A new vaccine mandate for truckers crossing into Canada from the US and Mexico is exacerbating a taxing environment for food manufacturers’ supply chains.
Michael Graydon, the CEO of industry body Food, Health and Consumer Products of Canada (FHCP), described the vaccination requirement introduced by the Canadian government on 15 January as a “step in the wrong direction”. He estimates more than 70% of trade coming across the border will be disrupted, meaning consumers face fewer choices and higher food costs at the grocery counter.
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By GlobalDataCanadian food manufacturers, like their US counterparts and others around the world, are up against rising input costs as a result of higher commodity and packaging prices, while sea-bound freight containers are still in shortage due to a backlog caused by the pandemic. Staff shortages from Covid-19 absenteeism are also impacting an already tight labour market, while a stretched trucking industry is facing drivers retiring early, often due to poor working conditions and long hours.
Graydon said FHCP members reported a 17% increase in costs as a result of supply chain constraints. The industry body recently joined the Canadian Trucking Alliance and 32 other associations urging the Government “to allow time for a transition to solutions that do not worsen cracks in our stressed supply chains”, Graydon explained.
He added: “Food, health and consumer product manufacturers have worked tirelessly to overcome a perfect storm of disruptions that continue to test Canada’s supply chains. The pandemic, of course, slowed production, shifted demand, and increased persistent worker shortages. In fact, more than 75% of FHCP members report labour shortages are impacting their production and ability to supply product in Canada.”
Meanwhile, a similar vaccination requirement for Canadian haulage drivers entering the US came into effect on Saturday (22 January). Just Food is awaiting a response from the American Trucking Association to gauge the potential impact.
Common among food manufacturers during the pandemic has been to cut the number of SKUs in order to meet consumer demand or focus on the more saleable pack sizes. But the production constraints have led to multiple price increases, with indications of more to come.
“In some cases, there are shortages in products and less selection on store shelves for Canadians as suppliers concentrate on key product flavours and sizes with the highest demand in order to maximise efficiencies,” Graydon said. “Consumers will likely also see fewer discounts given product scarcity in the months to come.”
Sylvain Charlebois, a professor in food distribution and policy at the Faculties of Management and Agriculture at Dalhousie University in Halifax, said the winter weather has also played a part in supply chain disruptions and pushing up costs. He pointed to some reports suggesting “getting a truck to cover the Canadian market is 25% more expensive compared to just a few days ago”.
Describing the emergence of the Omicron variant as a “gut punch” to the food industry, Charlebois said vaccine mandates are an added pressure, “robbing the industry of the oxygen it desperately needs right now”.
Charlebois explained: “If food continues to cross the border, and it probably will, we expect food to be more costly. Higher logistical costs, like anything else involving the supply chain, will catch up to consumers. That’s the reality of supply chain economics. And with fewer people driving around, major buyers will be prioritised over smaller ones. Many processors will have a harder time getting the ingredients they need to manufacturer the food we buy every day, on both sides of the border.”
Graydon said the Canadian vaccine measures have led to warnings from businesses about the “grave risks” posed to consumers and the economy. The Government should form a task force with business leaders to “find solutions”, he urged, including longer-term measures.
“Canada must also redouble coordination efforts with the United States and invest overall in transportation and infrastructure. We also need government to look beyond this crisis and recognise manufacturing’s critical importance to all Canadians. A national manufacturing strategy would usher in real progress, as would acting on turn-key solutions that could rein in cost aggravations contributing to inflation in grocery and drugstores across the country.”
Despite all the challenges, Charlebois said the Canadian food industry continues to deliver, albeit with “some government-level lack of forethought”.
“Canadians should not underestimate how resilient our food industry is. Consumers may not always find what they want at times, but they will always find what they need at the grocery store. This is due to the work and effort of companies, and people willing to deal with whatever is thrown at them.”
