E-commerce Overview Series:
Agri-food Industry in Canada

Publication Date: February 2004

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Description of the Sector

The agri-food industry includes a large number of firms, 84% of which are small- and medium-sized enterprises (SMEs) with fewer than 50 employees. The agri-food processing sector is divided into eight sub-sectors: 1) Grain and Oilseed Milling (cereal); 2) Sugar and Confectionary Manufacturing (sweets); 3) Canning and Specialty Foods Manufacturing (canning); 4) Dairy Product Manufacturing (dairy); 5) Meat Product Manufacturing and Seafood Product Processing (meat and seafood); 6) Bread/Bakery Product and Tortilla Manufacturing (bakery); 7) Other Food (includes condiments and snacks) Manufacturing (snacks); and 8) Beverage (includes soft drinks and alcoholic beverages) Manufacturing (beverage).

Diagram 1
Distribution of Food Manufacturing Firms in Canada by Sub-sector

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The largest concentration of firms occurs in the bakery, meat and seafood, and beverage sub-sectors (refer to Diagram 1). Geographically speaking, the distribution of agri-food firms favours locations in three provinces, namely, Ontario (33%), Quebec (25%) and British Columbia (15%).

Role of Information and Communications Technologies (ICT) in the Sector

Having a Web site is considered an interesting measure of the prevalence of electronic business (e-business) in a given sector of activity. In the food processing industry, the percentage of firms having a Web site varies considerably by sub-sector. Firms in the beverage sub-sector (40%) are the most likely to have Web sites, followed by those in the cereal (36%), dairy (29%), snacks (29%), sweets (28%) and canning (26 %) sub-sectors. Firms in the meat and seafood (13%) as well as bakery (9%) sub-sectors have markedly fewer Web sites than those in the other food processing sub-sectors.

Source: Scott's Business Directories, 2002.

Firms are regionally segmented in terms of e-business. All things being considered, in certain sub-sectors, Quebec firms have fewer Web sites than Ontario firms. This is true for the cereal (21% in Quebec compared with 38% in Ontario), beverage (29% versus 57%) and canning (20% versus 34%) sub-sectors.

New Electronic Business Models

The four principal business models or electronic solutions used by firms in the agri-food industry are: 1) E-malls, or virtual shopping centres aimed at broadening the scope of food processors; 2) Electronic or virtual stores that permit SMEs to promote their products; 3) Information brokers who are more often connected with agriculture production than food processing; and 4) Third party marketplaces are less prevalent in this industry. Diagram 2 provides a few examples of firms or Web sites that stand out in the agri-food industry. In Canada, SMEs in this sector are found mainly in quadrants one and two.

Diagram 2
Technology Solutions Arising From Business Models

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To fully understand Diagram 2, the reader should consult the document entitled "Electronic Business Models: A Conceptual Framework for Small- and Medium-sized Canadian Enterprises" at the following address: www.cefrio.qc.ca/english/pdf/Strategis%20_Eng.pdf. This document describes in detail the four main models illustrated in the above diagram.

Issues for Canadian Firms

E-business plays a key role in the distribution of products within Canada's agri-food industry. Firms in the sector need to pay close attention to this area of their operations.

Barriers

Canadian agri-food SMEs need to overcome barriers primarily related to difficulties encountered in developing new markets. Even though electronic markets make it possible to reduce advertising and promotion costs, it remains difficult for SMEs to join certain distribution channels that are dominated by large buyers.

Opportunities Open to Firms in the Sector

E-business opens up opportunities for specialty products marketed by agri-food SMEs, reduces the cost of entry into niche markets that compete with grocery markets, and constitutes a new information and distribution channel that offers SMEs an alternative to the grocers. Moreover, information technologies make it possible to reduce promotional costs.

Finally, grouping small food processing firms together in a region to form an e-mall (or virtual shopping centre) that is associated with one specialty and exports beyond the region, offers SMEs some very profitable opportunities.

References

Statistics Canada, 2000, Canadian Business Patterns (Beyond 20/20)
http://strategis.gc.ca

To learn more, you can visit these Web sites: 

www.cefrio.qc.ca/english/indexAccueil.cfm
http://strategis.gc.ca/plastics
http://strategis.gc.ca/ebizenable
http://sourcecan.com
www.agr.gc.ca

Published in Partnership

This document has been prepared by CEFRIO, as part of the project "New E-business Models and SME Development", a project undertaken in cooperation with Industry Canada, the National Bank of Canada, TELUS, CANARIE and Canadian Heritage.

The research team included Mrs. Louise Côté and Mr. Michel Vézina from HEC Montréal, and Mr. Vincent Sabourin from the Université du Québec à Montréal.

For more information, please go to the CEFRIO Web site – the authority on information technology appropriation – at: www.cefrio.qc.ca/english/indexAccueil.cfm.