Canadian grocers are facing a supply chain with less room for disruption, but new data from Capgemini shows they have fewer backup options than their global peers.
Only 34% of Canadian companies have alternate logistics routes, ports or carriers in place, compared with 44% globally, while 89% report raw-material scarcity, compared with 67% in the US. At the same time, just 44% of Canadian organizations are redesigning production processes to use less water, versus 49% globally and 70% in Germany.
Vinayak Madappa, Strategic Advisory Partner at Capgemini works with Canadian grocers on rerouting supplier relationships, stress-testing logistics networks and managing risk. He said Canada’s supply chains were built around a small number of trading relationships predominately with the USA and Mexico due to the proximity and ease of access to these markets, and the data shows it.
“Only 34 per cent of Canadian organizations have alternate logistics routes, ports or carriers in place, the lowest of the 13 countries surveyed and 10 points behind the global average. For grocers and retailers in general, that means a single border slowdown or port closure can impact the ability to ensure the product reaches the shelf in a timely manner,” said Madappa.
“Diversification, while ideal, is dependent on the global markets and geopolitical trends. A balance between diversifying both within Canada and with new markets will be critical and to establish supply chain resilience.
He said the supply chain pressure is showing up in raw materials, ingredients, packaging, and production more than finished goods.
“Packaging is a good example: if you buy your cans from a US supplier, you pay tariffs on those materials even if the food inside is Canadian, so the cost of the finished product is higher. For grocers, ingredients, packaging and other upstream inputs are where scarcity and cost bite first,” said Madappa.
He said most companies went into the Canada/US trade dispute with six to 12 months of safety stock, and that buffer is running down.
“Grocers are getting choosier about which products go to which stores, sourcing more from Europe, Mexico and Latin America while also expanding and investing in local/domestic food production, and putting more behind discount banners and store brands, which sends business to smaller Canadian producers,” said Madappa.
“As of now, the question is not about availability of the product. This is pressure coming as an outcome of tariffs impacting cost management and profitability. To mitigate this, companies could take advantage of provincial trade barriers being relaxed for most products, and leverage this to balance inventory risk particularly for fresh produce, dairy and prepared foods.
“Another focus is to sharpen demand forecasting and create a multisupplier ecosystem. None of it moves fast, so shoppers could see less choice on shelves in the coming months.”
He said Canadian companies have rarely had to plan around water scarcity, so few have redesigned for it.
“Only 44 per cent of Canadian manufacturers are changing production processes to use less water, compared with 49 per cent globally and 70 per cent in Germany. Food depends on water at every stage from farm to processing plant, so as roadblocks hit growing regions here and abroad, grocers will feel it in both price and availability,” added Madappa.
He said retailers are absorbing rising costs against their margins for now, but once that runs out, Canadians are likely to see the impact of fewer options on the shelf or as companies adapt – higher prices or shrinkflation.
“Tariffs, conflict and fuel prices are all hitting at once, so grocers relying on a single source or route are the most exposed. The biggest opportunity is visibility and planning leveraging AI, advanced analytics, and digital supply chain platforms enable real-time visibility and faster decision-making. This will allow for proactive risk management and help organizations identify potential disruptions, optimize inventory, and improve supplier performance,” noted Madappa.
More from Retail Insider:
