Building a more resilient food system in Canada

Canada’s food industry is at an inflection point. Global supply chain challenges and environmental issues are increasing pressure on the sector’s ability to meet demand.

Over the next 25 years, feeding everyone on the planet will become an even more daunting task, as global food needs are expected to increase by about 60% as the population nears 10 billion people. At a time when countries need to work closely together to find sustainable solutions, protectionism, including trade wars and tariffs, is threatening to disrupt global supply chains. Consumers will bear the brunt of these shifting dynamics, with Canadians already paying more for food than ever before.

The best way for Canada to meet demand and fend off trade threats is to create a sustainable, resilient, and self-sufficient supply chain instead of relying on other countries. To do that, farmers, grocers, producers, manufacturers, and governments must work together to create an industry that embraces technological innovation, supports businesses with additional investment, and considers environmental impacts to ultimately give consumers high-quality products at affordable prices.

It will take substantial work to make a significant change, say the individuals from KPMG in Canada interviewed for this article, which is a companion piece to KPMG’s Reimagining global food system resilience report. “Currently, the mood among producers is not positive, as people are worried about trade with other countries,” says Ebony Verbonac, Partner and Agribusiness Sector Lead for KPMG in Canada’s western region.

Farmers are worried about access to land, which has become more expensive, ultimately impacting rates of return. Generally, farmers are concerned about the impact rising costs can have on their business and livelihoods.

David Guthrie

Partner, National Agribusiness Sector Leader

KPMG in Canada

Quickly adapting to new consumer trends, which have been the hallmark of the most successful companies, is not as easy as it once was, as preferences are rapidly shifting. “What is trending today might not be popular in the following year,” explains Guthrie. “You need to consistently adapt to consumer trends and know where your market is headed.”

Canada’s food industry should strive for greater sustainability, which entails a reduced dependence on other countries for resources. “In Canada, we have enough staple foods to feed the country, and are large enough to diversify in international markets,” he says.

Building resilient supply chains

Building a resilient food industry will take time, but it starts by creating an independent supply chain – something Canada doesn’t have today. While the country has invested in railroads and trucking corridors to get food from one end of the country to the other, we’ve relied on other nations to invest in supply-related areas. Ted Salter, Executive Director of Supply Chain, KPMG in Canada, says the country currently suffers from a significant underinvestment in its supply chains, particularly around commerce, data, and technology. Until now, there’s been no need for Canada to put money into all these areas.

However, going forward, we do need to develop a more sustainable supply chain. Here are some ideas as to how.

Embrace “coopetition”

Collaboration is critical when developing more independent supply chains, which can be referred to as “coopetition”, a term given to competitors who cooperate. In Europe, food manufacturers have adopted a synchro modularity approach, which brings all elements of a supply chain together. There, they have shared logistics clusters, where businesses use the same facilities, such as freezer space and warehousing. Many companies also invest in new infrastructure together. This approach has many benefits, from reduced costs per company to creating more efficient use of space and quicker technological adoption.

Bridging gaps

Canada has three key food supply chain-related ecosystems:

Agri ecosystem: farmers and primary producers
Production ecosystem: those who transform raw ingredients into products
Channel ecosystem: those who sell food to consumers, including grocery stores, restaurants, and foodservice providers

Supply chain ecosystem

Each area operates on their own and in tandem, with inefficiencies within each system, but even greater inefficiencies between ecosystems. There’s a significant opportunity to bridge these inefficiency gaps. How?

By better understanding the relationships between these ecosystems
Increasing collaboration
Sharing data
Reducing friction
Providing more certainty to partners

The point is to create a more interconnected, transparent supply chain where everyone moves together.

Interconnected supply chain

Share data

As companies become more vertically integrated across the supply chain, they’re also collecting more data. While businesses tend to be protective of their information, when we are experiencing uncertain political and economic environments, information should be shared. Why? Because data can help make processes more efficient, enhance trade, make it easier to fill demand gaps within Canada, and more. Everything from decision intelligence to workflow collaboration across enterprises could be available for all to benefit from. If businesses remain reluctant to share information, there could be an opportunity for Canadian food and farming organizations, to create a database on information related to soil, weather, or consumer trends. This will benefit the organization in terms of generating engagement and merit with its community, and it will provide agricultural companies with valuable information.

TELUS Agriculture provides real-time data connectivity and insights across stakeholders in the value chain, from farmers to food companies, CPGs, and grocery store shelves. Agritech companies regularly share updates on soil diagnostics, crop performance, and prescriptive data algorithms to enable customers to deliver insights on seed, fertility, and crop protection. TELUS synthesizes this input and delivers easy-to-use tools to farmers via mobile platforms, ensuring accessibility even in remote areas.

Farmers, in turn, use these tools to monitor real-time data on soil moisture, pest activity, and crop health in close coordination with their trusted advisors and agronomists. Feedback from farmers and agronomists is directly integrated into updates, ensuring tools evolve with user needs. This real-time exchange of information—from researchers to developers, and ultimately to end-users—creates a robust cycle of continuous improvement.

Improve investment opportunity

To create a supply chain that can operate sustainably in today’s environment, we need to encourage investment in the agricultural industry. From a supply chain perspective, Canada needs capital models to help startups scale and build expertise in advanced analytics to make the country more attractive for investment.

Every level of government has a significant role to play. The elimination or reduction of inter-provincial trade barriers would help goods move more easily and freely across the country and would help reduce costs. Furthermore, new tax credits and policies for investments in technology could help startups scale and make Canada more attractive for investments. Additional support could also be given to companies with export capabilities.

"Developing an environment that encourages capital investment is key, as startups need help to scale and build the expertise required to make the country more attractive for investment," Ted Salter, Executive Director of Supply Chain, KPMG in Canada.

Invest more in AI and blockchain

Technology is a key area for improvement. One that Canadian companies across the food chain must embrace. Artificial intelligence (AI) could significantly impact the industry, enabling everything from precision agriculture, where farmers can pinpoint the most effective ways to use water and fertilizers, to supply chain transparency, where blockchain is used to track where food comes from.

The latter is already in use; many consumer-packaged goods have QR codes that allow consumers to see the entire supply chain's journey.

These tools are important for creating a sustainable and responsible supply chain. In the case of a lettuce recall, for example, blockchain technology can provide grocers with a specific lot number from which the affected item originated. This allows retailers to target only those bags from the contaminated lot for removal, rather than discarding every bag from the shelves.

Kareem Sadek

Partner, Advisory, Emerging Tech Risk Leader and Cryptoassets & Blockchain Co-leader

KPMG in Canada

With AI, it’s still early days, but adoption will be critical if businesses are to remain competitive and responsive to changing markets and consumer needs. If Canada can’t compete on economies of scale, it can employ AI to increase operational efficiencies, create better harvests, reduce reliance on manual work, improve water usage, and reduce waste, among other uses.

TELUS Agriculture is already using AI through its digital kits, which equip farmers with Internet of Things (IoT) sensors, farm management software, and predictive analytics tools. These kits have been found to enhance sustainability and improve food system resilience by helping farmers achieve a 20% increase in water use efficiency and a 15% reduction in fertilizer applications, saving 500 million liters of water annually.

Yet, AI and technological adoption are generally not a given in this industry. John Jansen, Global Head of TELUS Agriculture, says that while there have been “amazing programs with phenomenal investments, they fall flat because there isn’t the time available on the farm or the margins that enable things to work. Getting crops planted becomes more important.”

Marc Low, Director of Innovation, Growth and Emerging Tech, KPMG in Canada, says there are several barriers to AI implementation, including:

Financial barriers: high upfront investment costs and limited capital for smaller producers.
Technological infrastructure: lack of digital and data-collecting systems.
Technical expertise: a shortage of skilled personnel who can implement complex AI systems makes it challenging to meet ongoing training and education needs.
Return uncertainty: benefits aren’t immediately clear, and users have concerns about how spending on AI will translate into gains.

Due to some of the challenges when implementing AI, Sadek recommends farmers and others to start with one area of focus within the supply chain. “Chunk it into smaller pieces,” he says. “Where are your pain points within the value chain? That’s where you need to start.”

One single technology isn’t the answer, however. To be effective, companies must layer multiple AI technologies on one another. For instance, a farm might have a robot that travels up and down rows of indoor greenhouses. With computer vision, it looks at crops to see if the pH levels of water are off or if there’s an issue with fertilizer. Then, using AI analytics models, it can determine how best to optimize yield. “That’s layering,” says Sadek. “It’s taking AI and IoT and marrying them to get this perfect solution.”

CEA vegetable grower Windset Farms, based in Delta, British Columbia hopes to implement AI in several ways. It’s eyeing tech to optimize crop production by automatically adjusting mechanical tools like venting, heating, lighting, irrigation, and other parameters based on complex data inputs. This will help Windset Farms manage more hectares of greenhouses with less manual oversight. Windset Farms is also developing its own proprietary software called Streamline^TM, which uses AI for procurement recommendations and sales insights. “AI is going to be pretty big with true machine learning, where it will steer the mechanical tools of the greenhouse more deliberately utilizing past experience,” says Steven Newell, President and CEO of Windset Farms.

Creating a circularity strategy

To create a more sustainable food system in Canada, it’s important to maintain resources for longer, minimize waste, and create a more resilient supply chain that doesn’t require continually obtaining new resources.

“The goal of circularity is to keep resources at the top of the ‘value hill’ for as long as possible,” explains Josh Hasdell, Senior Manager, KPMG in Canada’s Strategy & ESG services practice. “The value hill represents the time, effort, and resources that go into creating a product for consumption. At the peak of the hill, the product achieves its highest value. However, once that product has been used, this value starts to be depleted. If circularity is not considered, the product is often discarded, resulting in a loss of all the value invested in its creation. The concept of circularity seeks to maintain products at the top of the hill for as long as possible by continuously reusing and extending the value of resources, rather than disposing of them after a single use.”

Circularity value hill

Water is a prime example. It’s used in many areas of production, from fertilizing crops to feeding animals to preparing soil. The goal is to keep water usage in a closed loop, allowing producers to recycle existing water, which reduces new water inputs, helps secure water supply, and protects local ecosystems. Windset Farms prides itself on its water conservation methods, where irrigation drain water from the plants in its greenhouses is collected, filtered, treated, and recirculated back to the plants. After that water has been reused, it goes through a de-nitrification process. The water is then used to irrigate nearby pasture crops before returning to the groundwater aquifer.

This kind of circularity, which Windset Farms employs in other areas with heating and energy usage, is fundamental to its business. “We aim to minimize our footprint to the greatest extent possible when it comes to energy, heating, electricity, water, fertilizer, and the land we use,” Steve Newell says. “That helps us produce 20 to 40 times per acre what an average open field can produce.”

Hasdell admits that not enough companies consider circularity concepts across the production process, despite KPMG’s finding that reusing resources can improve efficiency, profitability, and innovation while positively impacting relationships with consumers and other stakeholders. Part of the problem is that circularity is seen as a buzzword instead of a basic supply chain management concept. Terms associated with this approach must be demystified if people are going to adopt it. A key myth to bust is that circularity solutions mean a product development cycle is just one big circle of resources, but that’s not true or practical. Circularity is about employing small loops frequently across the production process to recover and maintain resources at the top of the ‘value hill’ efficiently.

Still, Hasdell is optimistic that more companies will create circularity strategies, either directly or inherently through good resilience planning, which will help Canada become more sustainable, from an environmental and supply chain perspective. “Everything will have to be framed to match core business procedures,” he says. “One thing we always say is that there shouldn’t be a separate team for sustainability. It should be interwoven into the core business process.”

Creating long-lasting partnerships

If Canada’s food system is to become more resilient, companies will need to innovate and collaborate in ways they may not have before. Windset Farms, for instance, forged a partnership with a local utility company. The government entity helped the company consider LED lights, which are far more efficient, rather than high-pressure sodium lights, common in greenhouse lighting.

It was a win-win for both – with Windset Farms reducing their power usage while allowing the local utility company to avoid buying fossil-fuel-based electricity from the U.S. allowing it to supply other companies and homes in the area during peak times. “It’s a great partnership, working together with technology to lessen the burden on infrastructure and alternative sources of supply,” says Newell.

