Soaring world food prices are not expected to take a major bite out of Canada's produce sector, industry officials say.
In fact, prices for fresh fruits and vegetables have dropped and producers believe an extremely competitive Canadian grocery marketplace means any potential price increases consumers face will be moderate.
"In this country, no one is going to increase their prices one dime," says John Scott, president and CEO of the Canadian Federation of Independent Grocers (CFIG). "Everybody is competing for the consumer dollar and no one is going to raise their price one penny (if they don't have to)."
This comes despite a global food crisis that has seen world food prices rise 45 per cent between August 2007 and April 2008, according to the Food and Agriculture Organization (FAO) of the United Nations.
The situation has been exacerbated by increasing fuel costs and farmers who have diverted corn crops from the food sector to biofuel production.
A strong dollar has also helped to insulate Canadians so far from higher produce costs.
Scott adds grocers are doing their best to absorb rising energy costs to limit any potential increases to consumers. "This market is just too competitive," he adds.
Prices for vegetables have fallen 11.6 per cent in the past year and the cost to consumers to buy fruit has dropped 6.7 per cent, says the Ottawa-based Canadian Produce Marketing Association (CPMA), which represents more than 665 international and Canadian members who are responsible for 90 per cent of the estimated annual $8-billion market for fresh fruit and vegetable sales in Canada.
Any upward push on produce prices from increasing fuel costs has been kept in check, agrees CPMA executive vice-president and marketing director Ron Lemaire.
"That's only one piece of the puzzle," he says.
"The rising cost of fuel in the supply chain impacts different levels at varying degrees. But at this point, it has not been significant enough to change the pricing for the consumer because the industry has been able to absorb the increases in the supply chain."
The CPMA says the retail model for Canada's produce sector was created to ensure price consistency to the consumer through contract pricing or switching to different global producers to get the right product for the right price.
Barring drastic unforeseen changes, such as a freeze wiping out Florida's entire orange crop, produce prices are unlikely to go through drastic overnight changes.
Corn producers who have switched their production over to the biofuel sector, removing it from the supply chain for human or animal feed consumption, are also posing a challenge, says Lemaire, although not to the same extent in Canada.
"Right now, we're moving in the same direction where we see corn production moving globally," says Lemaire.
"If a local producer makes a move to switch to biofuel production, there are others where we can turn in the global market.
"Is it an immediate concern? No. But it could be in the future," says Lemaire.
CFIG's Scott says Canada is also in good shape in terms of other grocery prices. He says according to Agriculture and Agri-Food Canada, Canadian consumers only spend five per cent of their disposable income on groceries, among the lowest in the world.
"Are we doing well? You bet we are," says Scott. "This is not a panic situation."
But Canadian producers are also dealing with other concerns. Lemaire says one major issue is the growing consumer trend of going "green" - a push toward organic and environmentally friendly products - a topic raised at the CPMA's 83rd annual convention and trade show held this month in Calgary.
Green issues are not going to drop off the radar screen as they did in past decades and are a lot more complicated than they first appear, says Perry Graham, president of the Ottawa-based Graymor Group Inc., which specializes in marketing consulting in the agricultural, agrifood and bioproducts sectors.
"The whole discussion on global warming in the earlier part of the decade has taken this to a new level. Green issues are on the verge of becoming a permanent part of the decision set," says Graham, who moderated a Going Green business panel at the CPMA convention.
"We think organic is pure mainstream now, we think 'buy local' is very much the current topic with a lot of people and (we think) sustainability - providing for the world's population without damaging the ability for future generations to provide for themselves - is where the pocketbook is going."
Graham says research shows the primary driver behind buying organic produce is a belief that the product is better for your health with the environment being a secondary purchasing concern.
Buying locally is driven by a conviction that freshness and quality is better when the produce is bought from a local producer, as well as an almost equal concern for environmental issues. Sustainability, on the other hand, is all about the need to save the planet.
Couple this with surveys that consistently show quality and price are the No. 1 and 2 prevailing decisions behind Canadian consumer purchases of fruits and vegetables - as opposed to a desire to buy locally or organic - and Graham says there is no simple solution.
Buying locally brings into question whether it's better to eat local produce instead of organic products that may have been shipped long distances.
And while products shipped from other continents would appear to create more of an impact on the environment, Graham says that is not necessarily true.
He points to a study by New Zealand's Lincoln University that showed countries importing New Zealand lamb or apples didn't create a larger carbon footprint - the measure of the impact on the environment in terms of the amount of greenhouse gases, or carbon dioxide, produced.
Studying the life cycle of the product - from the product's beginnings to how it was grown, processed, packaged and shipped - the research illustrated that New Zealand could put lamb in a British supermarket for a smaller carbon footprint than lamb raised in the U.K., and that New Zealand apples could arrive in a London supermarket with about the same carbon footprint as apples trucked in from Spain.
Graham says industry must also realize that consumers come in different shades of green, ranging from light to dark.
"Consumers are going to be inconsistent," he says, noting that they may purchase energy-efficient lightbulbs, yet opt to buy other items that have more significant environmental impacts.
"We (consumers) are not green across the board."
He advises producers to tell the public about any methods friendly to the environment.
"We do recommend people be modest, start small, gain some experience and never say anything they can't back up," says Graham.
Sustainability has to be brought to the table as well, he adds.
"Quality, price and nutrition, we're saying those things are really important, but that there will be a fourth one coming to the party and that is sustainability.
"We don't think it's going to overtake the others but over the next decade it's going to be far more important," says Graham.
"So, if you're in the business and you've got a good product and it's competitively priced, there can be additional points to be made by putting your product in a situation where it's looked upon as a product made using sustainable practices."
(Laura Severs can be reached at laura@businessedge.ca)
