Evaluation of the AgriInnovate Program

Abbreviations

AAFC

Agriculture and Agri-Food Canada

CAP

Canadian Agricultural Partnership

DGIC

Director General Innovation Committee

ISED

Innovation, Science and Development Canada

LFE

Linked File Environment

OAE

Office of Audit and Evaluation

PIP

Performance Information Profile

PSF

Pre-Screening Form

R&D

Research and Development

SME

Small- or Medium-Sized Enterprises

Sustainable CAP

Sustainable Canadian Agricultural Partnership

Executive summary

Purpose

The Office of Audit and Evaluation of Agriculture and Agri-Food Canada (AAFC) conducted an evaluation of the AgriInnovate Program (AgriInnovate or the program) to assess its relevance, design, delivery and performance, including efficiency and effectiveness.

Scope and methodology

The evaluation examined AgriInnovate activities from 2018-19 to 2022-23 using multiple lines of evidence including a review of program documents, project files and literature; key informant interviews; and analyses of administrative and financial data. Early program design changes under the Sustainable Canadian Agricultural Partnership (Sustainable CAP) in 2023-24 were also considered.

Background

AgriInnovate's objective is to provide repayable contributions of up to $10 million for projects that aim to accelerate the demonstration, commercialization or adoption of innovative products, technologies, processes, or services that increase sector competitiveness and sustainability. The program is intended to address the gap in financing available to move agricultural and agri-food research to commercialization, as well as to assist industry in mitigating the inherent risk in scaling-up products and processes. Under the Canadian Agricultural Partnership (CAP), AgriInnovate provided $114.9 million in funding for 32 projects.

Findings

• AgriInnovate responds to a continuing need in the Canadian agricultural sector by addressing barriers to innovation and reducing financial risk for agri-businesses.
• Program objectives are well aligned with department and federal priorities. However, the extent to which these priorities are supported through AgriInnovate is uncertain.
• While AgriInnovate remains AAFC's primary program supporting innovation projects for for-profit agriculture or agri-food firms across Canada, there are other programs in place that fund these types of projects in specific areas. AgriInnovate works with other programs at AAFC and elsewhere in the federal government to limit the potential for projects to receive duplicative funding.
• The program's funding mechanism has several strengths. Opportunities exist to develop an improved delivery model based on conditional repayment as well as financial risk reduction incentives for marginalized and underrepresented groups.
• AgriInnovate's design contributes to challenges in efficient program delivery, including prolonged timelines to notify applicants of funding decisions and significant delays in processing claims payments.
• Recipients reported that AgriInnovate increased their competitiveness and productivity, as well as their capacity to demonstrate, commercialize and adopt innovative projects.
• Changes under Sustainable CAP will help address identified data gaps and performance measurement limitations. However, there is still a lack of a qualitative data being captured by the program to demonstrate long-term impacts of projects.

Conclusion

There is an ongoing need for federal support within the Canadian agriculture and agri-food sector for innovation projects. The program's objectives are well aligned with federal priorities to strategically support the agriculture and agri-food sector. Despite funding reductions in successive agricultural policy frameworks, AgriInnovate remains AAFC's primary innovation program targeting for-profit firms across Canada, and the extent to which the program can support federal priorities is unclear. There is potential for AgriInnovate to overlap with other federal innovation programming. To address this limitation in program design, AgriInnovate works with other programs at AAFC and elsewhere in the federal government to limit the potential for projects to receive duplicative funding. That said, it supports a small number of projects. Additional collaboration efforts within the Canadian agricultural innovation ecosystem would strengthen existing networks and AAFC's ability to advance sector priorities.

AgriInnovate's distinctive funding mechanisms and governance tools are strengths. That said, the design of the program contributed to challenges in efficient delivery. Design improvements under Sustainable CAP are expected to better support firms experiencing short-term revenue pressures and expand accessibility for underrepresented and marginalized groups.

AgriInnovate achieved or is on track to achieve both its immediate and intermediate outcomes in terms of increasing participating firms' capacity to demonstrate, commercialize and adopt innovations for the sector. Several performance measurement changes planned under Sustainable CAP will improve indicators for tracking expected results such as implementing qualitative performance data to inform the ultimate outcome. Revised data collection for potential applicants will also address data gaps for equity-deserving groups.

