Let’s not rush to judgement on Maple Leaf
Updated: Aug 12, 2019
Maple Leaf recently announced the construction of a manufacturing facility in Indiana for their Lightlife plant-based protein products division. There was considerable criticism of Maple Leaf, as a Canadian Company, for building a food manufacturing facility in the United States. Critics bemoaned the lack of new food processing facilities in Canada. The question though, is whether this decision by Maple Leaf reflects a lack of competitiveness for Canadian food processing (or a lack of loyalty to Canada), or a strategic decision based on other factors.
There is little doubt that there exist factors which make manufacturing in Canada difficult. In Ontario particularly, electricity rates are high. Labour is also a significant issue. In my conversations with food processors, the availability of labour is often a complaint. This does not just relate to work in the factory (more general labour) but also to trained managers and food scientists. During a recent trip to the United States I heard several processors complain about the same issue. They suggested that it had gotten worse with the tightening of immigration policy under the current administration. Taxation and other factors have also been raised. It has been suggested that Canada does not provide an environment conducive to food innovation. I have not seen any definitive evidence on this (although, it may exist) but it merits consideration and further study. There are always competing incentives between jurisdictions but that often depends on who is in power and the specifics of the industry. The lack of new processing facilities in Canada may be due to some combination of these factors.
However, the answer may be simpler. It is worth remembering that Maple Leaf was recently praised for investing in a large chicken processing facility in London, Ontario. This investment may have been different because chicken is supply managed, which limits the importation of processed products, but it represents a significant investment in Canada by Maple Leaf.
The company also has other significant processing infrastructure in Canada - notably a large pork processing plant in Brandon, Manitoba.
Then why would they build in Indiana? The plant-based protein company they acquired was originally based, and continues to be based in the United States. The existing manufacturing infrastructure is located in the US, although not in Indiana, so to build manufacturing in proximity to the company’s management seems like a natural extension. The US is a market ten times larger than Canada, so proximity to the market matters. While Western Canada is a significant producer of field peas (one of the primary ingredients in the Lightlife products), the Midwest can also grow peas which will reduce the distance to market and, therefore, costs.
Market access may also be important. We have seen China use trade as a weapon. We’ve also seen the US administration break trade rules to protect the domestic market (and not just during the Trump administration - i.e. softwood lumber). Facing that kind of uncertainty, I would probably choose to invest in the larger market too. These US focused reasons have more to do with the decision than the Canadian environment in this case.
We do have an issue with the food processing sector in Canada. The constraints to growth are not well understood and merit attention. In this case, I’m not convinced that the Maple Leaf plant in Indiana is a real example of the issues we have in Canada. Highlighting it muddies the waters and may bring unwarranted criticism of a company which is doing a lot of good things in Canada.
Recommended citation format: von Massow, M. “Let’s not rush to judgement on Maple Leaf”. Food Focus Guelph (23), Department of Food, Agricultural and Resource Economics, University of Guelph, April 22nd, 2019.