Thank you very much, Mr. Chair.
It's a great pleasure and honour for all of us to appear and have the opportunity to speak before this committee.
Before speaking to the current situation of the agri-food sector, let me start with a few facts on the importance of the food processing sector to the Canadian economy.
In 2019, the agri-food sector was a key contributor to the gross domestic product, employment and exports.
The food and beverage processing industry is the largest manufacturing sector in terms of GDP, representing 17% of manufacturing GDP and 290,000 employees.
The food industry is a major economic driver for rural communities, as it purchases about 40% of the total Canadian agriculture production.
Small and medium-sized enterprises account for over 95% of establishments, while large establishments account for about half the industry's total output.
Exports of processed food and beverage products stood at a record value of $38.1 billion in 2019. Globally, Canada is the eleventh largest exporter of processed food and beverage products in the world.
In total, Canadian-based processors supply about 70% of all processed food and beverages that Canadians consume every day.
The food and beverage processing industry performed relatively well over the recent five-year period. Specifically, I wish to give a sense of the results in terms of growth, trade and employment.
Industry revenues for the food processing sector increased at an average rate of 3.5% per year, compared to 2.3% per year for total manufacturing. In addition, employment increased by 2.9% per year, compared to 1.1% for total manufacturing. Finally, exports of processed food and beverage products grew at an average annual rate of 6.9% during the last five years, whereas growth was at 3.5% for total manufacturing.
Overall, the opportunities for the Canadian food processing industry are significant given the growing global demand for processed foods and beverages, as well as population and income growth in emerging markets. Our well-recognized food safety regulatory framework is a key positive attribute for our products in foreign markets.
There is no doubt that the current pandemic has caused an unprecedented shock to the whole food system as a result of significant changes in food demand.
I shall preface my upcoming comments on the impact of the pandemic with a word of caution. Any current assessment is no indication of how the situation can evolve in coming months.
To give you a sense of the dramatic shift in demand, between February and April 2020, food service sales declined by 57% , while food and beverage store sales increased by only 18%. Purchases at restaurants continue to lag pre-COVID-19 levels. In August, food service demand was at about at 80% of pre-pandemic levels. However, this is likely lower now with the recent restrictions in many regions of the country.
Purchases at grocery stores in October were at 8% above the pre-COVID-19 levels. As mentioned earlier, although the supply chain seems to have stabilized, we cannot take the resilience of the sector for granted. Extraordinary efforts were required to keep grocery store shelves stocked and food on the table. The system remains vulnerable as the COVID-19 pandemic continues to have an impact.
Since the beginning of the pandemic, the food processing industry experienced a number of challenges that resulted in new and significant cost pressures. For example, industry had to adapt to health protocols that required plant modifications, increased sanitation measures, and changes in manufacturing processes, often leading to reduced production.
To provide for increased worker safety, companies had to provide their employees with personal protective equipment. Further, labour costs rose significantly due to additional payments for overtime, hero pay and training. Other increased costs included higher transportation, packaging costs and increasing fees paid to retail for infrastructure development such as for e-commerce. Lastly, some companies faced lost revenue from food service without commensurate increases in retail sales, as well as increased cost for surplus inventory.
The total financial implications of COVID-19 on the food processing industry remain to be seen as statistical agencies, such as Statistics Canada, continue to gather information over time. However, it is clear that impacts throughout the industry have not been homogenous.
In response to COVID-19, the Government of Canada has implemented a number of food industry specific initiatives to ensure a safe, reliable food system. I will just mention three of those initiatives.
The government set up a $77.5 million emergency processing fund (EPF) to help companies implement changes to safeguard the health and safety of workers and their families, as well as to improve facilities needed to increase Canada's food supply capacity.
The government also set up a $50 million surplus food purchase program to help move surplus food commodities through the food system as efficiently as possible to help feed vulnerable Canadians.
Finally, there is the mandatory isolation support for temporary foreign worker program to support these workers who are absolutely essential not only for our horticultural industry, but also for our food processing sector. The $50 million fund helps cover some of the incremental costs associated with the mandatory 14-day isolation period imposed under the Quarantine Act.
I would also like to highlight the efforts of the Canadian Food Inspection Agency (CFIA) to preserve the integrity of Canada's food safety system. First, CFIA prioritized critically important activities and services during the ongoing COVID-19 pandemic by introducing a temporary suspension of low-risk activities that did not immediately impact the safety of food or the protection of our agricultural resources.