Recommendations

• Recommendation 1: The Assistant Deputy Ministers of Programs Branch and Strategic Policy Branch should adjust the design of AgriInnovate to better support sector needs as well as to manage overcrowding in the innovation program ecosystem.
• Recommendation 2: The Assistant Deputy Minister of Programs Branch should identify and implement changes to the AgriInnovate application review process to increase the timeliness of funding decisions.
• Recommendation 3: The Assistant Deputy Minister, Programs Branch, in consultation with the Assistant Deputy Minister of Corporate Management Branch, should revise AgriInnovate's performance measurement approach to include the collection of qualitative data to complement the quantitative modelling already planned in the PIP.

Management response and action plan

Management agrees with the evaluation recommendations and has developed an action plan to address them by March 2028. For further details see Annex C.

1.0 Introduction

The Office of Audit and Evaluation of Agriculture and Agri-Food Canada (AAFC) undertook an evaluation of the AgriInnovate Program (AgriInnovate or the program) as part of the 2024-25 to 2028-29 Integrated Audit and Evaluation Plan. The program supports for-profit Canadian agri-businesses through repayable contributions for targeted commercialization, demonstration and/or adoption innovation projects intended increase the competitiveness and sustainability of the agricultural and agri-food sector. The results of this evaluation are intended to inform current and future program and policy decisions.

2.0 Scope and methodology

This evaluation assessed the relevance, design, delivery and performance (efficiency and effectiveness) of AgriInnovate activities from 2018-19 to 2022-23, under the Canadian Agricultural Partnership (CAP). Early design changes under the Sustainable Canadian Agricultural Partnership (Sustainable CAP) in 2023-24 were also considered to place findings in context and ensure that recommendations are useful and relevant. The evaluation used multiple lines of evidence, including a review of documents, project files and literature; key informant interviews; a comparative review; and thematic case studies. For more detailed evaluation methodology, see Annex A.

3.0 Program profile

3.1 Overview of AgriInnovate

AgriInnovate supports AAFC's core responsibility for Science and Innovation and the departmental objective of ensuring that the Canadian agriculture and agri-food sector is effective in transforming ideas into new products. The program is a continuation of the AgriInnovation Program Stream C: Enabling Commercialization and Adoption Program, which was in place under Growing Forward 2 (2013-18). Under CAP (2018-2023), AgriInnovate spent $130.9 million. AgriInnovate was renewed under the Sustainable CAP, with a total of $95.4 million planned program expenditures over 5 years.

Under CAP, AgriInnovate's objective is to accelerate the demonstration, commercialization or adoption of innovative products, technologies, processes, or services that increase the agricultural sector's competitiveness and sustainability. Projects were considered for funding within four priority areas:

• adopt new or world-leading clean technology (including precision agriculture);
• increase productivity through advanced manufacturing, automation, or robotics;
• strengthen Canada's value-added agriculture and agri-food sector; and
• secure or expand new export markets.

Projects that incorporated more than one priority area were given greater consideration. Eligible applicants were for-profit organizations that were incorporated in Canada, including businesses and/or corporations, cooperatives; and corporations and cooperatives operating in Indigenous communities. AgriInnovate applicants could receive funding for up to 50% of total eligible costs and a maximum of $10 million. Total government funding (federal, provincial/territorial and municipal) could not exceed 75% of eligible project funding. Eligible costs included but were not limited to capital expenditures, contracted services, salaries/benefits and other direct project costs.

3.2 Resources

Over the evaluation reference period (2018–2023), 32 AgriInnovate projects were approved, and AAFC contributed a total of $114.9 million to these projects, with some fluctuations in year over year expenditures^{note 1} (see Table 1). On average, projects received $3.7 million in repayable contributions, with the smallest project approved to receive $400,000 and the largest project receiving $10 million.^{note 2} Of the 32 approved projects, 6 (19%) were deemed by AAFC's Repayment and Financial Business Case Analysis Division to be in default of the agreement, accounting for $26.2 million in AAFC contributions. Files are deemed to be in default of the agreement when the recipient is unable to repay its loan under the contribution agreement for reasons including but not limited to receivership, bankruptcy or insolvency. When this occurs, the file is transferred to AAFC's Account Receivable to attempt collection.

