An internationally popular city with a growing and diverse ethnic population, Toronto boasts one of the top terminal markets in North America. The jewel of Ontario is also surrounded by verdant growing regions along the shores of Lake Ontario and Lake Erie. This access to local product, combined with an ever-widening array of imported fruits and vegetables, continues to attract new business partners to the Ontario Food Terminal and merchant wholesalers.
Locally Grown
Part of Toronto’s attraction revolves around local fruit, as southern Ontario has ample seasonal production. Apples are a top draw; according to the Ontario Apple Growers, there are up to 20 varieties grown in the province on over 15,000 acres. Top varieties by acreage are McIntosh, Gala, Empire, Red Delicious, and Northern Spy. In addition to apples, other seasonal favorites include pears, plums, apricots, cherries, raspberries, and strawberries. On the vegetable side, wholesalers can source anything from asparagus, beans, and broccoli to pumpkins, radishes, and sweet corn. Among the crops with rising acreage are mushrooms, rutabagas, and turnips.
Of course, North America’s top greenhouse production area is just a couple hours away from Toronto, in Leamington, where acres of tomatoes, peppers, and cucumbers are grown in massive structures to meet skyrocketing demand.
Rain, Sourcing & Volatile Pricing
On and off the Ontario Food Terminal (OFT), wholesalers report positive growth, even with more competition and some tough pricing as a result of the California floods early in the year, which curtailed harvests and shipments of some fruits and vegetables, and affected plantings of others.
“Business is good,” confirms Anthony Formusa, president of National Produce Marketing, Inc. “We’re seeing moderate positive increases in sales volume—as well as increased competition with new, emerging companies.”
Formusa says Toronto is a growing city that continues to get a great deal of notice and notoriety. “It’s in the spotlight, and that’s luring newcomers into the import and distribution businesses, including merchants from Central and South America, and even Mexico who are setting up their own deals with family or other connections.” Even so, he is forecasting reasonable, steady growth for the rest of 2017.
Curtailed Shipments
Much of the progress, however, came with some growing pains this year. The impact of the California rain and floods hit most markets in North America, and Toronto was no exception.
“The rains that California experienced in the early part of 2017 are still having an effect,” mentions Manny Dinis, vice president at Triple Star Logistics Inc. The vegetable deal ran behind in both production and supply, he says, and it took a while to catch up.
“Prices have been at or close to all-time highs on most green commodities,” Dinis shares. “Lettuce touched $110 a case on the floor, which is unprecedented. Packaged salads remained very tight and production was very slow.
An internationally popular city with a growing and diverse ethnic population, Toronto boasts one of the top terminal markets in North America. The jewel of Ontario is also surrounded by verdant growing regions along the shores of Lake Ontario and Lake Erie. This access to local product, combined with an ever-widening array of imported fruits and vegetables, continues to attract new business partners to the Ontario Food Terminal and merchant wholesalers.
Locally Grown
Part of Toronto’s attraction revolves around local fruit, as southern Ontario has ample seasonal production. Apples are a top draw; according to the Ontario Apple Growers, there are up to 20 varieties grown in the province on over 15,000 acres. Top varieties by acreage are McIntosh, Gala, Empire, Red Delicious, and Northern Spy. In addition to apples, other seasonal favorites include pears, plums, apricots, cherries, raspberries, and strawberries. On the vegetable side, wholesalers can source anything from asparagus, beans, and broccoli to pumpkins, radishes, and sweet corn. Among the crops with rising acreage are mushrooms, rutabagas, and turnips.
Of course, North America’s top greenhouse production area is just a couple hours away from Toronto, in Leamington, where acres of tomatoes, peppers, and cucumbers are grown in massive structures to meet skyrocketing demand.
Rain, Sourcing & Volatile Pricing
On and off the Ontario Food Terminal (OFT), wholesalers report positive growth, even with more competition and some tough pricing as a result of the California floods early in the year, which curtailed harvests and shipments of some fruits and vegetables, and affected plantings of others.
“Business is good,” confirms Anthony Formusa, president of National Produce Marketing, Inc. “We’re seeing moderate positive increases in sales volume—as well as increased competition with new, emerging companies.”
Formusa says Toronto is a growing city that continues to get a great deal of notice and notoriety. “It’s in the spotlight, and that’s luring newcomers into the import and distribution businesses, including merchants from Central and South America, and even Mexico who are setting up their own deals with family or other connections.” Even so, he is forecasting reasonable, steady growth for the rest of 2017.
Curtailed Shipments
Much of the progress, however, came with some growing pains this year. The impact of the California rain and floods hit most markets in North America, and Toronto was no exception.
