Canadian Food Business Spring 2021

» The science of food and beverage ISSUE 1 • 2021

RISK MANAGEMENT There’s a lot at stake for livestock producers

INNOVATORS AND INVESTORS Report showcases Canada’s natural and functional food

THREE PANDEMIC TRENDS THAT ARE HERE TO STAY

GUEST EDITORIAL

By Suzanne Ma

the pandemic has presented some of the biggest challenges food businesses have ever faced, it’s also been exciting to witness so much innovation. We’ve seen hundreds of businesses across Canada and around the world get creative and pivot literally overnight in order to thrive in this fast-paced and unpredictable world. From farmers and grocers, to breweries, bakeries and meal prep companies, everyone is getting on the innovation bandwagon.

When COVID-19 hit, grocers in particular experienced an unprecedented spike in demand. But consumers who normally shopped at retail stores faced empty shelves, long lines and stay-at-home orders. So, many turned online and formed new behaviours – and there’s mounting evidence these new behaviours are here to stay. A recent study of nearly 60,000 U.S. shoppers projects online purchases will account for about 21.5 percent of total U.S. grocery sales by 2025.

This is just one of many exciting new trends in the world of grocery. Here are some more:

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Three Pandemic Trends That Are Here to Stay

WHILE

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GUEST EDITORIAL

Trend #1: Shop local

The local food movement is undergoing a renaissance thanks to COVID-19, with local farms, producers and CSAs seeing a significant uptick in demand.

“We got lucky in that we didn’t have any supply chain interruptions,” says Jesse Bradley, fleet manager at Local Foods, a retail market and wholesale distributor in Chicago.

“Whether or not there is a pandemic going on, crops are still going to be growing and farmers are still going to be harvesting.

Our ultimate strength is how high-quality our product is and where the produce comes from. When you buy apples from us, it’s really the freshest food you can possibly get outside of going to an orchard.”

Such local producers or distributors – also known as “farmto-table” or “farm-to-door” – present an enticing offering: First, supply chain transparency gives consumers a sense of security, knowing exactly where their food has come from.

And second, fewer touch points means a much lower risk of contamination.

As a result of the pandemic, local farms and food hubs have raised their profile as a healthy, sustainable and resilient source of food for communities around the world.

Trend #2: Home delivery is everywhere CANADIAN FOOD BUSINESS VO L U M E 3 6, I S S U E 1 • 2 0 2 1

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As people stay at home for their health and safety, home delivery has become a critical offering. The pandemic has forced grocers to meet this demand in order to keep their businesses afloat. Toronto-based wholesale grocer Bondi Produce – which traditionally supplied restaurants and institutions – is a great example.

“Our business took a big hit,” says warehouse supervisor Claudio Bondi. “We locked ourselves in a boardroom and said ‘How can we stop the bleeding?’ We had always wanted to get into home delivery and expand our product range, and this was our chance to test those waters.”

Within two weeks, they put up a new website complete with an online store, and then retrofitted the back of the wholesale warehouse to house grocery and home delivery items. The team then integrated delivery management software which allowed them to plan and execute on the hundreds of home deliveries orders that came flooding in as people refrained from going into traditional retail grocery stores.

“Right off the bat, it was a huge hit. And because we’ve implemented delivery management and routing technology, our home delivery business has the potential to scale. We plan to continue to offer a home delivery service even after the pandemic is over,” Bondi says.

Trend #3: Zero waste

Local food businesses and their consumers are often passionate about protecting the environment. In fact, the movement towards zero waste is gaining momentum across all industries. But when it comes to running a profitable business, sustainability isn’t easy to achieve.

“If you are not organized and ready for a zero-waste, returnable packaging model, it can actually turn into a liability very quickly. But if you plan ahead, you can actually increase your margins,” says Jeff Pastorius, founder of On The Move Organics, a company that delivers local and organic food to communities across southwestern Ontario.

On The Move makes their deliveries in large Rubbermaid bins, and smaller items are packaged in glass jars within the bins. After deliveries are made, these containers are picked up on a subsequent delivery, sanitized and prepped for another delivery.