Changing consumer behaviour

Consumer expectations will come into play in the future, with more people caring about food sourcing and demanding transparency in supply chains. There’s a greater expectation to understand where a consumer’s products are coming from because of an inherent increase in safety, health, and environmental concerns.

While sustainability is perceived as important to consumers, inflation is weighing on people’s minds – and wallets.

For a long time, consumers have said they want more locally grown or produced food options with more sustainable practices but are struggling with rising food costs – and ultimately price is winning out. However, you can have both: companies should explore ways, such as incorporating technology, embracing coopetition, circularity, etc. to improve production and sustainability, while reducing prices.

Katie Bolla

Partner, Customer Practice & GTA Consumer and Retail Industry Lead

KPMG in Canada

If Canada can adapt to the shifting market environment, the possibilities for the industry – domestically and globally – are endless. “When you export internationally, food made in Canada is known as high quality,” says Guthrie. “There’s a lot of trust in the food we grow, and consumers know it’s coming from a highly regulated system that’s going to be safe for consumption.”

If you look at Canada compared to the world stage, we’re positioned nicely in the agriculture sector. We have land base, water, and the infrastructure in place to be a big player in the field. So, if we can acclimate with technology and keep developing more efficient practices, then we really can continue being a leader in agribusiness on a global scale.

Ebony Verbonac

Office Managing Partner, Lethbridge

KPMG in Canada

David Guthrie

Partner, National Agribusiness Sector Leader

KPMG in Canada

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Six steps to a more resilient system

It is evident that there’s an urgent need for everyone within Canada’s agricultural and food ecosystems to come together and create a more sustainable supply chain.

Here’s what the industry must do to develop a more resilient system.

Provide national food security
A food system can’t be sustainable if consumers can’t afford to participate in the ecosystem. New solutions must be considered that can help increase production or input yield, which, in turn, would increase access to food while lowering its cost.

Increase government support
Governments of all levels must take charge of this issue and establish a framework that allows Canada to be a leader in global food production. Through improved regulations that support innovation and increased funding opportunities, governments can further encourage the development of a domestic supply chain.

Appeal to the next generation
One potential challenge is that many of Canada’s farmers are reaching retirement age. If Canada is going to push forward and compete on a global stage, it’ll need a new cohort of eager farmers with fresh ideas to take over. The government has a role to play here, too: They can create policies that support producers more broadly but also make farming more attractive to the next generation. That could include investing in agriculture focused university programs, financial incentives for young farmers, and more.

Invest in technology
As AI rapidly evolves, Canada’s agricultural industry can’t fall behind. To keep up with the rest of the world, governments, venture capitalists, and others must develop programs that support agriculture tech start-ups and create conditions that encourage homegrown innovation. The farmers themselves must experiment, too, even in small steps. Governments should consider finding ways to help this group invest in new technologies.

Keep the consumer in mind
When it comes down to it, the customer is the one stakeholder that must be satisfied. Producers must stay on top of consumer trends and understand what’s important to them now and in the future. At the same time, the industry must identify ways to improve efficiencies so costs can remain low, especially in inflationary times. Environmental sustainability and education are also important here, as many consumers care – perhaps more than ever – about how their food is made and sold.

Ultimately, everyone must think carefully about how we produce food, which may mean reimaging the entire agricultural ecosystem. If we can’t rely on the U.S., where do we need to invest to build up our domestic industry? Growth will come once governments and companies make those critical investments into AI and when they start forging novel partnerships that can last decades. Big thinking must prevail – it’s the only way we can truly become the resilient food-producing nation we need to be.

How can we help

At KPMG, our professionals provide audit, tax and advisory services to many of Canada’s leading agricultural based organizations, from suppliers and producers to processors and distributors.

Clients draw on our deep industry experience and extensive technical resources to achieve profitable growth and obtain a fresh perspective on augmenting decision making and internal capabilities. This gives us unique insight into the complexities and opportunities within the sector, allowing us to bring reliable solutions to the table.

Ready to grow your business? So are we.