“The rains that California experienced in the early part of 2017 are still having an effect,” mentions Manny Dinis, vice president at Triple Star Logistics Inc. The vegetable deal ran behind in both production and supply, he says, and it took a while to catch up.
“Prices have been at or close to all-time highs on most green commodities,” Dinis shares. “Lettuce touched $110 a case on the floor, which is unprecedented. Packaged salads remained very tight and production was very slow.
“For a short period early in the year,” Dinis continues, “citrus was impossible to find; it was the first time in decades that citrus growers had this big of an issue with supply.” Prices typically fall from highs once growers get back on track and there’s more availability.
“California vegetables—broccoli and all the leafy greens—have been in the spotlight with spiking prices from droughts and floods,” agrees Formusa. “We saw huge broccoli prices,” he recalled, reaching as high as 40 and 50 Canadian dollars, when product normally sold for about half that amount.
Pricey Product
Of course, shortages and skyrocketing prices can hurt business, but when everyone is in the same boat and people have to eat—buyers and sellers must adjust and adapt to the prices or choose to do without. Few wholesalers are comfortable doing without certain products.
“Mostly, we’re finding that our customers are willing to pay because they have to have the commodity and there aren’t many alternative, viable sources,” explains Formusa. Inevitably, he notes, the “pricing trickles down to the retail shopper. We do a little less volume, but it all seems to be moving. Times like this give you a sense of the price elasticity of fresh fruits and vegetables.”
When wholesale prices spike due to weather, the costs get passed along to retailers and ultimately to consumers—up to a point. “The floods probably impacted our margin more than the on-the-floor retail price,” says Normand Legault, senior director of produce procurement at Metro Ontario, Inc.
“We do not pass along the full cost in high markets to the retail price,” Legault explains. “There’s a ceiling where there is no point in going any higher because you will dry up consumer demand.” Of course, such spikes do not affect all items, as some products are protected by contract pricing.
New Retail Products & Venues Create Buzz
Sometimes price isn’t the prime, motivating factor when it comes to grocery shopping, as consumers weigh the cost of convenience. With a desire for balanced meals up against the time it takes to prepare them, more and more shoppers are reaching for both value-added packaged kits and ready-to-eat side and full meal solutions.
According to a recent Technomic market research report, Canadian retailers have been more than happy to provide shoppers with a broad range of packaged meal solutions. This is confirmed by Legault, who says, “The trend in packaged products has definitely increased over the past year.”
One finding from the report was of particular note to suppliers: more than 60 percent of retail meal solution purchases are planned, while 38 percent are impulse buys. This means suppliers have a continuous pool of shoppers who regularly buy prepared meal kits, along with others who will buy more if the prepacked meals meet their expectations. Equally interesting is a message for retailers: more than half of consumers surveyed cared as much about the friendliness of the grocer’s staff as the meal kits themselves.
Veggie Noodles
One of the hottest meal trends in both Canada and the United States are micro-sliced vegetables, often called spiralized or ribbon ‘noodles,’ as a primary protein. Consumers buy them with other packaged sides like fresh-cut fruit and vegetables to create a full meal.
These newfangled noodles have gained considerable pull with shoppers of all ages looking for a quick, healthy meal. The thinly-cut vegetables can be prepared like pasta but have less calories than traditional noodles. Among the sliced vegetables flying off retail shelves as pasta alternatives are broccoli, carrots, sweet potatoes, turnips, and zucchini.
Fresh Forum Do you think a Trump Administration retool of NAFTA will negatively impact U.S. trade with Canada?
Bruce Nicholas, Ontario Food Terminal Board
I would go under the assumption that we are buying a lot of product from the United States and therefore Trump’s interests are selling it to us. Why would he want to interfere with that?
Edwin Yu, Season Produce, Inc.
Definitely. It depends on what aspects he retools—tariffs or import restrictions—but there is definitely a fear out there. He has delivered on some of his campaign promises, others he hasn’t. We have to play it day by day, but when all is said and done, we have to eat and we will do our best to work with it.
Anthony Formusa, National Produce Marketing, Inc.
You have to be a clairvoyant to answer—it’s hard to foresee exactly the seriousness or the magnitude… More and more Canadian produce companies are developing relationships with Mexican producers, so this could have an impact. New business practices include crossing the goods “in bond” (across the United States without officially entering it) versus buying Mexican from Nogales and other border cities. Depending on policy, that could be a way to avoid duties, or it could be a red-tape nightmare.
Manny Dinis, Triple Star Logistics Inc.
