How Canada’s food strategy could reshape competition in the grocery sector
Independent grocers are poised to gain more competitive ground against Canada’s largest grocery chains.
The federal government’s new national food security strategy, announced in June, is designed to strengthen Canada’s food system. Backed by more than $3 billion over 10 years, the strategy includes measures to improve competition in the grocery sector, boost domestic food production and give Canadians access to more affordable food.
Central to the plan is a $1-billion investment in infrastructure to build and expand food terminals and regional hubs. With this investment, the government says independent grocers can rely less on wholesalers operated by the large retail chains they compete with.
The plan notes that a small number of large companies control a significant share of the market across the supply chain, including wholesale, processing and retail.
“We have a very consolidated industry—that’s just a reality,” says Gary Sands, senior vice-president of government relations at the Canadian Federation of Independent Grocers (CFIG). “I don’t like to say anything is going to level the playing field for grocers because that’s like wishing you could put the toothpaste back in the tube. But these kinds of measures will help independents stay on the playing field.”
The benefits of new food terminals and hubs
The strategy includes plans to expand the Ontario Food Terminal, which distributes nearly two billion pounds of fruits and vegetables annually across Canada and is the country’s only food terminal of its kind.
“The Ontario Food Terminal already plays a critical role as a central wholesale market where independents can buy produce in volumes that suit their business, source from multiple vendors in one place, and respond quickly to shifts in demand,” says Christy McMullen, chair of the Ontario Food Terminal board of directors and vice president of Summerhill Market. “Expanding that model gives independents more capacity, more reach and more flexibility.”
Sands notes that CFIG has been advocating for the government to support an expansion of the Ontario Food Terminal, as well as the development of new food terminals in Canada.
“We pointed out to them that we’ve got independents who drive in from Manitoba and the Maritimes to use the Ontario Food Terminal,” he says. “As the country pivots more toward the east-west supply chain because of what’s happening with the United States, we need to look at having additional terminals—one in the East, closer to the Maritimes, and one in Western Canada.”
According to the government, funding will also support the development of up to 40 food hubs. “If the network is expanded properly, it can reduce geographic disadvantages for smaller operators and make it easier for them to buy local and regional product at competitive prices,” says McMullen.
Food hubs are particularly important in rural and remote communities where independents are the only grocers in town, notes Sands.
“When you reduce the distance, you reduce the cost of getting food to those communities,” he says. “In addition, the food hubs act like mini terminals. You’re eliminating the wholesaler and independents can go directly to the food hub and get those products. That’s good for the independent grocer, that’s good for the people in those communities, and that’s good for Canadian producers and processors because they’ll have an opportunity to get more of their products to independent grocery stores.”
What more competition means at shelf
In McMullen’s view, one of the most practical benefits of a stronger terminal and food-hub system is a shortened supply chain.
“If an independent grocer can buy more directly through a terminal or hub rather than through intermediaries, they have a better chance of improving price, freshness and margin,” she says. “That is especially important in produce. It also allows access to smaller growers or growers that only grow one or two products that you may not know of otherwise.”
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At the store level, that means a stronger local assortment and differentiation. “More terminals and hubs can make it easier for smaller Ontario growers and processors to reach store shelves, which gives independents more unique local assortment and a clearer point of difference from banner chains,” she says.
For consumers, it might also mean better prices. “If independent grocers have better access to competitively priced product, that improves their ability to sharpen retail pricing and stay competitive with the major chains,” McMullen says.
Growing and processing more food at home
A significant part of the strategy focuses on expanding domestic food production and processing capacity. Investments include a new $1-billion Agri-food Project Finance Fund through Farm Credit Canada to finance businesses to expand food processing capacity; a $150-million Food Security Fund to help small and medium-sized businesses upgrade equipment; and a $100-million Collaborative Food Innovation Fund to help producers expand agri-food processing.
On the growers’ side, $750 million is earmarked to drastically expand year-round Canadian production of fresh fruits and vegetables, including through greenhouses and vertical farms. The government says the aim is to become less dependent on imports.
The investment includes $650 million to support producers in adopting technologies such as automation and digital growing tools, while helping them grow a broader range of produce and scale their operations. Another $100 million is slated to support rural and northern communities in expanding local food production.
Ron Lemaire, president of the Canadian Produce Marketing Association (CPMA), says the strategy is a “turning point” and represents one of the most important investments in the fresh produce sector in recent history.
“This is the first time we’ve seen a whole-of-system approach backed by significant investment—over $3 billion—to address the structural drivers of food affordability, supply resilience and domestic capacity,” he says. “While Canada is an agricultural leader, the strategy directly addresses that gap by investing in productivity, innovation and year-round growing capacity, which is critical for long-term food security.”
A key test, however, will be how readily businesses can access funds. “A lot of times when you see large infrastructure funding programs like this, they don’t come without significant complications,” says Matt MacDonald, national food and beverage processing leader at MNP. “We’d want to understand how pragmatically this announcement can be adopted by SMEs and what it means for them in a more tangible way.”
He also makes the case for the government to address what he calls “GDP leakage” in the processing and manufacturing sector. The issue arises when primary agricultural goods are exported to the U.S. and the “finished goods” are sold back into Canada. GDP leakage exists in that gap, MacDonald says, in the form of lost jobs, revenue and market share.
“We want to see more funding and programs that are built to support and bolster those businesses to capitalize on that GDP leakage and missed opportunity,” he says.
That said, he sees the national food security strategy as good news. “Overall, when you see funding come into the economy, it’s a positive thing for consumers and for independent grocers because it’s a level-set that allows new entrants to come into the market and greater competition,” MacDonald says. “I believe greater competition drives more transparency and more accountability, both of which are good for the Canadian consumer.”
