Canada’s FMCG sector faces weeks of disruption to supply chains, an industry leader has warned, after a shutdown of freight traffic on the country’s two largest railways.
Services have ground to a halt after a midnight (EST) deadline passed without agreement between rail companies Canadian National Railway Co. and Canadian Pacific Kansas City and union officials over working conditions. Engineering and conducting staff have been locked out.
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According to the Railway Association of Canada, some C$380bn (US$279.7m) of goods are moved on the country’s railways each year, ranging from cars to agri commodities and frozen foods.
The railway operators and unions have accused each other of not embarking on negotiations seriously.
Business groups have demanded Canada’s federal government steps in and insists on bargaining.
Speaking to Just Food, Michael Graydon, chief executive of trade body Food, Health & Consumer Products Canada, warned of the impact on production and distribution even if a speedy resolution, including government action, is found to break the impasse.
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By GlobalData“I expect they will step in fairly quickly and force some binding arbitration on the process but who knows when that would be?” Graydon said.
He said supply chains had already seen disruption as the deadline neared. “I do believe that it will be relatively short term but when you think we’ve pretty much been on strike for a week. They’ve stopped shipping stuff. By the time you get things up and running, it’s another week. It’s going to take six weeks to get the supply chain back into normalcy.
“You’ve got tons of inventory that people have moved into places in hopes that it’s not too long and we can satisfy the consumer demand for products. Everything is a bit disrupted and it’ll take a little time to iron out. Fingers crossed, it either gets resolved or government steps in and resolves it for them.”
With Canada’s food manufacturing base principally in the “Ontario, Quebec corridor”, Graydon said, FHCP’s members rely on rail to ship most of the production to the west of the country.
“For them, we’re looking at for every week close to C$40m in lost sales with the inability to ship and do that,” he said.
Manufacturers are also set to face disruption to their supplies of inputs, including agri commodities.
“The other side of it is, if it’s any longer-term work stoppage, both the Port of Vancouver and the Port of Montreal are the input ports for an awful lot of the ingredients utilised in manufacturing of consumer goods and consumer packaged goods and our consumer health products,” Graydon said. “It’s going to put a strain on manufacturing capacity, with shortages of ingredients to be able to complete the manufacturing process.
“I think people have bought inventory in to be able to get them over a short to medium term hump but one of the things is we’ve got massive backlog at the ports because they stopped moving stuff or have been very selective in what they’re moving.”
Asked when the impact of the stoppage may start to be seen on store shelves or on menus, Graydon suggested “probably two weeks”.
He added: “The other challenge is this is getting a lot of media in Canada right now and so what you end up with – very similar to what happened during Covid – is you get consumer hoarding and so the inventory strain is quite significant. It’s really hard to manage that. That will put a bit of a strain on it, too, and maybe deplete them towards a little bit faster in some key categories but it will have to see.”