3.3 Governance

AgriInnovate is managed by the Commercialization Programs Division, located within the Innovation Programs Directorate in the Programs Branch. The assessment of project applications is carried out by the Director General Innovation Committee (DGIC), comprising members from AAFC's Programs Branch, Strategic Policy Branch, Market and Industry Services Branch and Science and Technology Branch.

4.0 Relevance

4.1 Gaps addressed by AgriInnovate

Innovation is a key driver for growth of the sector, as it contributes to increases in productivity, performance, profitability, efficiency and competitiveness. Government support for the adoption of new or world-leading clean technology and innovation in sustainable agriculture and agri-food is critical to enhancing the future competitiveness of the sector and creating skilled jobs in agricultural research and development (R&D), agri-food production systems and value-added manufacturing. Agricultural innovation underpins AAFC's strategic efforts to improve the resilience of the sector.

Canadian agri-businesses face several barriers

Canadian agriculture and agri-food firms face more intense competition; a faster rate of technological change; and an operating context that is changing due to population growth, urbanization and climate change. Agri-businesses need to adapt to face these challenges, to maintain Canada's economic growth and to increase the competitiveness and productivity of the Canadian agri-food sector. Canadian agricultural and agri-food firms face several barriers to the commercialization and the adoption of innovations, such as decreasing levels of public and private investment in R&D, limited availability of venture capital investment, and rising costs associated with higher interest impacting the acquisition and operation of new technologies. In this environment, there is a need for government support for innovation. According to the Organisation for Economic Co-operation and Development, public investment in agriculture research and innovation as a proportion of gross domestic product declined from 2000 to 2022 for all comparator countries, including Canada.^{note 3} AgriInnovate aids Canadian agri-businesses to mitigate these global and national challenges by incentivizing targeted and innovative commercialization, demonstration and/or adoption activities for agriculture and agri-food sector.

AgriInnovate helps to support the sector by funding the implementation of innovation

Government support to accelerate the adoption of innovative technologies and use of sustainable practices helps create the conditions for success for Canadian agri-businesses. AgriInnovate serves as AAFC's key instrument to better manage cost and market-based instabilities for Canadian agri-businesses as they transition from R&D to commercialization of innovative projects. The evaluation found that the program helps to mitigate the following challenges associated with investment availability in high-risk and long return on investment agricultural projects:

• capital costs of innovation that require firms to take on significant financial risk, particularly start-ups or early revenue firms;
• limited return on investment with traditional financing that is higher risk for smaller agri-businesses due to additional interest costs;
• supply shortages for agricultural inputs for the commercialization of innovative food products such as disease or crop failures, which lead to cost volatility, reduced margins and/or lower sales;
• market penetration challenges such as slow or low adoption of innovative products, processes and technologies in traditional markets; and
• regulatory approvals, protection-based policies and/or international standards that lead to delays in getting innovative products to market.

Innovation funding levels and scope have contracted over time

The federal government has allocated funding to support innovation commercialization activities for the agriculture and agri-food sector in the last three rounds of agricultural policy frameworks. Since 2013, federal funding for the sector has decreased by 42%. Under AgriInnovation Stream C: Enabling Commercialization and Adoption (Growing Forward 2, 2013–2018), AAFC expended a total of $164.8 million; while under the CAP iteration of AgriInnovate (2018–2023), $149 million was expended.^{note 4} Under Sustainable CAP (2023–2028), the program received a total of $95.4 million. In addition, the program's design was changed to narrow the scope of eligible activities under the CAP, with a greater emphasis on first-in-Canada technology and a limitation to the amount of funding for modernization projects. Because AgriInnovate is the only AAFC program that supports innovation in firms across all subsectors of the agriculture and agri-food sector at certain stages of the innovate continuum, these design changes limited the department's ability to support agri-food processing in Canada. Under the CAP, AgriInnovate funded 32 projects. By comparison, AgriInnovation Stream C supported 45 projects under Growing Forward 2.

4.2 Alignment with priorities, roles and responsibilities

AgriInnovate is well aligned with departmental and federal priorities over the evaluation period, such as:

• Departmental Plans from 2018–2023 and the 2020-23 Department Sustainable Development Strategy;
• AAFC commitments to the Pan-Canadian Framework on Clean Growth and Climate Change which supports increased competitiveness and sustainability of the agricultural and agri-food sector;
• The 2021 Fall Economic Statement which calls for funding innovative research and sustainable growth projects intended to maintain sector competitiveness;
• Budget 2022 which explicitly refers to the CAP, emphasizing that the suite of programs will support agricultural innovation, sustainability, competitiveness and market development;
• Speeches from the Throne (2019–2021) and Mandate Letters to AAFC's Minister (2019–2021), which refer to AAFC's commitment to support innovation and Canada's global export growth potential; and
• The 2021 Guelph Statement, which calls for targeted investments in science, research and innovation to address key challenges and opportunities.

However, limitations to the scope of eligible activities covered and amount of funding for AgriInnovate may impact the extent to which AAFC can support these objectives.

4.3 Overlap and duplication

AgriInnovate is AAFC's primary innovation funding program targeting for-profit agri-businesses with innovation projects at the commercialization, demonstration and/or adoption phase of the innovation continuum (see Figure 1).

However, there are many other programs offering funding for along the innovation continuum, or for specific subsectors. Other AAFC programs include:

• the Canadian Agricultural Strategic Priorities Program, which funds projects that help the agricultural sector adapt to new technologies, enhance sustainability, engage in strategic planning and address emerging issues;
• AgriScience, which supports pre-commercial research and science activities, funds projects aimed at accelerating innovation in the agriculture and agri-food sector through non-repayable contributions and collaborative research support;
• AgriMarketing, which funds projects that aim to increase and diversify exports of Canadian agricultural, agri-food and agri-based products by enhancing market development and promotional activities;
• the Supply Management Processing Investment Fund, which funds projects that support investments in dairy, poultry and egg-processing facilities to improve productivity and efficiency through the purchase of new automated equipment and technology;
• Agricultural Clean Technology: Research and Innovation Stream, which funds projects focused on pre-market innovation, including research, development, demonstration and commercialization of clean technologies in 3 priority areas: green energy and green efficiency, precision agriculture and the bioeconomy.

Other departments, such as Innovation, Science and Economic Development (ISED), also offer funding to support innovation. In addition, AgriInnovate complements other sources of government funding used to support costs that would not be covered under other funding sources, such as those available from the regional development agencies and Farm Credit Canada.

AgriInnovate works to address duplication through pre-screening and consultation

The program was not designed to pre-emptively limit the eligibility of projects that could be funded under other AAFC programs. Instead, the pre-screening stage of AgriInnovate's application process is used to determine suitability for funding under AgriInnovate and other programs. In this step of the review process, program officers work to determine suitable projects that align with the program's priorities. To address the possibility of duplication, AgriInnovate works with other programs at AAFC to limit the potential for projects to receive duplicative funding.

Other departments also offer programs supporting innovation, but on a different scale. 2 ISED programs offer funding to large-scale projects in the food processing sector (Protein Industries Canada Innovation Cluster and the Strategic Innovation Fund). Both of these programs are designed to support large scale, transformative projects that drive R&D, innovation and growth across all sectors in Canada. Evidence indicates that AgriInnovate is appropriate for agriculture and agri-food businesses that focus on incremental process and technology improvements for projects up to $10 million, which represents much smaller funding amounts relative to the projects funded under ISED's programs. In addition, a memorandum of understanding was developed with Protein Industries Canada to share information on projects, though the type of projects supported by the two programs is different.

Increased federal role in supporting collaboration within the innovation ecosystem is required

The agriculture and agri-food sector in Canada is based on an integrated supply chain that encompasses primary agriculture, food and beverage processing, food retailers and wholesalers, as well as food service providers. To increase awareness of the program, AAFC undertook various promotional activities such as Minister's announcements through AAFC's communications channels and stakeholder information sessions with companies during the program's first year of delivery. These activities included engaging key national organizations vested in the innovation ecosystem, such as the Canadian Food Innovation Network and the Canadian Agri-food Automation and Intelligence Network. In subsequent years, program staff participated in broader industry engagement activities, including AAFC's Sector Engagement Tables and Value Chain Roundtables, the Innovation and CleanTech Hub, and other related industry associations.

