Milling in Canada
November 6, 2007
By Michelle Brisebois
A tradition older than the country itself
It’s one of Canada’s oldest, and most stable, industries. In fact, Canada’s milling industry was in full swing by 1767 – making it about one hundred years older than our nation itself. Some of Canada’s present-day milling operations are operating at, or near, many of those early locations. Positioned as the vital link in the supply chain between the farmers, marketing boards, bakeries and food manufacturers, and the grocery and foodservice sectors – mills play a pivotal role in providing the right products, timed perfectly, so retailers can tap into consumer trends. These businesses are anything but run-of-the-mill.
It’s no surprise that a country like Canada, whose wheat-based agriculture is so prevalent, would have a thriving milling industry. According to the Canadian National Millers Association, our country boasts about 50 commercial wheat, oat and corn mills from coast to coast. Seven of our 13 provinces house mills, with a total milling capacity being shared about equally between eastern and western Canada. Eastern Canada – being closer to larger urban centres – houses the majority of wheat milling capacity. Our Prairie provinces hold most of the oat milling capacity. Our national mills grind more than 3.5 million tonnes of wheat, oats, corn and barley each year, and we export our milled grain products to more than 30 countries annually. The U.S. is our largest export market for milled grain products. The milling industry is dynamic, and continuing to adapt to changing customer needs. There is approximately $1.5 billion Cdn invested into our milling facilities, and 20 per cent of our grain mills are relatively young (less than 10 years old).
Canada excels at being a food exporter, and the expansion of more affluent middle-class consumers in export markets has resulted in a corresponding increase in exports of prepared foods, many of which contain milled grain products as ingredients. According to Statistics Canada, “Other food products,” listed as seventh in terms of total food exports, experienced one of the biggest export increases of 184 per cent between 1995 and 2002, or $823 million. “Other food products” include such items as salty snacks, peanut butter, coffee and tea, flavourings, seasonings and dressings, salads, par-baked frozen bakery products, and fresh pasta.
Canada’s grain mills must juggle production and shipment of ingredients to a wide variety of markets from local niche customers to the large export opportunity. As always, our millers have adeptly identified the host of opportunities, looked at their own business models, and targeted the sector that best fits their products and services. Even the fickle ups and downs of the diet industry haven’t caused the milling sector to stumble.
The low-carbohydrate diet fad, so popular a few years ago, has given way to a new appreciation on the part of consumers for whole grain products. What continues to be a challenge for both milling and baking industries is the lack of labelling guidelines – often allowing consumer confusion between a whole wheat product and a whole grain product. Steps are slowly being taken by the government to provide some clarity. “The Canadian milling industry welcomed Health Canada’s new dietary recommendations to consume more whole grain products,” says Gordon Harrison, president of the Canadian National Millers Association. “Canadian consumers have already adopted more whole grain foods than their U.S. neighbours. Part of this success has been the long term availability of whole wheat bakery products, providing a great vehicle for the consumer to transition from white to whole grain products.”
Anita’s Organics of Chilliwack, B.C., has made artisan grains and flours their focus for a number of years. They have grown to two production sites, serving retail bakeries, as well as other manufacturers. They also operate a retail store on site. Is there a “typical organics consumer”? “We have loyal customers shopping at our retail store from all walks and stages of life,” responds Andrea Gunner, general manager. “Our customers are more alike in their eating philosophy, than they are in terms of demographics. They tend to be progressive and well-informed.”
Anita’s Organics has thrived by developing solid and close relationships with its network of suppliers. “We’ve had bakeries tell us that they can sleep at night because they know that we’re buying Canadian wheat from trusted sources,” says Gunner. Larger mills have targeted the growing organics sector as well. Mark Hayhoe, former president of Hayhoe Milling, confirms that they’ve been providing organic products for over 10 years. “The organics market is still relatively small, but growing. People forget that before the 1950s (and the advent of pesticides) organic was the mainstream,” says Hayhoe. It’s an interesting point to ponder, given foreign wheat has been under the microscope lately — both literally and figuratively.
