Because Ontario is a key player in the nation’s agriculture industry, and in North America, examining the trade in Canada’s most populous province is a must. This produce powerhouse is the leading fruit and vegetable producer in eastern Canada and harvests more than 125 different crops valued at more than $1.6 billion, according to the Ontario Fruit & Vegetable Growers’ Association.
Ontario’s expanding and increasingly diverse population drives the province’s produce trade, and Toronto has long been celebrated as one of the most multicultural cities in the world. Yet in more recent years, the city has rightly earned a reputation as a foodie mecca.
“Because we have such a diverse group of ethnicities living in Toronto, there’s demand for a wide range of flavors,” confirms Julian Sarraino, COO of Fresh Taste Produce Limited Canada, an importer located on the Ontario Food Terminal.
Ontario’s unique combination of cultures has led to a vibrant mix of fine and casual restaurants, quick-serve food venues, and supermarkets. There are currently more than 37,000 restaurants, bars, and caterers across the province generating $32 billion in annual sales according to Restaurants Canada.
As for the retail grocery scene, there are more than 8,500 food and beverage stores throughout the province, and many of the thousands of dining and grocery destinations are supplied by Ontario produce wholesalers from the well-known Ontario Food Terminal.
The Ever-Evolving OFT
Located right in the city of Toronto, the Ontario Food Terminal (OFT) is the heartbeat of the province’s produce pipeline. The wholesale market, which moves more than 2 billion pounds of produce annually, serves as the major distribution center for eastern Canada as well as Michigan, Ohio, Pennsylvania, and New York in the United States. Spanning 40 acres, the OFT is the third largest wholesale produce distribution center in North America and the largest in Canada.
“The benefit of the OFT is that buyers of fresh, high-quality fruits and vegetables can shop at a competitive wholesale market in one location, thereby not having to drive all over the province to source their produce,” points out Bruce Nicholas, general manager, secretary and treasurer of the Ontario Food Terminal Board.
“This conveniently and strategically located facility provides local Ontario produce, organic produce, and produce from all over the world, which is sourced from the OFT’s 400 Ontario farmers and 20 warehouse tenants,” adds Nicholas.
Because Ontario is a key player in the nation’s agriculture industry, and in North America, examining the trade in Canada’s most populous province is a must. This produce powerhouse is the leading fruit and vegetable producer in eastern Canada and harvests more than 125 different crops valued at more than $1.6 billion, according to the Ontario Fruit & Vegetable Growers’ Association.
Ontario’s expanding and increasingly diverse population drives the province’s produce trade, and Toronto has long been celebrated as one of the most multicultural cities in the world. Yet in more recent years, the city has rightly earned a reputation as a foodie mecca.
“Because we have such a diverse group of ethnicities living in Toronto, there’s demand for a wide range of flavors,” confirms Julian Sarraino, COO of Fresh Taste Produce Limited Canada, an importer located on the Ontario Food Terminal.
Ontario’s unique combination of cultures has led to a vibrant mix of fine and casual restaurants, quick-serve food venues, and supermarkets. There are currently more than 37,000 restaurants, bars, and caterers across the province generating $32 billion in annual sales according to Restaurants Canada.
As for the retail grocery scene, there are more than 8,500 food and beverage stores throughout the province, and many of the thousands of dining and grocery destinations are supplied by Ontario produce wholesalers from the well-known Ontario Food Terminal.
The Ever-Evolving OFT
Located right in the city of Toronto, the Ontario Food Terminal (OFT) is the heartbeat of the province’s produce pipeline. The wholesale market, which moves more than 2 billion pounds of produce annually, serves as the major distribution center for eastern Canada as well as Michigan, Ohio, Pennsylvania, and New York in the United States. Spanning 40 acres, the OFT is the third largest wholesale produce distribution center in North America and the largest in Canada.
“The benefit of the OFT is that buyers of fresh, high-quality fruits and vegetables can shop at a competitive wholesale market in one location, thereby not having to drive all over the province to source their produce,” points out Bruce Nicholas, general manager, secretary and treasurer of the Ontario Food Terminal Board.
