Toronto’s manufacturing isn’t dead: We’re dining out on its success story

Friday, December 31, 2010 – Globe and Mail

The belly of Soham Ajmera’s business smells of warm garlic and sounds like a million motorized hamster wheels.

The factory floor hums and squeaks as a series of caterpillar-like, chain-mail conveyor belts roll, stretch and bake endless rows of teardrop naan. The This flatbread Rube Goldberg machine will churn out 20,000 pieces of the flatbread today, made to order under private labels for supermarket shelves.

Around the corner, dozens of a massive muffin operation is under way as trays of tins filled with morning-glory batter are transferred to slowly rotating vertical ovens before they’re shipped off to fancy coffee shops across the country.

The Ajmera family’s FGF Brands has grown since its 2004 inception as a maker of almond-flour muffins to a baking flatbread behemoth, provider baker of President’s Choice naan and Starbucks muffins.

Forget the struggling automotive industry: This is Toronto’s industrial heartland.

In 2010, Ontario’s manufacturing sector added jobs for the first time since 2004 and grew in GDP for the first time since 2005, according to a study released Dec. 29 Wednesday – turning a corner, economists said, after years of relentless decline.

But even Jim Stanford, a CAW economist and vice-chair of the Ontario Manufacturing Council, admits the hard-hit manufacturing industry has a long way to go if it hopes to return to pre-recession levels. The Centre for Spatial Economics predicts that won’t happen until 2020.

It’s an optimistic outlook, but also painfully slow.

Unless you count the food manufacturing industry, that is.

In 2010, Ontario’s manufacturing sector added jobs for the first time since 2004 and grew in GDP for the first time since 2005, according to a study released Dec. 29.

But even Jim Stanford, a CAW economist and vice-chair of the Ontario Manufacturing Council, admits the hard-hit manufacturing industry has a long way to go if it hopes to return to pre-recession levels.

The food manufacturing industry, however, seems an exception to the rule.

Southern Ontario may be better known for the cars it used to turn out by the thousands, but by 2008, Greater Toronto’s food-manufacturing sector had already eclipsed the area’s automotive industry: 58,460 employees to 45,830, according to Statistics Canada Labour Force Survey data.

The GTA’s food-processing sector is the second-largest cluster in North America, beating out Chicago but behind Los Angeles, which carries the continental title for greatest number of people employed slicing, pasteurizing, baking, juicing and packaging.

And it’s still growing – as it has been steadily over the past 15 years – even while many of the region’s blue-collar jobs have disappeared. Toronto’s proximity toprime location within easy driving distance of key markets in Canada and the U.S., combined with a renewed focus on local food and the home-team advantage when it comes to pumping out diverse cuisine, have helped keep companies competitive and profitable.

So while the hard-hit manufacturing industry struggles to return to its pre-recession levels, its food-sector cousin can savour a different success story.

Michael Wolfson, the city’s food and beverage sector specialist, says businesses are taking advantage of incentives to move back to Toronto. Long criticized for its disproportionately high commercial-tax rate compared to other municipalities, the city has been trying sweeten the deal for industrial developers with grants and waived fees: to reverse that ratio while offering other reasons for companies to set up shop: A tax increment equivalent grant in select areas of the city waives building permit and planning fees over a specified period; industrial developers who invest at least half a million dollars in new or expanded development or retrofits are eligible for rehabilitation grants.

And the city’s apparently counterintuitive planning tactics might be paying off. In an economy where housing development is in high demand, Toronto kept some sites zoned industrial, kiboshing condo development on land developers saw as prime residential real estate that would bring in more money than a factory in the midst of a manufacturing slowdown.

But Build Toronto spokesman Bruce Logan says the city has gotten “a lot of interest” in one city-owned property, a 10-hectare industrial-zoned piece of surplus land near Lakeshore Boulevard and Islington in Etobicoke they hope will go to a company developing it for food-processing purposes.

But Build Toronto spokesman Bruce Logan says the city has gotten “a lot of interest” in one of those designated properties, a 10-hectare industrial-zoned piece of land near Lakeshore Boulevard and Islington in Etobicoke they hope will go to a company developing it for food-processing purposes.

Even investors and private-sector giants are buying the hype: George Weston Ltd., owner of grocery giant Loblaw, bought artisan Ace Bakery for $110-million in November. And Premium Brands, based in Richmond, B.C., bought a majority share in Torontonian Maximum Seafood in July – the Richmond, B.C.-based company’s first Central Canadian acquisition.

The municipal government’s tax-break carrots aside, it makes sense (especially in an economy bracing for triple-digit oil) for businesses to set up shop nearby the people they’re selling to, the people they’re buying from and the people who are working for them.

“The food industry is a 24-hour, seven-day-a-week industry. So you need access to labour, you need access to transit to get people to the midnight shifts,” Mr. Wolfson says, adding that the city’s reputation as being too stodgy and interventionist for businesses to grow isn’t entirely warranted.