“People will often pay a deposit of one dollar on a jar, and this would normally cover the cost of disposable packaging. So, even if the customer doesn’t return the jar, we’ve offset the cost and reduced risk – all while maintaining our zero-waste strategy,” Pastorius explains.

Implementing an efficient zero-waste program takes time and effort – but it’s worth it if it means staying true to the company’s core values. “This is an industry where you need to take your punches and learn how to make this work in the interest of the Earth not imploding,” Pastorius adds.

By taking a hard look at the opportunities in front of them, these companies are making the best of a tough situation.

Typically, rethinking their business model was the first step to success, and home delivery has become a saviour for many food suppliers.

Suzanne Ma is co-founder at Routific, a delivery management and route optimization solution that helps local food businesses scale up home delivery operations.

NEWS BITES

EDITOR’S NOTE:

COPING WITH CHANGE, & MAKING A DIFFERENCE

Along with exposing Canada’s food security and distribution issues, we all know that COVID-19 has impacted the restaurant and bar industry on a dramatic scale. Restaurants Canada estimates that 10,000 restaurants closed in 2020, resulting in approximately 800,000 job losses; if lockdowns continue, it’s estimated approximately 50 percent of restaurants could shut down. From what I’ve seen, I’d guess more.

Several organizations, including Restaurants Canada, are engaging in campaigns to support local businesses; delivery and pickup options have contributed to the survival of many restaurants, and retailers in general, although few can say they aren’t losing money, according to most reports.

To support those who work(ed) in the hospitality industry, Not9to5.org is a new online initiative, providing mental health resources and educational courses “to educate and empower hospitality workers and employers on mental health and substance use literacy and support skills.”

New Tracking Tech For Livestock

A new direct-to-satellite smart livestock ear tag, Ceres Tag (developed in Australia) is a gamechanger for farmers with large herds. The solar-powered tag is an accelerometer with RFID technology, the first of its kind designed to meet accreditation guidelines with national livestock traceability programs. Each tag lasts more than 10 years to ensure lifetime coverage. Recently, Ceres Tag announced the addition of eGrazor technology, developed

by Australia’s government agency, CSIRO; the sensor uses algorithms to monitor a wide variety of cattle behaviours, including pasture feed intake. cerestag.com

In the realm of food security, one of the people who is making a big difference in Canada is Lori Nikkel, CEO of Second Harvest (interviewed in the Spring 2019 issue of Canadian Food Business). In February, she was appointed as a member of the new Canadian Food Policy Advisory Council, established

by Agriculture and Agri-Food Canada. The Canadian Food Policy Advisory Council is a key component of the Food Policy for Canada and brings together 24 experts and stakeholders from a variety of sectors, including the agriculture and food sector, health, academia and non-profit organizations.

As the CEO at Second Harvest, Canada’s largest food recovery charity, Nikkel led the recovery and redistribution of more than 22.3 million pounds of healthy, unsold food to nonprofits across Canada in the last year. She was also named as one of the 2021 Women of Influence for her role in expanding the organization’s reach during times of need; a nationwide effort by Second Harvest provided approximately 62,000 meals per day. Nikkel also was a key player in the Surplus Food Rescue Program, which purchases surplus produce from farmers to be distributed to community groups such as shelters and school breakfast programs.

In times of crisis, when the community supports those in need, we all come out ahead. Thank you to everyone who is making a difference!

Fifteen varieties of wheat from around the world were catalogued by a team from the University of Saskatchewan, enabling scientists and breeders to much more quickly identify influential genes for improved yield, pest resistance and other important crop traits. The research results, published in Nature, provide the most comprehensive atlas of wheat genome sequences ever reported. The 10+ Genome Project collaboration involved more than 95 scientists from universities and institutes in Canada, Switzerland, Germany, Japan, the U.K., Saudi Arabia, Mexico, Israel, Australia and the U.S. One of the world's most cultivated cereal crops, wheat plays an important role in global food security, providing about 20 percent of human caloric intake globally. It’s estimated wheat production must increase by more than 50 percent by 2050 to meet increasing global demand.