“This conveniently and strategically located facility provides local Ontario produce, organic produce, and produce from all over the world, which is sourced from the OFT’s 400 Ontario farmers and 20 warehouse tenants,” adds Nicholas.
Keeping pace & moving forward
Over the last several years, the OFT has been in the process of ongoing expansion and renovations.
“The OFT is ever-changing,” remarks Sarraino. “Structurally, there have been some significant changes to the facility, and it has grown.” Thanks to the terminal’s close proximity to the city, Sarraino says countless independent customers “flock to it in the dark hours of the morning.”
“The food terminal has been making a lot of improvements,” agrees Ted Kurtz, president and buyer for Stronach & Sons Inc. on the market. “It’s an old building, built in 1954, so they’re trying to do whatever they can to update and make the facility safer.”
Part of the improvement efforts includes completion of the new southeast buyer loading docks, providing space for 23 additional tractor-trailers. Next, according to Nicholas, “will be extending the depth and width of existing cold storage receiving and shipping docks, which will add to additional dock doors and make it a safer dock to work in.”
Further, he notes, will be upgrades to the Market’s waste facility, which handles separation and recycling functions. These projects are scheduled for completion by early spring in 2019.
Commodity Ups and Downs
In addition to structural changes to the market, OFT wholesalers offered their thoughts on a few shifts in demand. While there are always mainstays, certain products will fluctuate more than others, with some declining in popularity as others gain more attention. With a nod to the region’s diverse offerings, top sellers differ remarkably from merchant to merchant.
Top sellers
“Our business is grapes and stone fruit,” notes Larry Davidson, president of North American Produce Buyers Ltd. “Those are our two major commodities,” he says, and fortunately, “they continue to grow.” Moreover, he explains, “We’re specialists, not full service, so our business is really focused on a few commodities.”
Vincent Formusa, vice president of National Produce Marketing Inc., says the company’s top five sellers are papaya, mangos, watermelon, broccoli, and carrots. “We import everything directly from source,” he explains.
“We try to work only directly with farmers and stay away from purchasing other products secondhand or from other wholesalers,” Formusa continues. “This gives us better control of our product and the quality, and allows us to ensure growers grow the product to the specifications we require.”
For Stronach & Sons, Kurtz says top commodities include cilantro, coriander, eggplant, and asparagus “when the price is reasonable,” he asserts. “When asparagus is $3.99 and under, it moves, but when the price goes over that, it tapers off a bit.”
Cameron Neale, a broker with S.J. Neale Company Limited at the OFT, says the distributor’s biggest sellers are green onions, broccoli, Roma tomatoes, peppers, and Brussels sprouts.
Wholesalers are also riding the upsurge in organics. “There’s more demand for organics, partly because prices continue to go down,” comments Davidson. “Also, organics are available from more places around the world on a regular basis, so it allows the category to be more stable and consistent.”
Pride and Province
Thanks to the province’s relatively mild climate and plentiful water, Ontario is the top fruit and vegetable producer in eastern Canada; it supplies over half of the nation’s total vegetable production, and a good portion of its fruit—though it faces competition from other provinces, especially British Columbia.
Fetching fruit
Among Ontario’s fruit offerings are apples, peaches, strawberries, and sour cherries, but grapes are by far its top fruit crop with more than 18,000 acres of vineyards across major grape growing regions: the Niagara Peninsula, Lake Erie North Shore, Prince Edward County, and the emerging South Coast region.
“The 2017 harvest was the largest grape crop on record in both value and volume, with 86,951 tons valued at $115 million,” enthuses Debbie Zimmerman, CEO of Grape Growers of Ontario.
The GGO, which celebrated its 70th anniversary in 2017, represents more than 500 grape growers and serves as an advocate for all processing grape growers in the province. “We are also an information resource for consumers, government, media, and winery and juice partners,” she says.
