Opportunities for Produce in Toronto

Produce is still significant to the locals in this Canadian city.

Originally printed in the April 2024 issue of Produce Business.

The city of Toronto, the region and the province of Ontario all have faced challenges, going back to the COVID-19 pandemic and moving through a period of inflation. Yet, priorities such as wellness continue to be significant to the local lifestyle.

Toronto is the most populous city in Canada, with about 6.7 million people, according to Statista. The Greater Toronto area, or GTA, population constitutes just over 40% of the Ontario population. The city of Toronto proper is home to just over 3 million people. It is ethnically diverse and just under half of Toronto residents are Canadian-born.

The city welcomed nearly 9 million visitors in 2023 or about 93% of pre-pandemic visitor arrivals. However, visitor spending reached $7 billion (Canadian), surpassing the pre-pandemic high, the result of continued recovery in visitation combined with higher inflationary increases.

THE BROAD VIEW

According to a Canadian Produce Marketing Association (CPMA) study, Ontario residents spend as much, or more money, in conventional supermarkets than other Canadians and the least in independent grocers.

About 57% of Ontario fruit purchases are what CPMA calls core, while 21% are specialty, and 21% are value-added. When it comes to vegetables, 55% of purchases in Ontario are core, 22% are specialty, and 23% are value-added.

Price is the first consideration when purchasing produce, cited by 48% in their purchasing decisions. After price, other considerations are shelf life, at 25%, and quality at 21%.

Ron Lemaire, CPMA president, says the ethnic mosaic that exists in the Toronto area is a consistent driver of developments in the food business including produce. Asian vegetables are strong, in one example of the tendency.

He says bag salads, bagged potatoes and carrots remain key in the value-added segment.

“When you start seeing the market shifting to non-traditional leafy greens and other vegetables, it’s a good sign for the entire industry relative to the consumer experimenting and getting back into the diversity of flavors of the palate,” he says.

“Everyone always says we don’t want to give up our share of the plate, but the reality is, there’s room to grow the entire plate, especially since we saw consumption decline in the last two years. We’re now on the upswing again, which is also another positive sign. You’re seeing it also on the fruit side, being driven around your mangos, your pineapples and even avocado.”

On the retail side, inflation has been an overriding market factor. It has driven some Toronto consumers to shop more at discount grocers, Lemaire says.

“But what’s interesting is in Ontario, about 60% of consumers say price is a factor in their purchase, but then shelf life and store experience, the quality of the store, that’s second and third,” he says. “So, when you start bringing it all together and start asking the core questions: What is it that the consumer is looking for? Well, they’re looking for quality, they’re looking to get back into a shopping experience and they’re looking for value.”

Another important consideration in the Toronto area is local agriculture. Controlled environment agriculture is evolving, and while vertical farming plays into the changes, what’s foremost is what’s happening with greenhouse growing.

No matter what the growing method, Toronto consumers like to shop for produce that grows in the vicinity.

“Local is a factor, hands down,” says Lemaire. “If someone out of Toronto has the opportunity to source local, that’s a preference. But local does not trump price. There’s a threshold of price local has to still meet.”

In the CPMA research, preference for local in Ontario is 49%, with 10% saying they only buy local. Lemaire says the high number does beg the question, what consumers, or individual consumers, consider local.

In the first quarter, as part of CPMA’s ongoing research, 30% of consumers in Ontario said they would be willing to pay up to 25% more for local produce, and 34% say they would be willing to pay from 25% to 100% more. At the same time, 14% of Ontario consumers say they would want local produce to cost less if it was to prompt a purchase, and 22% said they would not pay any premium.

“Local sells well, but you have to still do it right,” says Lemaire.

Shoppers in Toronto are also interested in specialty fruit, which may arise from their cosmopolitan environment. Whatever the case, Toronto residents remain on the lookout for new foods, including fruits and vegetables.

WHOLESALE DEVELOPMENTS

Julian Sarraino, chief operating officer of Fresh Taste Produce, Toronto, who also is on the Ontario Food Terminal Board, says the culture and demographics of the market lend to opportunities for the produce sector.

“The Toronto metro area has a unique multicultural demographic,” he says. “The beauty of this is that we see a strong demand for a wide variety of products.”

The Toronto market has a lot going for it but has its challenges, too, because, despite consumer preferences, the reality is that a lot of produce consumed in Toronto comes from somewhere else.

“The Greater Toronto Area is Canada’s largest population center and continues to be a growing and multicultural community,” says Hutch Morton, senior vice president, J.E. Russell Produce, Toronto.

