The Industry > Processing
The dairy processing industry is vital to the Canadian
economy, ranking second in the Canadian agri-food sector. The industry employs
approximately 26,000 people and generates thousands of jobs in related sectors
such as transportation, packaging, handling, and marketing of dairy products.
The dairy processing industry represents a significant segment of the Canadian
economy. In 2005, the value of products shipped by dairy processors amounted to
nearly $11.5 billion, making up 15.9% of the value of all shipped products in
the Canadian food and beverage industry.
Value of Manufactured Shipments
Dairy processing plants exist in every region of Canada and are generally located in areas where farm milk production is concentrated. Fluid milk plants tend to be located on the fringe of urban centres to serve the consumer market. Dairy plants manufacturing items with longer shelf life, such as butter, milk powders, cheese, and whey powder, are located in rural areas closer to the raw milk supply.
From a regional perspective,
the industry is heavily concentrated in central Canada. Ontario and Quebec account for more
than 65% of all plants. Data from 2005 indicates that Quebec had 179 plants of which
77 are inspected by the CFIA, while Ontario had 130 plants, 107 of which are inspected by the
CFIA.
Dairy processing facilities
In Canada, there are two markets for milk: the fluid milk market (milk and table cream) and the industrial milk market (butter, cheese, ice cream, and yogurt). During the 2005-2006 dairy year, about 80.5 million hectolitres of milk were produced for both of these markets. About 40% of the milk shipped by producers was intended for the production of fluid and the other 60% was intended for dairy processing.
The following table illustrates milk utilization by class. For a definition of uses for each class, see the Harmonized Milk Classification System. On the basis of butterfat content (3.6 kg/hectolitre), 29.14% of all the milk produced in Canada was transformed into fluid milk, cream and milk beverages, 33.91% into cheese, 7.2% into yogurt and ice cream, and 19.08% into butter.
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Milk Utilization in 2005-2006 |
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|
Milk Classes |
Millions of hectolitres |
% of Total |
| 1(a), 1(b), 1(b)ii, 1(c), 1(d) |
23.5 |
29.14 |
| 2 |
5.8 |
7.21 |
| 3(a), 3(b) |
27.3 |
33.91 |
| 4(a) and 4(a)1 |
15.3 |
19.08 |
| 4(a), (c), (d), (m) |
1.0 |
1.23 |
|
5(a),(b), (c) |
5.7 |
7.07 |
| 5 d) |
1.9 |
2.36 |
The Canadian dairy processing industry has seen significant rationalization over the past decades. Company mergers and acquisitions are largely responsible for the decline in the number of companies and processing plants. The number of plants has decreased by half since 1975 and the rate at which plants disappeared accelerated between 1988 and 1995 when the number of establishments dropped 25.8 %.
There are several factors responsible for this trend. First, the specialization of dairy farms and the reduction of transportation costs achieved through economies of scale and technological gains made consolidation possible. Static or declining industry output provided another incentive for processors to consolidate as a means of increasing market share. With mergers, firms have found they can reduce plant overcapacity, combine resources and skills and reduce cost by operating few but larger and more efficient plants. An additional factor is the consolidation of enterprises in the retail sector. Retailers now require their suppliers to provide larger quantities than in the past. Finally, globalization gives impetus to this trend since Canadian companies have to compete increasingly with foreign companies both locally and on foreign markets. Indeed, the arrival in Canada of a few multinationals in the early 1990s seems to have had an impact on Canadian companies in the rationalization process.
Industry ownership has become highly concentrated. Today 15 % of plants are owned by three leading processors, Parmalat, Saputo, and Agropur, who process 71% of the milk produced in Canada.
|
Top Players in the Canadian Dairy Processing Industry (2005) |
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| Type of ownership | Total Revenues ($000) (1) | Country | |
| Saputo Inc. | Private |
$3,883,069 |
Canada |
| Parmalat Canada | Private |
$2,018,900 |
Italy |
| Agropur | Co-operative |
$2,154,400 |
Canada |
| Kraft Canada | Private |
$2,852,000 |
United Sates |
| Nestlé Canada | Private |
$1,600,000* |
Switzerland |
| Unilever Canada Limited (2004) | Private |
$1,556,388 |
United Kingdom |
| Neilson Dairy (2004) | Private |
$476,850* |
Canada |
| Gay Lea Foods | Co-operative |
$329,424* |
Canada |
| Scotsburn Coop Services (2004) | Co-operative |
$250,190 |
Canada |
| Farmers' Coop Dairy Limited | Co-operative |
$161,668* |
Canada |
|
Sources: Company financial statements *http://www.bizlink.com/foodfiles/PDFs/sept2006/food_top_100__sept06.pdf |
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| Notes: 1) Total revenue includes all the sales of the company (not only Canadian sales). |
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Dairy co-operatives are producer-owned dairy processing and marketing businesses run by professional management teams. These organizations allow producers to control more of the marketing process as their milk moves off the farm to the consumer. In provinces where milk marketing boards do not exist, co-operatives often serve as an outlet for the milk produced by its members. They are an important part of the dairy industry in every province.
In 2003, there were 33 dairy co-operatives in Canada. Although there are more dairy co-operatives in Quebec, they are an important part of the dairy sector in the Prairies, British Columbia and the Maritimes given the volumes of milk which they process.
Until the early 1990s, cooperatives operated mainly in local markets. In recent years, the have actively participated in the rationalization process by acquiring other companies, often located outside their province of origin, or merging with them. In doing so, they have increased their market share to 42% in 2002.
Last Updated: 2006-12-05