Though its emphasis is on processing and not table grapes, the group encourages Ontario consumers to purchase wine and juice made from locally grown grapes. “The Grape Growers of Ontario are continually planning for the future,” Zimmerman notes. “We look forward to implementing strategies to support our members and grow Ontario’s grape and wine industry domestically and abroad.”
Voluminous vegetables
When it comes to field production, Ontario produces a wide range of vegetables including sweet corn, green peas, tomatoes, green and wax beans, carrots, pumpkins, squash, and onions. A major potato producer, Ontario harvests plenty of spuds but is bested by Prince Edward Island as the country’s top producer.
Wholesalers love sourcing local produce, and when available, these items are extremely popular with OFT customers. “Once local season ramps up,” Formusa shares, “we partner with Ontario farmers who produce broccoli, onions (a cooking onion and a red onion), and cauliflower.”
Kurtz and Stronach & Sons are also big fans of the province’s seasonal crops. “Locally grown is still high in demand, and we’re probably the biggest handler of Ontario-grown produce on the market, other than the farmers’ market outside,” he says.
In addition to Ontario’s field crops, its greenhouse industry in Leamington produces plenty of high quality vegetables and a few fruit items. Kurtz says the seasonal calendar begins in around April, with radishes and bok choy from greenhouses (for more information on Ontario’s burgeoning greenhouse industry, see the other article in this supplement).
“Then around mid-May, I start with the outdoor stuff: arugula, radishes, and asparagus,” Kurtz adds. Communication, he observes, is key: “We communicate well with the local growers, and they know our needs.” More importantly, he stresses, is “the facilities are all food-safe.”
All About Convenience
As consumers have become increasingly concerned about food safety, wholesalers are seeing mounting demand for packaged products, especially those that are prepared and ready to eat, offering quick, simple, healthy meals or side dishes.
“Prepared items are becoming a huge thing—you see more and more, and they’re making it easier,” says Kurtz. “There are recipes now, too—some of the items, like packaged beets, can actually be cooked right in the bags. Everything is already done for you. Consumers take advantage of those items because it’s less work.”
This is backed up by a 2017 Mintel study, in which 85 percent of Canadians responded they had used some sort of ‘home meal replacement’ item over the past three months. There’s no question this trend is all about convenience—among those surveyed, 44 percent said they purchase these products because they “don’t want to cook” and 36 percent said they have “no time to cook.”
Retail Corner
As Ontario’s population surges and demand for fresh produce climbs, the province’s retail scene has grown intensely competitive.
“The competition is fierce, probably no different from anywhere else,” contends Davidson. “But I think it’s good healthy competition because everybody pushes everybody else. That’s just the way the business is, and the cream will rise to the top.”
Over the last few years, U.S. retailers like Walmart and Costco continue to add stores. Although Walmart Canada is the largest mass merchandiser in the country, the company’s share of grocery receipts is only 9 percent, but food sales continue to climb at a rapid pace.
Big chains and independents
Even so, Canada’s “Big 3” chains—Sobeys, Loblaw, and Metro—still dominate the landscape both in Ontario and across the nation. Independent retailers, however, are also still in the game and giving the chains a run for their money.
“The chains really dictate the market, but I’ve been really surprised to see more independents popping up and starting to do well,” confirms Formusa. He believes the smaller retailers are successful because they cater to a specific demographic and often carry hard-to-find specialty products not available in chain stores.
A few of Ontario’s up and coming or independent retailers include Farmboy, Longos, and Nations. “People really see value in these family-owned independents,” Formusa adds, and says he wouldn’t be surprised if a larger chain offered to partner with or buy an independent like Nations, similar to the fate of T&T Supermarkets, which was acquired by Loblaw to reach into the growing Asian market. The T&T stores offered unique Asian food items not available in other markets. Today, there are 23 T&T locations in Canada, including eight stores in Ontario.
Davidson believes Ontario’s independent retailers are flourishing because they’re more “hands on” than the larger chains. “I think the thriving nature of the independents has pushed the major chain stores to raise their game,” he posits.
Either way, the more independents continue to prosper, the more business they bring to the OFT and its merchants. “I can’t speak to the profitability of these companies, but as it relates to our business, it’s good,” Davidson says.
