of
Agriculture, Food and Rural Affairs (OMAFRA). What concerns Wolfson is
that this ministry is, by nature, rurally focused, not mandated to focus
on urban areas such as Toronto. While some primary processing occurs in
rural areas, much of the value-added, or secondary processing occurs in
a municipal setting. Wolfson wonders if the proposed International Food
Processing and Innovation Centre (see sidebar) would already be approved
and funded were it not in the heart of urban Toronto.
Married
to Toronto
Navazesh
and his bakery are situated in Toronto for one main reason: the labour
pool. It supplies him with suitable employees for both management and
production positions. But he believes this urban setting comes with a
heavy cost once taxes, expenses, and land prices are taken into account.
Wolfson acknowledges the costs are real, but notes that companies often
realize the suburbs are not a utopia, and that at some point suburban
taxes will rise. Last year, he points out, four processors returned to
Toronto from the suburbs.
Is there
jurisdictional competitiveness? Sure. ShaSha Navazesh has been courted
by Canadian and American mayors trying to lure his bakery to their
cities. He likes having his company in his city of residence — but says
it’s expensive, and when business growth allows him to pay people enough
that they would commute to a suburban plant, he’ll consider moving. It’s
business.
Farmers
in the Toronto family
“The food
processors in Ontario buy 70 per cent of (provincial) farm production —
so we are the biggest customer for farmers,” says AOFP’s Graham. That’s
a lot of food.
Wolfson
sees processing undergoing a paradigm shift. Instead of the traditional
model of farmers growing commodities so processors can transform them
into a product that they think consumers want, consumers will
increasingly drive what processors manufacture. For farmers, this will
create opportunities if they’re focused on being in tune with consumer
trends.
Wolfson
recounts the tale of a vegetable grower who felt that by educating
ethnic communities about his product, he would sell more. To Wolfson,
this is backwards: Why not simply grow what people want instead of
trying to change well-formed cultural preferences?
If such challenges and opportunities are tackled, how large can Toronto’s food processing grow? Graham is confident more growth is possible — much more growth. “We can become,” she says, “an epicentre for food processing in North America.”
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