The retooling of NAFTA would have a big impact on Canada/U.S. trade. The United States is Canada’s biggest trading partner and any changes to the agreement would slow the number of goods moving across the border.
Normand Legault, Metro Ontario Inc.
Nobody knows exactly what’s going to happen. Prior to NAFTA, we had tariffs and we lived with them. It’s no different than rain or a drought that raises costs, but it’s all speculation at this time.
Rick Carnevale, Veg-Pak Produce Ltd.
It would depend to what extent NAFTA will be retooled; it would change the export dynamics between the United States and Canada versus Canada and Mexico, and likely increase the strength of Mexican and global imports into Canada. I think the United States is very dependent on Canadian markets to make up its volume, so I don’t think U.S. growers would be too happy with a tariff scenario.
John Russell, J.E. Russell Produce Limited
As far as imports from the United States, that would probably mean tariffs. Although we experienced tariffs before NAFTA, they will drive prices up. And when you couple that with an already difficult currency exchange, you get increasing prices for fresh produce with no real value basis, and that’s never a good thing.
“We’ve started offering shredded veggie spirals made from squash,” confirms Rick Carnevale, vice president at Veg-Pak Produce Ltd., who has seen demand for not only the spiralized noodles, but various vegetable mixes and an increasing range of ready-to-use items, especially Asian and Indian vegetables.
He sees value-added, prepacked items designed for double-income families continuing to climb, and this includes a variety of prewashed and precut fruit and vegetable items. “Bagged greens—kale and spinach, and kale mixes—are very popular,” Carnevale says.
Legault, too, sees higher sales. “Not just the traditionally packaged vegetables, but also value-added products like the new shredded veggies.”
New and Unique
Ease of use is certainly important to today’s consumers, but unique products are too. Novelty comes in many shapes and sizes, with taste and origin factoring into the equation as well.
A recent poll by Canadian Grocer found almost a third of surveyed grocers said shoppers are hungry for new, unusual items, with 15 percent of Canadian grocers saying ‘exotic’ and imported fruits and vegetables were more of a factor and gaining prime space in produce sections.
In this regard, one venerable Canada retailer is trying something new. Sears Canada is following in the footsteps of Walmart and Target by expanding into groceries. The longtime retailer, headquartered in Toronto, will include conventional produce as well as a selection of organic fruits and vegetables and products.
The retailer hopes to provide the quality of a Whole Foods store with Joe Fresh (Loblaw’s low-priced banner) prices, according to executive chairman Brandon Stranzl. The inclusion of organics into the mix is a key factor, as the retailer is hoping to draw in millennials and higher-end shoppers. Whether the gambit will work is anyone’s guess, though the incentive is on target given the popularity of one-stop shopping and rising sales of organics.
“There’s strong demand for local and organic produce,” affirms John Russell, president of J.E. Russell Produce Limited. “Consumers in Canada are very sophisticated buyers, and people with a higher income level are willing to pay more for organic produce.”
A Healthier Potato
Another innovation from the True North combines flavor, novelty, and health benefits into one vegetable. A new potato, called “Carisma” by EarthFresh Farms, Inc., represents a breakthrough for consumers who avoid eating spuds because they must carefully monitor their blood sugar levels.
“We knew this variety had special attributes, and invested in testing to get approvals from Health Canada [the country’s federal health program],” shares Stephanie Cutaia, marketing director at EarthFresh in Burlington, ON. She considers the new potato a trailblazer for healthy eating, since its low glycemic levels help speed up the conversion of carbohydrates to glucose or blood sugar. This is especially important for consumers with health issues like diabetes.
“Although we cannot associate health conditions with our labeling, people with diabetes are well aware of the glycemic index,” Cutaia explains. “Normally, they wouldn’t eat regular potatoes because of the spike in blood sugar, and now they have an alternative.”
Cutaia says that more than 9 million Canadians live with Type 2 diabetes. EarthFresh is also a supporter of Diabetes Canada and uses the group’s logo in marketing and branding.
Ups & Downs
Despite strong sales for several categories, there are always issues with product crossing the border, ranging from truck delays and food safety concerns to import/export costs.
ONTARIO FOOD TERMINAL
Established: 1954 Address: 165 The Queensway, Toronto, Ontario M8Y 1H8
Located between Park Lawn Road and Stephen Drive in South Etobicoke Phone: (416) 259-5479 Email: info@oftb.com Website: www.oftb.com Hours: Deliveries accepted 24/7
Mondays to Fridays: 4:00 am to 2:00 pm
Sundays: 6:00 am to 11:00 am Size: 40 acres (1.74 million square feet) Office Space: 37,934 square feet above warehouse area Cold Storage Space: 80,000 square feet on two levels. Temperatures are computer controlled with rooms generally set at either 32°F or 42°F. Space can be rented per pallet, weekly, or monthly. Current Number of Tenants: 21
Farmers’ Market: Open Saturdays May through October; 50 stalls available for lease on either a semiannual basis (January to June or July to December) or annual basis (July through June). Space is also rented on a daily basis; daily growers can take occupancy of any vacant stalls before the market opens.