AgriInnovate exceeded its planned spending over the evaluation reference period by 4%. These results suggest that communication and outreach activities attracted an adequate number of pre-screening forms (PSFs) and full applications from the sector, considering the level of funding available.

As noted above, investments in innovation in the global agri-food sector are declining in many countries, including Canada. As such, there remains a need for government support for innovation. To help address this need, increased collaboration between programs that fund innovation is necessary to help make sure that the reach of Government of Canada support is maximized. This approach has been successfully implemented in other countries. For example, the Netherlands, which is the second-largest exporter of agricultural products (by value) in the world, is renowned for its agricultural innovation system. They have national policies that drive collaboration between government, businesses and academic institutions. This level of collaboration has helped encourage Public-Private Partnership projects and support the growth of SMEs.

5.0 Design and delivery

5.1 Program design strengths

The program supported project activities at critical points of the innovation continuum

AgriInnovate is designed to support 3 types of projects: demonstration, commercialization and adoption. Demonstration projects enable companies to secure key customers and access markets, to produce samples for market validation, or to create a showcase site for pre-commercial demonstration. Commercialization projects mitigate the financial risks associated with transforming research into commercially viable products. Adoption projects support the adoption of new and innovative technologies and/or services to increase production and/or reduce production costs.

The program recently focused on first-in-Canada commercialization, demonstration and adoption projects with the objective to increase the competitiveness of the sector across the value chain and accelerate projects through later stages of the innovation continuum (see Figure 1, in section 4.3). Companies funded by AgriInnovate receive support in transitioning between early-stage and late-stage investment, which provides a competitive advantage for their innovation projects.

The program was comparatively accessible for SMEs and start-ups

Most AgriInnovate funded applications came from micro-, small- or medium-sized organizations. This suggests that companies in most need of federal support, such as SMEs,^{note 5} high-growth companies and start-ups, were accessing the program. Similarly, over 80% of funded firms were considered SMEs, and three quarters of funded firms were receiving AgriInnovate support for the first time (see Table 2).

Program data shows that AgriInnovate was accessible to both new and established firms where the greatest proportion of funding was allocated to firms operating for 5 years or less (29%) at the time of application, followed by firms operating for 11 to 15 years (20%) and 35 years or more (20%).

However, the program only funded 32 projects (at 32 companies) over the evaluation period. While SMEs are well represented among funded companies, few companies were able to access AgriInnovate funding.

Features of AgriInnovate's funding mechanisms were beneficial for businesses

Smaller agri-businesses face the greatest challenge in accessing financing for innovation commercialization, demonstration and adoption projects due to the repayment structure of most types of private financing. For example, the higher-risk nature of lending to SMEs, start-ups and emerging sectors can limit the ability for these types of firms to access traditional lenders.

AgriInnovate features several funding mechanisms that benefit recipients, including SMEs: specifically, interest-free contributions, a grace period of one-year post-project completion and a 10-year repayment term. In addition, there is no security requirement and AAFC does not receive a stake in the company in exchange for funding. These design features enable Canadian agri-businesses to access sources of financing and enhance their company's liquidity. This, in turn, increases working capital to accelerate the pace of scale-up and expansion. Increased liquidity is particularly important for SMEs as well as start-up companies during the scale-up phase of commercialization and market expansion.

Further, recipients emphasized that the program's design features enabled them to undertake their project sooner than they otherwise would have been able to with traditional commercial loans or other sources of venture capital financing.

5.2 Program delivery

AgriInnovate has several governance structures in place to support effective delivery.

The pre-screening process helps reduce administrative burden for applicants and AAFC staff

AgriInnovate's two-step application process, including follow-up from program officers, encouraged firms to complete a PSF to determine a project's alignment with the program's priorities and eligibility criteria, without having to invest the significant time and resources required for a full application. Program data shows that less than one third of projects that completed a PSF were invited to submit a full application. The program implemented changes to the pre-screening process in later years of CAP, based on consultations with Strategic Policy Branch, to limit the likelihood that firms will be invited to apply if their projects were not sufficiently innovative. This measure minimized administrative burden for both applicants and AAFC staff.

During the evaluation period, 557 projects began the pre-screening process. Approximately half of these (266/557) completed the pre-screening survey. Of those that completed the survey, 28% (101/266) completed an application and 12% (32/266) were funded.