The recent animal deaths attributed to tainted Asian wheat gluten have actually highlighted the excellent reputation of our grain supply chain. Canada’s large and small mills both service the pet food industry. Anita’s Organics provides ingredients to a pet food manufacturer for a non-wheat-based dog food. “We’ve seen that business trebling in volume over the last few months,” confirms Gunner. Larger mills have also seen the pet food scandal emphasize the sterling reputation of Canadian wheat. “It’s really put the spotlight on the exceptional quality standards that the Canadian milling industry has embraced for so long. There’s a trust factor associated with our industry standards,” explains Hayhoe. From pet food to toxic spinach – our food supply has never been under more scrutiny by consumers, and eating products grown close to home is a strong trend fuelled by food safety concerns. “In terms of trends, food supply sourced from close, trusted origins is very big. Eating local is the ‘new organics,’ ” points out Gunner.
The grain milling industry is quite broad in scope. “A relatively small percentage of what the Canadian grain milling industry produces actually finds its way onto retail shelves as wheat flour and other milled grain products. It’s only about 10 per cent of the business. The other 90 per cent of industry shipments is used as ingredients by food processors in products found in virtually every aisle of the supermarket, from breakfast cereals to frozen entrees,” confirms Harrison. Canada’s milling industry services a wide variety of business sectors – literally and figuratively – everything from soup to nuts. To be able to do this effectively, means that millers must be innovative in terms of product development and process innovation. “Supply chain logistics has been a key area of innovation for the milling industry and its customer,” says Harrison. He notes that in some cases, a supply cycle that used to take weeks or months, has been whittled down to a few days, as part of a just-in-time ingredient delivery. This has been an effective strategy for keeping costs in check.
Just how does our milling industry balance the cost of quality assurance and food safety programs with the immense pressure from large retailers to keep prices down? “The milling industry has traditionally been an efficient industry, securing fairly conservative margins, so we’ve pretty much stayed the course,” says Harrison. This steady, long-term investment view appears to have been a wise strategy, shared by Canadian and multinational shareholders – one that allows the industry to manage the opportunities, rather than allowing the opportunities to manage it.
The U.S. milling industry expanded rapidly in the early ’90s, finding itself ahead of market growth, and with excess capacity by the mid- to late ’90s. This resulted in some volatility, and rationalization in recent years. By contrast, the Canadian expansion has occurred later, and at a more consistent pace. “It would be accurate to say that the Canadian milling industry expanded in response to what has been sustained growth in North American market demand,” says Harrison, noting that grain milling has become an extensively modernized industry on this continent, in which Canadian mills have demonstrated they can readily compete.
The North American Free Trade Agreement allows for the free flow of milled grain and bakery products, and Canada enjoys a modest trade surplus with the U.S. in wheat-based products. Oat milling also continues to be a bright spot, with Canadian oat mills meeting a major portion of the North American demand for oat products. Other export markets pose a greater challenge. “Though the Canadian milling industry exports to more than 30 countries, that amount remains modest,” says Harrison. Export subsidies available to millers in European Union countries render Canadian wheat flour uncompetitive in many export markets. There continue to be enormous opportunities for our milling industry, a view shared by large and small companies alike. Mike Matthews of Arva Mills, in Ontario, sees spelt as a solid area of growth for his business. “There’s a high demand for spelt right now, coming from consumers that appreciate spelt’s unique flavour and high nutritional value,” says Matthews. “More farmers are beginning to grow spelt.”
While other industries, such as the auto sector, make front page news for their ups and downs, Canada’s milling industry continues to be a solid, dependable growth sector within the Canadian economy. It’s been said that, “Your brand is your reputation. It’s what others say about you when you’re not in the room.” If this is the case, the Canadian milling industry has a very strong brand indeed.
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