Michael McCain, Maple Leaf Foods, on the need for a ‘Canadian Food Strategy’

Excerpts from a speech given by Michael McCain, President and Chief Executive Officer, Maple Leaf Foods, at the Conference Board of Canada’s Food Summit, February 2012 in Toronto:

“Globally, the magnitude of the challenge of feeding the world population is staggering.  In fact, the word “crisis” is thrown around regularly in describing it.  With a current world population of seven billion people, rising food prices have put into poverty millions of people who spend more than half of their income on food.  By 2050, there will be an additional two billion people to feed affordably. By then the production of meat will have to rise by 75 percent from current levels, according to the World Economic Forum.  The United Nations says that within 20 years we will need to produce 50 percent more food or condemn billions to poverty.  “Crisis” seems like the right word to describe the situation.

And we will have to meet those production targets in ways far different than we do now.  Not only do we need to improve the quantity of food, we need to do so in a way that is affordable to those who need it.  We also need to do it in the face of climate change, so agricultural and food supply practices have to be adapted to the changes happening to growing conditions, including less use of fresh water.  And we need to do it smarter, so the massive increase in food production does not itself continue to exacerbate global warming.  Agriculture accounts for thirty percent of the world’s greenhouse gas emissions.  As we ramp up production to feed billions of additional citizens, we have to figure out how to do it with a lot fewer emissions, not more.  

Some of the smartest people in the world are working on how to meet the challenge of a sustainable food supply.  It’s extremely complicated stuff, with many moving parts and linked factors.  But one thing is very clear.  Production of that quantity will require incredible innovation from where we are now.

One link that has been established already is that between scale of enterprise and the ability to invent and innovate.  A number of recent studies have looked at the relationship between size and innovation, and at the impact of scale on the food industry.  The conclusions are clear.  To create new processes and to implement new processes requires economies of scale.  This means that many people in the western world are going to have to get more comfortable with larger farms and food companies. 

I know what you may be thinking, that bigger is not always better. That is true and there is clearly an important role for small and mid companies to meet the diverse needs and wants of consumers. But I am here to tell you that in the Canadian food manufacturing industry scale matters a lot and plays a big part in our competitive success.  It matters in offering domestically grown foods that are affordable for Canadian families and single households.   It matters in the investments we can make in innovation to offer Canadians more variety that better suit their needs.  It matters in job creation and efficiencies in stringent food safety procedures. And it is essential to maintain a strong Canadian food sector that can compete on a sustainable basis with US and global multinationals, whose cost of production for the most part is currently well below ours.  

Building a comfort level with “large” requires open-mindedness. People can’t afford themselves the luxury of opposing scale in food production for ideological reasons. Try explaining that to the hungry.  We need to base our decision making on facts and science. . . .
According to research conducted in 2011 by the George Morris Centre and the Institute for Competitiveness and Prosperity, Canada’s food manufacturing industry trails the U.S. in productivity.  While our processing industry is not structurally different it is less productive and tends to pay lower wages. U.S. food processors have significantly greater scale than Canada and the study concluded, as we have, that scale is an important contributor and can improve the competitive health of Canada’s industry. . . .

I want Canada to be part of the food solution – for Canadians and for the world.  I want Canadians feeding Canadians, and I want Canadians helping to solve global food shortages.  That is what we have always done – feed the world. I think we can do it.  Canada has few companies that are currently structured to be successful in the environment I am describing but that is going to change.  At Maple Leaf Foods, we have bet heavily on our ability to do just that . . . .

This challenge requires much more than just Maple Leaf ramping up. Canada needs more companies of scale. Canadian food industries understand the Canadian marketplace and the brands that are iconic to us. The money we spend stays right here. Maximizing our productivity allows us the liberty to innovate and ensure Canadians have access to the food they need at a price they can afford. And it will allow us to be part of the global solution.

There is room and lots of it for small suppliers and processors to meet niche markets.  There isn’t only one answer.  But small niche providers will not feed the world and they will not solve the affordability problem in Canada either.  Most Canadians are balancing tight budgets and the food industry must be well positioned to respond with food that delivers good nutrition at an affordable price. Government needs to look at its policies to ensure they are not discouraging the development of food companies that can meet those needs.

Government policies matter because Canada, due to our population and geography, does not do scale naturally.  We do small and localized.  And while our natural resources are highly competitive around the world, the food we make has to be equally as competitive.  It takes proactive steps.  Steps that aren’t always easy for companies to make, as I identified earlier. And steps that aren’t easy to make politically either.  But I would urge government to look at the regulatory, subsidy and policy set in the country and – without compromising one bit on safety or health regulations – make sure we aren’t standing in the way of the food supply we need going forward.  As The Economist said “feeding the world in 2050 will be hard, and business as usual will not do it.”

The food challenge facing the world is daunting.  It is no exaggeration to say that nothing of the scope of this transformation has ever been done before.

I am an optimist.  I believe this can be done.  But I am a realist.  I know it won’t happen without a great many correct decisions and actions.  “Idealism detached from action is just a dream. But idealism allied with pragmatism, with rolling up your sleeves and making the world bend a bit, is very exciting.”  Bono said that, and he has done a bit of bending the world himself. 

When people think of transformative technologies these days, they are most likely talking about computing or the internet.  But the people in this room and the people in the food industry everywhere, are on the front lines of the challenge to continue to make our planet work.  That is pretty exciting.”