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The Daily. Monday, December 20, 1999
The vast majority of Canadian food processing companies have adopted at least one form of advanced technology, and most report the biggest impact has been on the quality of their products, according to a new analytical study.
About 90% of companies in the food processing sector, the nation's third largest manufacturing industry, used at least one of 61 advanced technologies in 1998. About 30% used more than 10.
Six out of every 10 of these enterprises reported that these technologies improved the texture or appearance of their products, their shelf life or convenience for consumers. In addition more than 70% of plants reported that the new technologies had improved food safety, and about 45% said they had also improved nutritional levels of their products.
Food processing plants are adopting a wide range of sophisticated technologies to stay competitive. These technologies include deep chilling and advanced filter technologies for processing; rapid testing techniques and automated laboratory testing for quality control; local and wide area networks for communicating; and advanced materials for packaging.
In many cases, these new technologies are being used to enhance taste, prolong shelf life, and reduce costs. More importantly, technology is frequently aimed at providing safer products.
The food processing industry employs about 200,000 workers, accounting for just over one-tenth of total manufacturing sector employment. In 1998, the gross domestic product of this industry was $14.5 billion, or 11% of the total manufacturing gross domestic product. The sector produces food products ranging from meat and milk through to frozen pizzas and highly processed meat products.
Four out of every 10 companies reported in 1998 that they had solid plans to upgrade their technologies with new, more advanced technologies within three years.
Food processing companies that value quality the highest have tended to adopt more advanced technologies, according to this study. These companies reported that the benefits from adopting new technologies were highest for technologies that improved the quality of products. But the search for quality extended beyond the use of new technologies.
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In particular, companies often adopted new specific business practices that enhanced the economic impact of new technologies and led to organizational changes. Adoption of advanced technology and these quality-related practices went hand-in-hand.
The most commonly used business practices associated with the onset of advanced technology were those primarily related to food quality and safety, in areas from processing to packaging.
Foreign-controlled plants led Canadian-owned plants in the use of advanced technology in 1998. The gap was particularly large in the areas of network communications and process-control technologies.
About 90% of foreign-owned plants had adopted at least one advanced network communications technology by 1998 as opposed to 60% of domestically-owned plants. Similarly, about 85% of foreign-owned companies had adopted process control technologies, compared with about 50% of Canadian-owned firms.
With increasing globalization, multi-national companies have been increasing their presence in the food processing sector. Consequently, foreign ownership is playing an important and increasing role.
Even though foreign-controlled plants accounted for only 11% of the total number of plants in this industry in 1995, they accounted for 40% of the total shipments. This has increased from less than 30% in the early 1980s.
The study found substantial differences in the use of technology between small plants (with 10 to 19 employees) and large plants (with 250 or more employees).
Large enterprises had much higher adoption rates of new technologies than small establishments, particularly when it came to network communications technologies, such as local area networks, and process-control technologies, such as programmable logic controllers.
About 90% of large companies had adopted network communications technologies in 1998, compared with only 45% of small plants. Similarly, about 85% of large enterprises had adopted process control technologies compared with 35% for small plants. This is partly because large plants were more likely to do continuous processing operations of higher value-added products.
Technology use differed greatly across the seven industries investigated in the study: dairy, fruit and vegetables, bakery, cereal, meat, fish and specialized products. Advanced technology use was highest in the dairy industry, followed by the fruit and vegetable industry and specialized food products industries, such as frozen pizzas and snack foods.
The higher levels of technology use in these three industries was generally associated with higher levels of competition. Both the fruit and vegetable industry and specialized products industries experience high competition from imported products. The dairy industry is faced with a competitive environment that has rapidly changed production technology.
Plant managers were asked to rate their production technologies against their international competitors. As many reported that their technology was more advanced than that of competitors as those who felt it to be less advanced.
Despite its lead in adopting new technology, the dairy industry considered itself to be lagging behind its American competitors. The fish products industry, on the other hand, had adoption rates well below those of the dairy industry, yet considered itself ahead of its American counterparts. Meanwhile, the meat industry, which was about average in terms of technology use, considered itself behind its U.S. competitors.
The publication, Advanced technology in the Canadian food processing industry (88-518-XPE, $45; 88-518-XIE, $33), is now available. See How to order publications.
For more information, or to enquire about the concepts, methods or data quality of this release, contact John Baldwin (613-915-8588) or David Sabourin (613-951-3735), Micro-Economics Analysis Division.
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