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Study Generates Genomic Atlas For Global Wheat

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FEATURE

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There’s a lot at stake for livestock producers

By Jana Manolakos

IN

2008, Guelph student Catherine McCorquodale – who today practices agriculture law – gave a hard-hitting speech at the Royal Agriculture Winter Fair in Toronto. It painted a brutal picture of the cost to the Canadian cattle and beef industry hit by mad cow disease.

“What do you do when in one day, you lose over $100,000 and your 15-year plan is thrown out the window?” she asked the audience, describing the impact on her family’s dairy farm in Embro, Ontario.

From diseases like mad cow to tariffs and climate change – to the impacts of the current pandemic – Canadian livestock farmers are fighting a seemingly never-ending battle to fend off risks to their operations, in an industry that had annual shipments worth $22.3B in 2019.

On the day of McCorquodale’s speech, five years had passed since a lone black Angus cow in Alberta had tested positive for bovine spongiform encephalopathy (BSE), also known as mad cow disease. This triggered an unprecedented crisis in the Canadian beef and cattle industry, which still today is engaged in a legal battle with the government. While her family struggled with the reality that their cattle business was facing ruin, further difficult news followed. Canada was almost immediately banned from exporting its cattle to over

FEATURE

40 countries. According to a BFO report, between 2003 and 2004, Canadian cattle producers lost $5B. A month after mad cow disease appeared in Alberta, the federal agriculture ministry introduced a $460M beef industry compensation package, cost-shared with the provinces.

The program included new slaughterhouse processes aimed at stemming the disease, along with millions of dollars invested in aggressive testing and disease tracking.

Buffering financial losses brought on by disease

Today in the Canadian pork industry, producers are watching closely for the after-effects of African swine fever (ASF), which ripped across China in 2018. They are bracing for a potential outbreak here at home, while seeing the impact on global pork prices. The loss of millions of pigs in China bumped up global pork prices, which was good news for Canada, as the world’s third-largest exporter of pork. That’s also why experts worry that an ASF outbreak could cost as much as $50B across the entire Canadian value chain.

For Canadian poultry farmers affected by avian influenza in 2014, the damage was equally as devastating to some, as the highly infectious H5N2 strain tore through more than 17 million birds. Farmers sprang into action, reporting cases to the Canadian Food Inspection Agency and initiating biosecurity measures that included cleaning and disinfection, quarantines and humane destruction of poultry. The disease, nonetheless, led to export restrictions on Canadian poultry and cost the Canadian economy $380M. A few years later, the federal government announced funding support to develop new insurance tools to protect poultry and egg producers against the financial impact of poultry disease. This was welcome news for Martin Adema, chair of the Poultry Insurance Exchange Reciprocal of Canada, a specialty provider of insurance products for losses caused by disease.

He explains, “For years, our subscribers have asked for a policy that protects them from financial losses due to avian influenza.”

Meanwhile, pork farmers in Manitoba recently launched into a two-year project to build their own risk management program. Similar to the one developed earlier by the chicken and egg famers, it would help them manage periods of financial instability and aid with the costs of cleaning and disinfection. By expanding the program to pork producers across Canada, they hope to make it more affordable for individual producers.

The project is funded through the AgriRisk Initiatives (ARI), a five-year program under the Canadian Agricultural Partnership that supports the development of new risk management tools. AgriRisk is one of two federal programs, including AgriRecover, that help reduce economic hardships of outbreaks and support efforts to manage risk. The programs were key in helping B.C.’s poultry producers with a $1.58M investment to recover from the impact of avian flu in 2015, get operations up and running and prepare against future outbreaks.

According to a BFO report, between 2003 and 2004, Canadian cattle producers lost

$5B

Last year, Ontario beef producers, who contribute $2.8B annually to the provincial economy, were already dealing with market volatility when COVID-19 hit. The president of Beef Farmers of Ontario (BFO), Rob Lipsett explains, “A perfect storm of market and trade disruptions caused average weekly losses of $2M over the past year in the Ontario beef industry.”

His group is among many agricultural associations that have asked federal and provincial governments to boost business risk management programs. For one thing, BFO wants to see a $100M cap removed on the federal/provincial cost-shared Risk Management Program, so more farmers have financial protection against downturns in commodity market prices. The risk management program supports the Ontario beef sector, and bridges gaps with federal programs.