“We serve hundreds of small independent customers every day, and it’s the relationships that they have cultivated in their communities that allow us to bring them the fresh produce from around the world that they want. Being in Canada, where such a large amount of our fresh produce is imported, we are always at the mercy of foreign exchange rates and all the costs of supply chain management.”

Michael Bruno, buyer, Italian Produce, Toronto, says the surrounding market has bounced back from the COVID-19 pandemic to a significant extent. In addition, transportation costs have become more stable. Still, he says, a lot of small retailers couldn’t survive the turmoil of the past few years.

Inflation remains a consideration that affects everyone, including wholesalers.

“Many of the shippers that we work with focus on higher-end quality,” he says. “That comes at a cost and end-consumers have been focused a little more on buying what they need, not necessarily what they want. That sometimes means that they might leave a more expensive imported berry or packaged salad on the shelf.”

Bruno says on the weather-related and supply chain side, there have been issues at times, but “that’s something that we’re built for, and we navigate those waters with our partners.”

“The challenge with Mother Nature is tracking whether these issues are presenting themselves more frequently. I can’t say that definitively, but it does anecdotally feel that way,” says Bruno.

Fresh Taste Produce’s Sarraino agrees with the weather challenges.

“Weather-related events tend to have the most drastic impact on price fluctuation,” he says.

Depending on the item, sensitivity to climatic conditions varies. When sensitive items become impacted by weather-related events, we need to change growing and loading locations. Typically, this results in a solution that, geographically, is further away than the initial option. Therefore, the sheer cost of the trip becomes longer, riskier and more expensive.”

In its operations, Fresh Taste continuously looks for resources and skills that can help it develop with the marketplace.

“Fresh Taste Produce continues to thrive,” he says. “We continue to develop our roster in an effort to provide the institutional knowledge needed to fulfill the requirements of our customer base.”

Bruno says rebuilding the Toronto-area economy post-COVID has been a challenge, as some businesses that were hard hit have not been able to gain momentum, while others found themselves positioned for success.

Housing costs, which have always been high in Toronto, have become a bigger worry, and that not only hits demand but labor costs, as wholesalers have to figure out how to pay enough for employees to afford a home, not to mention a life.

J.E. Russell Produce’s Morton says, “The standard business at the Ontario Food Terminal has not quite returned to the pre-pandemic ‘normal.’ I think that there are more buyers still operating remotely and also operating a little more lean and cautiously. It is my expectation that as the Canadian consumer begins to feel more confident in an improving economy, that the foodservice and retail sides of our business will improve.”

In terms of lifestyle and its effect on food demand, Sarraino says Toronto has at least come closer to normalcy, which has had positive effects on businesses.

The generational and well-established wholesalers in the Toronto market help with maintaining standards and practices.

“I hate to sound like a dinosaur, but this family-owned and -operated business was founded on the very premise that if you treat your customers fairly today, they will come back and give you a chance to serve them again tomorrow,” Morton says. “That is the culture at Russell, and we do work hard to make our customers happy every day, and in the same light, make our shippers happy.”

Bruno says the expansion of agriculture in Ontario continues to translate into more interest in local produce under more circumstances.

“We’ve seen a major hike in demand for greenhouse and locally grown berries,” he says.

Driscoll’s has greenhouse operations and others are looking to expand the varieties of berries they’re cultivating.

“A lot of the customer base that we have really appreciates locally grown produce,” says Bruno. “We’ve been doing quite well with Ontario greenhouses. If there is a trend heading in any direction, I would assume, confidently, it is a greenhouse, local trend.”

The wholesale business in Toronto remains dynamic. Bruno says the Ontario Produce Terminal is constantly renovating and expanding.

Toronto wholesalers have been taking stock and responding to the consumer and often regulatory concerns about the environment.

“Sustainability is a big issue for us,” says Sarraino. “We are always looking at options to ensure that the investments into our infrastructure utilize state-of-the-art, environmentally friendly refrigeration and machinery.”

As noted, wellness is a consideration in Toronto, and the dynamics around the issues generate a range of responses.

“I think that we have the largest organic offering at the Ontario Food Terminal, and we take great care of ensuring that we have the right product for our many diverse customers,” says Morton. “There is definitely more of a focus on health and wellness, and we help meet that interest. I also think that snackability is something that’s emerging at retail as more important to consumers, and we also have offerings in that space.”

Morton says consumers and foodservice will always look for something new and unique, “so we must, too. For example, we are starting to see much more interest in mushroom varieties that in the past would have been considered way too niche to build a program around.”