When Quebec-based Lassonde Beverages wanted to expand elsewhere in Canada, a Toronto location was a must. Now more than six years old, their Toronto plant – the company’s largest outside Quebec – pumps out 53 million litres of juices and fruit cocktails a year. It boasts what plant manager Daniel Marcoux calls “the most modern aseptic bottling line in the world,” used to package juice for sterile environments such as hospitals.

“We’re located close to the airport and the highway system. … If you look at the corridor between Toronto and Niagara Falls, that’s 7 million people, roughly. So it’s a big chunk of our market,” Mr. says plant manager Daniel Marcoux says. “Your major suppliers are within driving distance.”

“And we’ve got the work force.”

“When you calculate in development fees and our costs of operating, we’re not as bad as people think in terms of the 905 region. We’re quite competitive.”

A University of Toronto study completed last month and provided to The Globe sheds light on a sector that’s maturing as it’s growing: While Toronto’s food manufacturers are still overwhelmingly small – with fewer than 50 employees – the number of small and medium-sized businesses has shrunk over the past decade, while the number of companies with more than 200 employees has grown. In that same time, the Toronto area’s total number of people employed in the sector went up, as well.

Robin Somerville, an economist with the Centre for Spatial Economics, notes it’s important to remember, when comparing food-industry and auto-industry jobs, the latter tend to pay better – way better. Even if the economy is adding food-sector jobs while shedding positions in auto plants, the payroll isn’t equivalent.

“But that’s a paradigm that maybe we just have to let go of,” he says. “Auto manufacturing is ongoing massive changes and restructuring. … These are not quite the gold-plated jobs we had in the ’80s and ’90s.

“Food manufacturing,” he adds, “does require an awful lot of people with various skills: There are engineers, scientists and chefs … and it’s got a large number of spinoffs in associated industries.”

The growth plays off the city’s desire, often viewed as a social-engineering anachronism, to use its planning prerogative to keep blue-collar jobs within city limits. Much of the city is zoned employment areas, left open only to industrial development in a city of flashy new residential projects. Condo-hungry developers thought the city was crazy when, as it began to sell off the first dozens among an estimated thousands of pieces surplus land, it designated some sites industrial when they could arguably fetch a better price if turned into high rises as the real-estate market soared and local manufacturing stalled.

“We are in discussions but it is very, very early so don’t have anything to report,” he said in an e-mail. “The market is very competitive.”

Lately they’ve been trying to develop that human capital: With 93 per cent of its 120 employees immigrants, Lassonde’s Toronto location has become involved in ESL and literacy programs with the school board and other local organizations. They’re also a member of Pearson International Airport’s “eco-business zone” Partners in Project Green, and are embarking on efforts to refurbish their lighting and refrigeration systems in favour of more energy-efficient models.

That isn’t to say things have been easy: The recession, a high dollar and renewed scrutiny on the food-processing industry thanks to such high-profile health scares as the 2008 listeria outbreak have meant it can be challenging to scare up enough capital to get started or expand, says Stewart Metcalfe, vice-president of Colliers Food Facilities Group.

Even when bakery and produce operations picked up initially, he says, “meat was almost a dirty word.”

“Producers trying to get capital in that sector were probably not seeing arms wide open from the banking system.”

Now that’s starting to change: Mr. Metcalfe says Super-Pufft, whose packaged snacks range from cheese curls to popcorn and potato crisps, recently bought a 400,000-square-foot former Goodyear site in Etobicoke that’s slated to become one of Canada’s largest food-processing plants.

And with global food security increasingly top of mind, Mr. Metcalfe argues, outsourcing food production becomes less palatable an option.

Mr. Ajmera relocated to Toronto for reasons both practical (to fill an unmet flatbread need) and sentimental: He says he fell in love with Toronto while passing through as a business student in Detroit. Toronto’s vitality reminded him of his native Bombay.

“We passed by the Don Valley, I saw all the apartment buildings. There what a sight: It was beautiful. I said, ‘That’s it.’”

He stays, he says, because it’s home: His Canadian-educated sons live here, as do his grandchildren. But there’s also a compelling business case to be made. If there weren’t, there’s no way FGF Brands, which he founded with friend Jim White, would be not only surviving but expanding in an increasingly competitive market.

“I’m in the baking business, and this is the best place to be based,” Mr. Ajmera says. So he learned to roll with the punches: When retailers seeking to target recession-weary consumers asked for cheaper products this year, he rolled out “tiers” of naan – some without expensive buttermilk and ghee – to keep prices down.

The latest challenge is parity, which makes it harder to target his primary market in the U.S. If the loonie stays high, he’ll consider opening another plant south of the border. But “my business is not currency trading. My business is manufacturing. If you’re going to talk globalization, then we’ve got to be competitive regardless of where you are. Right?”

FGF Brands has grown steadily after opening at his sons’ behest, a decade after Mr. Ajmera sold his first baking company, Dough Delight. And after upgrading three times to larger buildings, the company plans to add a second plant on the other side of Steeles, a few blocks away from their headquarters on the Concord side of the Vaughan-Toronto border. It’s a base he plans to pass on to his sons Tejus and Ojus Ajmera, who work with him now.

“They are the future. They are the business. And I’m the proud father.”

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