Disruptions caused by the pandemic became painfully apparent this past December, when Guelph-based Cargill Meat Solutions, Canada’s largest federal beef processing plant, temporarily closed because a large number of its employees fell ill. The shutdown dramatically reduced processing capacity and left barns sitting idle.

Within days, the governments of Canada and Ontario offered $5M to help the province’s

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A perfect storm: The cost of COVID-19 and market volatility

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beef farmers manage costs associated with the impacts of the pandemic, accessible through Agricorp, the crown organization that supports risk management programs in the sector.

Bob Lowe, president of the Canadian Cattlemen’s Association, suggests, “We must look at and support all actions that can assist our current situation. This could include increases in processing capacity at provincial packing plants and holding back cows so that we can focus slaughter on fed cattle – everything must be considered.”

Working with public health officials, beef processing plants have stepped up measures to prevent the spread of illness. They are taking temperatures of employees before the start of work each day, have added cleaning and disinfection for high-touch surfaces, their quality assurance personnel are monitoring hand washing and the use of hand sanitizers, and they have asked employees to self-monitor and to stay home if unwell.

The past year was volatile for the Canadian pork industry, as well. Swine fever in China toward the end of 2018, a ban on Canadian pork by China in 2019 and the beginning of the COVID-19 pandemic have impacted Canadian pork prices and the Canadian pork market. As processing plants sit idle, hog farmers are faced with feeding stock that typically would move to market; by some estimates, the cost of feeding can run as much as $300,000 a month for a farm with 1,600 hogs.

“Pork producers are expected to lose more than $500M due to COVID-19, losses that are expected to continue well into 2021,” warns Rick Bergman, chair of the Canadian Pork Council. This is where government programs like AgriStability come in; it’s a margin-based program designed to help producers manage large income declines.

When it comes to trade issues, Canadian dairy, egg and poultry farmers also have found themselves fighting to survive. Two recent free-trade agreements, the Comprehensive Economic and Trade Agreement with Europe (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), cut into the sector’s domestic market share. According to the Chicken Farmers of Canada, the CPTPP – which came into force last December – alone cost billions in net operating costs for poultry and egg farmers.

The losses triggered $691M in federal funding, announced in December. Roger Pelissero, chair of Egg Farmers of Canada, explains, “This investment in our sector will provide new opportunities for our farmers to reinvest in their operations and plan for the future as they navigate the market losses as a result of the CPTPP agreement.”

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And then there’s climate change...

With Canada’s winter season predicted to shorten, and longer, hotter summers, Canadian farmers are looking for ways to overcome risks associated with inclement weather patterns.

From drought resistant feed production to mitigating heat stress, Canadian farmers have teamed up with scientists to resolve the potential for catastrophes, like the one in Quebec in 2002, when a heat wave killed half a million poultry, despite modern shelters and ventilation systems; or the heat wave in Ontario in 2012, when hundreds of dairy cattle died.

Last year, the federal government announced a new cooperative called the Living Laboratory, a nation-wide network of sites where farmers work with scientists and government on designing new practices or technologies to help with issues of climate change, water contamination, soil conservation and boosting capacity and biodiversity in agricultural settings.

At the launch of Living Lab’s Manitoba site last December, the Minister of Agriculture and Agri-Food, Marie-Claude Bibeau explained, “For Prairie farmers to keep feeding Canadians and people around the world sustainably, they need to get their hands on the right tools as quickly as possible. This innovative, collaborative research approach will help Manitoban farmers get the tailored tools they need to drive productivity in a sustainable manner.”

Back in 2008, as McCorquodale finished her speech, she reminded her audience, “Canada has worked hard to gain the confidence of nations around the world by showing that we will face the problem head on. Our willingness to spend the time and money to ensure any problems are minimized for the future has revealed to the rest of the world that Canada prides itself on being a world leader in food safety and providing people with a reliable food supply.”

“Pork producers are expected to lose more than $500M due to COVID-19, losses that are expected to continue well into 2021.”