Neale agrees, adding, “The independents really keep the food terminal going.”
Ontario Obstacles
Although Ontario’s produce industry is certainly booming, growers and wholesalers across the province still battle their share of problems, both recurring and new. Here are a handful of the more prominent challenges.
Delivery delays
Ontario produce importers, like their counterparts throughout North America, are dealing with slower delivery times thanks to new electronic logging device (ELD) requirements in the United States, which went into effect in December 2017 (though with two extensions for agricultural haulers), and Canada will soon follow suit.
The Canadian Council of Motor Transport Administrators (CCMTA) is in the process of finalizing its own proposed ELD mandate, which will likely take effect by 2020. Canadian officials have already published a draft set of rules that would make ELDs a lawful requirement for drivers. Canadian truckers who cross the border into the United States, however, are already required to use an ELD (for extensive information on the industry’s reaction to ELDs, look for the other supplement to this edition of Blueprints, on transportation and logistics).
“No doubt, the biggest issue for us this year is logistics,” remarks Davidson. “We’re dealing with the e-log situation and the hours of trucks, and that’s affecting everyone across the continent.”
Davidson says the ELD requirement adds a full day to the delivery time of product coming in from the United States. “In the past, you could have a boat unloaded in Philadelphia or Wilmington pretty much anytime of the day today, and it would be here by tomorrow morning,” he explains. “This new e-log essentially adds a day to our expectant receiving times, so that really changes things—especially when you’re trying to be just-in-time and keep your inventory under control.”
Higher rates
The ELDs are also associated with higher costs. “Because of e-logs, trucking companies are having to pay drivers for an extra day of work, so it’s adding to the cost,” adds Formusa.
Jaime S. Furman, president of Sunbelt Logistics Group, a transportation company based in Mississauga, offered his thoughts: “Back in October and November of 2017, transportation costs began to escalate to levels unseen in our industry,” he recounts.
“This caused major instability and prices spiked to exorbitant levels,” Furman adds. “Since then, we’ve seen a softening in transportation costs—however, they still remain about 35 percent higher than last year this time. I expect this increase will not ease, and that as demand for transportation increases, so will prices.”
There is at least one purported benefit to the ELD mandate. “We need to remind ourselves that the overriding reason for ELD introduction by the U.S. Department of Transportation is safety,” points out Furman. “Safety on the road is paramount as more and more goods flow by truck across North America.”
Controlling other costs
In addition to higher transportation and shipping costs, Ontario’s buyers and sellers are looking for ways to absorb these and other operating expenses.
Grape Growers’ Zimmerman says mounting prices are causing problems for grape farmers across the province. “Input costs for grape growers are increasing, and specifically labor costs following the increase to minimum wage,” she explains.
According to a 2017 Minimum Wage Impact Assessment commissioned by the Grape Growers organization, a $15 per hour minimum wage will result in an approximate increase of $507 of labor cost per acre. This can add up for growers of any size, and will probably be passed on, ultimately to consumers.
Formusa, too, is worried about the impact of rising costs. “Our biggest challenge is just controlling our costs,” he says. “To add to that, you have the fluctuation of the exchange rate and the uncertainty of what’s going on down south with potential tariff increases.”
Trade Concerns
As Formusa mentioned, produce businesses throughout the North American supply chain are wary of future trade as the North America Free Trade
Agreement (NAFTA) is renegotiated. Few are willing to predict the outcome, but most are trying to remain hopeful the discussions will lead to fair provisions for all three partners—Canada, the United States, and Mexico.
Originally created to increase the flow of goods between the member nations by reducing or eliminating import tariffs, by all accounts trade has risen exponentially since the agreement was put into force in 1994.
“We’re optimistic NAFTA will coalesce and uncertainty in trade will diminish within the next four to six months,” says Furman. “There’s much drama in this regard, but we need to remember that our economy is intrinsically webbed with our American friends. There’s a common goal and interest in ensuring the flow of goods, in and out, continues to run smoothly between the ‘three amigos.’”