Currency Trade a Burden
Of late, the exchange rate continues to hamper suppliers on the Canada side of the border. Although it was about par 5 years ago, the exchange rate has fallen to the low-70 cents range.
As Canadian wholesalers buy much of their produce both from the United States and other countries in U.S. dollars, they’re exposed to increased costs and prices when they covert to Canadian dollars for sales and income.
“The weak and weakening Canadian dollar has been challenging for most of us importing from the United States,” agrees Formusa. “It’s adding to our costs and our selling prices in Canadian dollars, and it’s difficult to establish a selling price from a cost basis that’s not stable.”
“We buy in U.S. dollars so the exchange rate does affect us,” says Legault. “But we have no way of controlling that and we live with whatever it is. When the Canadian dollar goes down, it’s a source of inflation for us, and when it perks up, it’s a source of deflation. That is assessed in our retail price because it’s integral to our costs. Right now, we’re probably going to live with inflation for a while.”
“Some big companies can curtail this by buying futures,” Formusa posits, “but the small- and medium-sized companies can get caught losing margin if the Canadian dollar weakens within the few weeks before they pay for shipments. It really keeps us on our toes, and we need daily and accurate information to make the right decisions.”
He also says that all freight, even offshore loads, are typically paid for in U.S. dollars. “That’s a big component of cost, but freight rates have been fairly stable recently, both in sea container and in trucking—so that’s not a major concern,” Formusa shares.
A Cost of Doing Business
For some wholesalers, however, the exchange rate is just like any other cost: whether it is related to shipping, weather, or supply. It’s part of business and gets added in.
“The currency rate doesn’t really affect us too much,” observes Edwin Yu, manager at Season Produce, Inc. “It gets passed along, and it’s not like there are a lot of local alternatives that are cheaper. Most of the commodities we import—exotics like papayas and mangos—don’t have a Canadian equivalent.”
“The exchange rate is what it is,” states Triple Star’s Dinis. “Wholesale buyers will bring in produce no matter what the exchange is. It just gets passed onto the consumer. Where it does have an effect is on exports. The stronger the Canadian dollar, the less the United States will buy from Canadian shippers.”
Ongoing Renovations
Overall, sellers report good business this year even with shortages and a challenging exchange rate. The OFT, which moves more than 5.5 million pounds of produce annually, is in the midst of a long-term construction project for significant improvements to the 63-year-old facility. Once completed, the terminal will be one of the better-structured and maintained markets in North America.
“We’re still doing renovations on the east end of the property, creating roadways and parking areas, extending out the southeast dock to enclose that area, and enlarging our cold storage and waste separation areas,” says Bruce Nicholas, general manager of the Ontario Food Terminal Board. “The work is being staged, and we hope to complete everything in about two years.”
Previously, water, electrical, and storm sewers were updated, and Nicholas says that once fully renovated, the market should last at least another 30 years. It also houses both a wholesale terminal and farmers’ market area on the premises. Many other terminal markets separate commercial wholesale and farmers’ market stalls. Some say having a farmers’ market section dilutes business at the wholesale stalls; for others, it’s a matter of space and traffic flow.
“The typical thought process is that farmers are competing with wholesale,” explains Nicholas, “but in Toronto the wholesalers are mostly selling tropical, so the local produce doesn’t compete too much. There is a little competition, but our tenants buy off of the farmers and sell that wholesale as well. There’s a lot of goodwill between the two types of sellers.”
Channeling Buoyancy
The big unknown is U.S. future policy, which has everyone hoping for the best, as the real market for many importers and distributors is no longer strictly regional, but spread across multiple borders.
“Having our office in Toronto and doing business at the OFT has its obvious advantages,” points out Dinis. “It allows us to interact on a face-to-face level daily, which always makes things easier. Having said that, we do quite a bit of business outside of Canada as well. This business really has no borders so to speak, and if you’re positioned properly, there are no boundaries.”
“After 39 years in the business, we’ve seen it all,” asserts Yu. “However, the political climate is something that has been a concern, something we’ve had to monitor more so than in years past. But so far, it hasn’t amounted to any major changes in the way we do business.”