– Rick Bergman, Canadian Pork Council

FEATURE

Report showcases Canada’s natural and functional food

INNOVATORS AND INVESTORS

By Jana Manolakos Brewery owner Ted Fleming

by Crohn’s Disease, Ted Fleming turned to drinking non-alcoholic beer, a beverage that was less irritating for his intestines. The problem was that most non-alcoholic beers lacked flavour and variety, so he grabbed the bull by the horns and began to brew his own, launching Partake Brewing in 2017.

Since then, his Calgary-based operation has grown into an award-winning producer of non-alcoholic beers that offer taste and low-calorie profiles (10 to 30 calories per can).

Partake is one of several startup and early stage companies featured in a new report by Natural Product Canada (NPC), an active investor and innovation cluster. The report, titled “Game Changers”, identifies companies, products and investors that NPC expects will have a major impact on Canadian functional food, nutrition and natural health products.

“The Game Changers report shows the breadth of innovation and investment activity that is happening in Canada. It reflects the quality and diversity of players that are involved in this growing area of Canada’s economy,” says Shelley King, CEO of NPC. The report features investment and acquisition activities over a 24-month period in Canada, as well as insights into some of the unique characteristics of the Canadian natural nutrition landscape, such as the legalization of cannabis, and the exceptional standards for quality product development. King suggests that Canadian businesses can benefit from the report’s bird’s-eye view of

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“The plant-based movement in particular is driving more attention and investment into Canadian product development and capacity.

The fact that so many of the big food players are focused on real, tangible innovation in everything from ingredients to sustainable packaging, means this industry is ripe for growth.”

– SHELLEY KING, CEO, NPC

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what’s going on, to get a sense of the types of players out there, and what they might be looking for in their next product or partner.

“Our focus on promoting Canada is two-fold,” she explains.

“First, we see high-innovation, high-quality Canadian products and companies that may not be on the radar of Canadian consumers, retailers or investors because of their size or relative stage of development. But the quality and potential is there for them to be solid – really excellent additions to the food supply chain in Canada. Secondly, Canada is a great place for international food and nutrition companies to do business.”

Driven by consumers who are increasingly educated about the foods they eat and who are strongly motivated by healthier lifestyles – a trend that has been further fuelled by health concerns stemming from the global pandemic – the market for natural and functional foods is growing in leaps and bounds.

Consumer interest in alternative proteins and plant-based diets, functional beverages, microbiomes, CBD and hemp is driving a burgeoning health and wellness product market which a Canadian government report says “is expected to reach US$20.7 billion in 2022 from US$14.9 billion in 2013.”

Healthy natural products had the largest market size in 2017 – a segment that is expected to surpass all the sub-segments in the health and wellness sector by the end of 2022.

“The plant-based movement in particular is driving more attention and investment into Canadian product development and capacity,” King says. “The fact that so many of the big food players are focused on real, tangible innovation in everything from ingredients to sustainable packaging, means this industry is ripe for growth.”

Companies like Maple Leaf Foods, which now offers meatless alternatives, and McCain Foods, which has pivoted to clean-label foods, have responded by expanding their traditional product portfolios and investing in healthier, plantbased ingredients. Newer companies like New Brunswick’s

Millennia TEA are attracting investments through sustainably sourced products.

For the cannabis sector, since it became legalized two years ago, many startups are tackling challenges associated with improving the quality of their products and reducing costs. “Technological developments in critical sectors such as lighting, genetics and growth systems have the potential to resolve many of the industry’s challenges, but on top of already high operating costs, the costs of R&D can often be a huge burden,” notes Nicholas Garcia, head of manufacturing consulting services at Leyton Canada.

This is where NPC can assist, explains King. The innovation cluster helps Canadian natural product entrepreneurs overcome key commercialization hurdles and attract investment. She explains, “We have everything they’re looking for to make substantial investments into R&D and production – agricultural capacity, an exemplary research and development system, a highly educated workforce, efficient national distribution systems and a stable, innovative infrastructure of government supports.”

