Feeding the world: Growing global population brings huge export opportunities for Canada

Feeding the world: Growing global population brings huge export opportunities for Canada

Canada’s agriculture and agri-food system is a complex and integrated supply chain that includes input and service suppliers, primary producers, food and beverage processors, food retailers and wholesalers and food service providers.

While there are many components to Canada’s agri-food sector, there’s one constant – change.

“The sector is always evolving,” explains Sonia Vieira, sector advisor, agriculture at EDC. “Consumer preferences are changing the agri-food industry.”

Those consumers are better educated, more health-conscious, take a keen interest in how their food is grown and pay increasing attention to the final ingredients that make it into products found on store shelves. Add into this recipe a surging consumer desire to know whether foods are produced ethically and do not adversely impact the environment. All tolled, the result is adding pressure on food producers and manufacturers to meet ever-evolving and growing consumer demands.

“It’s really changing the landscape of how companies are making food,” adds Vieira.

The agri-food industry landscape, from farm to fork, is a diversified industry that includes primary agriculture, equipment manufacturers, commodities and processed food manufacturers.

The food and beverage processing sector is the nation’s largest manufacturing segment, accounting for 16 per cent of total manufacturing and approximately 17 per cent of overall employment.

Despite Canada’s small population, Canada is a major player in the agri-food industry’s global context. More than half of the nation’s exports are destined to markets south of the border.

“The U.S. is our largest trading partner, but Canada exports agriculture and agri-food products all over the world,” Vieira says.

With close to 95 per cent of the companies described as small- or medium-sized enterprises, Vieira says that it’s a natural progression for agri-food companies to look at the U.S. as their first export market after they establish themselves domestically.

Looking forward, part of the ongoing change engulfing the industry is opening new doors of opportunity for Canadian companies around the globe. The world’s population is expected to grow to 9 billion people by 2050, requiring an estimated increase in food production by 70 per cent.

“The majority of the (population) growth is in emerging markets,” says Vieira. “We will see a lot of growth specifically in China and India.”

For a SME looking to tap into either of these lucrative markets, research, including talking to other companies already doing business in those markets, is critical.

India, with a population of 1.2 billion and expected to reach 1.4 billion by 2025, is focused on educating its population. As this occurs, income levels will increase and there will be more jobs and households with two working parents.

“Products like convenience foods will be in higher demand, much like here in North America,” Earl Geddes, president of Progression Consulting and former CEO of the Canadian Grains Institute, told ExportWise in December 2015. “The country has a tremendous food production capacity, but today India loses as much as 25 per cent of what they produce to inadequate storage facilities, weather and rodents. That rate is not sustainable in a country with such dramatic food consumption increases on the horizon. There is likely going to be strong demand for proper grain storage and material handling equipment.”

While opportunity looms large, Nathan Nelson, EDC’s chief representative in India, cautions Canadian companies to not rush in without due diligence.

In the ExportWise First 5 Calls: India Q&A, Nelson explained, “Indians know their country is a hot market and they really want to look for long-term partnerships. They might have a deal for you the day you arrive, but they will make you wait for six months to a year to see if you are a dedicated partner or investor.”

Nelson also cautioned that venturing into India is a big investment.

“You need to spend time while you’re here and you need to come back multiple times. That’s a big expense, especially if you’re a small or mid-sized business.”

He also adds that EDC’s downloadable guide to doing business in India is a valuable and practical resource.

For companies that are looking to export agri-food products for the first time, China is not likely the best place to start, because it requires a considerable investment of both time and money. However, so long as risks are managed, tapping into the gigantic Chinese market can offer many rewards.

Among the keys is to find the right partners “who will help you through China’s bureaucracy and to avoid fraud and corruption – experts who can help you with things like how to structure your company legally,” explained Denis L’Heureux, EDC’s chief representative in China in ExportWise’s First 5 Calls: China, which offers connections and insights from five China-based trade experts. “You also need somebody on the ground, so send somebody you fully trust – ideally someone fairly senior in your organization who can come and stay here for a couple of years.”

Visit our agri-food site.

Canada’s Free Trade Deals

Leveraging Canada’s free trade deals offers another key to opening up foreign markets. Three major agreements coming online soon include the Canada-Europe Trade Agreement (CETA), the Trans-Pacific Partnership (TPP) and Canada Korea Free Trade Agreement (CKFTA).

“Free trade agreements will be a big driver of opportunity for Canadian agri-food companies,” Vieira says.

With the overall goal of making it easier for nations to do business with one another, free trade deals impact Canadian companies in many ways.

“In many situations, FTAs can be a great help to Canadian exporters and investors. But just because Canada and another country have an FTA, it doesn’t necessarily follow that the market will suit your company’s needs and strengths,” explains Dominique Bergevin, EDC senior underwriter and Mélanie Carter, EDC small business account manager, in an ExportWise blog post published February 17, 2015.

Not all FTAs cover the same ground. Some merely eliminate tariff barriers among the partner countries, while others can reach into areas such as intellectual property protection. But depending on what was negotiated in the agreement and how it applies to your sector, an FTA may help you do business more easily and cheaply in the partner country or countries.”