“Eventually agriculture will be affected, but it’s hard to say to what degree,” Davidson remarks. “It’s probably not worth worrying about something if we have no clear picture of what it’s going to be.”
Imports and exports
While Ontario supplies most of Canada with fresh produce, the province is also a major international importer and exporter with trade partners across the globe. Ontario’s top five fresh fruit export destinations are the United States, Costa Rica, Cuba, United Arab Emirates, and Trinidad and Tobago. The province primarily imports fresh fruit from the United States, Mexico, Chile, Costa Rica, and Guatemala.
As for vegetables, Ontario’s top five export destinations are the United States, Japan, France, Russian Federation, and Bermuda. The province’s vegetable imports primarily hail from the United States, Mexico, China, Peru, and Spain.
“For us, Mexico would be the most significant trading partner, and then Costa Rica, the United States, and Peru,” offers Formusa. “Our imports are 60 percent by freight and 40 percent by sea—and the rates for both are higher this year.”
Davidson says Chile, Peru, the United States, and South Africa are the major trading partners for North American Produce Buyers; in his view, ocean rates “are not significantly higher this year, so it’s not having a material effect.” Land shipping, however, is a different story: “Where the rates are higher—is with trucks.”
Furman has parlayed Sunbelt’s logistics know-how into more work with exporters. “Produce continues to be a large component of the commodities we distribute; however, our growth has largely come from diversification of commodities both in and out of Canada,” he explains. “European and Middle Eastern exporters continue to grow their operations in North America, seeking our logistics and distribution expertise to help leverage the distribution of their commodities.”
Providing extra services has paid off for North American Produce Buyers as well. “We’ve tried to build the business as a one-stop shop,” notes Davidson. “We opened up two logistics companies over the last few years that provide additional or complementary services, and those companies continue to grow. Rather than just selling the produce itself, we’re able to deal with the import side, the food safety requirements, and governmental requirements. Having a separate logistics company that can provide support for all of these issues has helped us grow.”
On the Horizon
Looking ahead, Ontario’s cadre of buyers, sellers, and brokers remain confident about the future overall, though certain elements may give them pause. When asked about how the year had been progressing so far, most were satisfied, citing the usual uptick of late spring and the onset of summer.
“We’re very optimistic about our current year,” shares Furman. “We’ve added capacity as well as new talent to our team to accommodate client needs. Overall, sales are up as we continue to diversify our food distribution makeup.”
Kurtz says his customer base has expanded, so he added two more to his sales team. As far as sales and volume, he says, “I would say sales are about on par with last year, which is not bad. You have good months, and not so good months.”
Formusa agrees, citing January and February as slow after the frenzy of the holidays, then waiting for winter to end. “A lot of the items we sell here are tropical, and tropical sales are down in the winter—people aren’t necessarily interested in eating a mango when it’s 30 degrees below zero,” he concedes. Luckily, however, he says it always picks up in the spring, and momentum and volume build into the summer months.
Cameron Neale is more guarded. “It’s been a little bit slow this year; it’s hard to say why, but we’re brokers, and I always hear people say it’s not like it used to be. I’m assuming because there’s more direct business and more competition. Sometimes newer people who come into the business buy based on price, not based on relationship.”
Davidson’s view is more upbeat: “Our business has continued to grow year over year, so things have been really good for us. No complaints from a business perspective here.”
What’s ahead
In looking specifically at Ontario and the province’s role in the immediate and greater produce supply chain, Zimmerman has a few thoughts: “Ontario’s agri-food industry is a key economic driver for the province and will play a critical role in its future,” she insists. “With continued consumer education, government support, and investment in research and modern technologies, the future of Ontario’s produce industry is bright.”
Neale mirrors this positivity. “Ontario produce will continue to do well because Canadians are so aware of the benefits of eating healthy,” he stresses. “People are living longer because they eat healthy, and I think produce will continue to be at the center of that trend.”
Images: maxi_kore, Monkey Business Images/Shutterstock.com