For Partake Brewing, NPC’s commercialization programs enabled the fledgling company to hire a VP of sales, which led to increased market share and revenues, and helped them with their capital raise of $4M. Sales of Partake Brewing have grown steadily, increasing 250 percent between 2019–2020, and sales continued to grow during COVID-19, with an increase of 100 percent from March 2020 to early 2021. Partake has added more than 1,000 retailers to its roster since the 2017 launch, and in April, launched a new ecommerce site to bring a more convenient retail experience to consumers.

Company owner Fleming acknowledges, “The support, guidance and insights NPC has provided put us in an excellent position to expand our category leadership and accelerated the success of our great-tasting, low-calorie, craft non-alcoholic beers across Canada and the United States.”

He offers advice for new companies: “The potential to gain traction and build momentum comes from solving a shared problem. Identify the problem, get started with a good solution and improve it along the way with feedback from customers.

Your solution, combined with passionate customers and a sizable market opportunity, will bring investors to you.”

Connecting with future investors is an almost daily occurrence at NPC. King explains, “When we start to help them take a closer look, you can see them get really interested in what Canada has to offer. The report was really developed to give a quick overview of how much innovation is happening, and how that’s translating into business opportunities. Game Changers makes it clear that Canada is a great source of innovation, and an excellent place to do business.”

She concludes, “The outlook for the Canadian natural foods market has never been brighter. The consumer focus on natural and clean label just keeps growing.”

FOOD WARE

PLANT-BASE PREBIOTIC OFFERS ALL THE GOODNESS OF FIBRE WITHOUT THE BLOAT With Arrabina’s excellent solubility, stability in solution and flavour, this arabinoxylan prebiotic dietary fibre offers an easy way for supplement, food and beverage makers to create delicious products while strengthening their nutrition labels and sustainability claims. Recent results from a double-blind, randomized clinical trial confirm its superior gastrointestinal tolerability and prebiotic function, which promotes the growth of bifidobacteria. The clinical trial consisted of 36 healthy individuals who consumed Arrabina at 6 or 12 g per day, or a placebo. Results showed that even at a high dosage of 12 g per day, there were no statistical differences in GI distress between the participants taking Arrabina versus those taking the placebo. Comet Bio uses upcycled crop leftovers to produce the plant fibre product, using a proprietary water extraction technology. comet-bio.com

NEW READER BOOSTS FOOD SAFETY ANALYSIS A new automation technology, the 3M Petrifilm Plate Reader Advanced gives food safety professionals new options to rapidly and accurately image, count and document microbiological colonies on 3M Petrifilm Plates indicator tests. The reader is a small, peripheral device containing a five-megapixel camera and versatile bar code reader, and it uses fixed artificial intelligence networks to enumerate 3M Petrifilm Plates. By rapidly automating the colony-counting step of the plates, this plate reader saves food safety labs time and increases productivity. 3M’s Petrifilm Plates are inserted into the device, with imaging and information automatically displaying on a USB-connected computer in less than six seconds, processing up to 900 plates per hour.

3m.com

WILEVCO The Wilevco SDA (Spinning Disc Applicator) is the perfect tool for evenly distributing coatings onto food products, such as spray coating chicken breasts. The SDA uses patented “spinning disc technology” to apply coatings without a spray-bar or nozzles, for an even and consistent coating while maintaining very specific application amounts. It means less mess, better control of the applied coating and, with no nozzles, no risk of clogging with particulate. The SDA saves wasted product and prevents overspray, puddles and slip hazards. Once the run cycle is complete, the SDA is easily washed to remove any food safety hazards. wilevco.com

Last fall, Simbe Robotics launched Tally 3.0, the latest addition to its line of autonomous retail robots. Enhancements to the robot’s optical system, greater durability and maneuverability ensure top performance.

With the introduction of an embedded data processor, Tally 3.0 is the most innovative, efficient retail robot on the market, offering accuracy, cost effectiveness and real-time data intelligence. Its compact, slim design and unobtrusive approach has the ability to capture accurate inventory in any retail environment, from standard fixture, variable shelving units to coolers, freezers and top stock auditing. Tally is seamlessly integrated in challenging retail environments like tight, crowded spaces and aisles. simberobotics.com

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TALLY IS THE LATEST AUTONOMOUS INVENTORY ROBOT ON THE MARKET

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