Learning how to benefit from an FTA begins with utilizing the wealth of information and resources of the Canadian Trade Commissioner Service (TCS), which provides companies with on-the-ground intelligence and practical advice on foreign markets to help companies make better, more timely and cost-effective decisions in order to achieve overall goals abroad.

Technology is also impacting the global agri-food industry, especially in China where a rapidly growing middle class is turning to e-commerce as the method of choice to buy food.

According to a study published by PayPal and Ipsos, 81 per cent of all Chinese consumers shopped online in 2015 and 35 per cent bought cross-border products online. The ratio of cross-border online shoppers was only 26 per cent in 2014.

“More and more Chinese consumers are no longer doing their groceries in physical stores, they are purchasing food online,” explains Vieira. “This presents opportunities for Canadian companies to extend their reach into China.”

Exportable nourishment can take on many forms, including breathable Canadian bottled air. Alberta’s Vitality Air is taking advantage of the smog and pollution problem plaguing many of China’s major cities and selling “Rocky Mountain Air” vie eBay and Alibaba to eager customers in the country.

Vitality Air’s initial shipment to China of 500 bottles in December 2015 was followed by a subsequent shipment in January, rising to 5,000 units.

Prime Minister Justin Trudeau identified the immense opportunity the Chinese e-commerce market provides for Canada’s exporting SMEs at the World Economic Forum in Davos, Switzerland this January.

“Alibaba has 440 million subscribers in China who are looking to purchase global goods,” he told a press conference of Canadian journalists. “And the idea of connecting Canadian small- and medium-sized businesses with the 300-million strong middle class in China that are looking for Canadian products is a very exciting one.”

Part of the reason why there are many opportunities opening for Canadian companies around the globe is a result of Canada’s reputation.

“On the international stage, the greatest advantage Canadian companies have is the Canadian brand,” adds Vieira. “Canadian companies have built a reputation for safe and high quality foods that buyers expect.”

And the ongoing demand for better-quality foods has created a new standard in the global marketplace – trust.

Vieira says that trust is not just important for the consumer, but it is a competitive advantage for Canada.

“Trust is our main selling point,” says Vieira. “People trust Canadian products because of our high standards.”

Selling the Canadian brand to the world in 2016

The TCS identifies a number of important events around the globe for companies in the agri-food sector. This year, it is planning on helping companies learn more about market opportunities in Singapore, Cuba, Korea, Mongolia, Germany, France and the U.S.

Companies must do more than rest on the Canadian laurels of quality. The key to having success in foreign markets in the agri-food industry relies on innovation and being different.

“By continually innovating, Canadian agri-food businesses can capture value-added and market opportunities both at home and internationally.” explains Vieira. “To remain competitive, Canadian companies need to evolve by adapting to consumer preferences and market trends in order to stand out from the others.”

Canadian companies in the agri-food sector are doing just that. According to An Overview of the Canadian Agriculture and Agri-Food System 2015, companies are focusing innovation by creating new and improved products as well as manufacturing methods.

Saskatoon’s POS Bioscience is living proof of how innovation in the Canadian agri-food industry can make a difference around the globe.

A global leader in the creation of value-added products from biological materials — providing expert R&D, custom processing, and analytical services to clients in more than 50 countries – POS, in collaboration with federal government, helped develop canola oil which has transformed the western Canadian economy, the lives of farmers and agricultural communities around the world.

With all these moving parts, figuring out where to compete on the international stage can be a daunting task, especially for SMEs, but it all starts with doing your homework and research. That’s where EDC can help, says Vieira.

“There are many services available that can help Canadian companies enter the international stage,” Vieira says. “To give you an example, EDC not only offers financing and insurance support to our Canadian exporters, we also offer trade expertise, international market connections, and market intelligence to equip Canadian agri-food businesses with the tools they need to be successful on the international stage.”

That may give Canadian companies an edge in a competitive global economy, but ultimately, it’s up to the companies themselves to seize the opportunity. And in the agri-food economy, that starts with being different and a willingness to take risks.

“Although exporting can open up new risks and challenges, companies who export can improve their competitiveness, profitability and stay in business longer,” she adds.

“My advice for long-term success is to adopt a global mindset and get on the export journey – take advantage of the support and resources that are available to get you started.”

Canada’s agri-food sector: Growing the economy

  • In 2013, Canada’s agri-food sector generated $106.9 billion, accounting for 6.7 per cent of Canada’s GDP. The sector also provided one in eight jobs in Canada, employing over 2.2 million people.
  • Canada was the world’s fifth-largest exporter of agriculture and agri-food products in 2013 after the E.U., the U.S., Brazil, and China.
  • Canadian export sales grew by 5.5 per cent to $46.0 billion in 2013, maintaining its 3.5 per cent share of the total value of world agriculture and agri-food exports.
  • The U.S. remains Canada’s most important agriculture and agri-food export destination, accounting for 50.8 per cent of total Canadian exports in 2013. China accounted for 11.2 per cent of Canadian agriculture and agri-food exports and Japan, E.U., and Mexico accounted for 17 per cent combined.
  • Exports to the U.S. increased by 10.8 per cent to $23.4 billion in 2013, while exports to non-U.S. markets grew by 6.0 per cent to $22.7 billion.

 

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