Some of the projects that submitted a PSF were diverted to other programs which were considered a better fit. To facilitate this, there are conversations that take place between AgriInnovate and other programs. However, reference to this work is not included in current AgriInnovate documentation. Work that is undertaken to manage the crowded space in which AgriInnovate operates would benefit from being articulated in program documentation.

Standardized tools have been developed to support the technical review process

An important step in AgriInnovate's application review process is the technical review stage. The methodology for technical reviews included an assessment of both financial and business risks focused on the applicant's ability to complete the project, as well as the likelihood the project would result in repayment. Technical reviews involved several AAFC branches, including Science and Technology Branch, Strategic Policy Branch and Market and Industry Service Branch.

In 2020, program officials also signed a memorandum of understanding with the National Research Council Industrial Research Assistance Program for additional program delivery support services including technical and business assessment support for proposal selection. Technical reviewers from different AAFC branches used standardized tools to ensure evaluations were consistent. The program leveraged department and external expertise during the application process to verify that projects were aligned with departmental priorities and met technical, market and financial requirements.

5.3 Impact of program design on efficient delivery

AgriInnovate's 4 service standards have been achieved to varying extents, as shown in Table 3. In general, AgriInnovate achieved its service standards for inquiries and acknowledgement of application, but did not meet timelines to notify applicants of funding decisions and claims processing.

The service standard for application review was missed as a result of a complex application review process

The program achieved its service standards for inquiries and acknowledgement of application, but missed the service standard to notify applicants of funding decision within 100 days. Applicants and program officials confirmed that delays in the project approval process occurred both at the technical review stage and at senior management levels for certain projects.

Other aspects of the program's design contributed to the long application review. This includes obtaining technical or financial assessments from internal reviewers across several branches; and receiving project approvals for those that require higher levels of approval after being presented to the DGIC. Similar issues were noted in the evaluation of AgriInnovation Stream C,^{note 6} which reported that only 57% of approval or rejection letters were sent within 100 business days of receiving a full application.

To improve efficiency, the program implemented several measures under Sustainable CAP:

• DGIC approval for applicants under a certain funding threshold ($100,000) is no longer required;
• Feedback from other branches will be received earlier in the project assessment phase to limit the number of projects going through a full review that are not well aligned with the program; and
• The program transitioned to the Grants and Contributions Digital Platform. This is expected to improve file sharing and communication with other branches such as automated technical review processes.

It is too early to determine the success of these changes.

Delays in claims processing were experienced

AgriInnovate's service standard target for sending a payment within 30 days of a completed and documented claim was met 100% of the time in the first year of the program but declined significantly to 52% in the last year (see Table 3). The challenges with claims processing are not unique to the program as claims for AgriInnovate projects are processed by a team that has responsibility for several other programs. The number of programs handled by this team nearly doubled since 2020 and staff shortages and turnover impacted the completion of claims and created a backlog within the suite of programs under the directorate's purview. That said, a review of data for these other programs shows that the claims processing service standard targets were met with a few exceptions, including AgriInnovate's performance in 2022 (52%).

The claims process for several AAFC programs, including AgriInnovate, was the subject of a recent audit conducted by the Office of Audit and Evaluation,^{note 7} which also found that some components of AgriInnovate's design contribute to long claims processing times. This includes multiple checkpoints and duplicate reviews. Although Programs Branch conducted various streamlining reviews of the claims process between 2014 and 2017, the audit found that the recommendations from these reviews were inconsistently implemented across directorates. The audit recommended that additional streamlining opportunities should be implemented.

Approaches to address design and delivery challenges have been implemented under Sustainable CAP

The evaluation found some challenges posed by AgriInnovate's design. For example, applicants applying in the last year of the funding cycle were unable to be considered for funding if their project could not be completed by the end of the fiscal year. According to the terms and conditions of the program, projects must be completed by the time AgriInnovate's funding cycle ends. Projects with longer timelines applying in the last year were less likely to be approved given there was insufficient time to complete the project.

In addition, the nature of the program as a repayable contribution program, even considering the length of repayment term and interest-free component, was reported to be a significant challenge for some recipients. Several firms experienced higher business costs related to unforeseeable macroeconomic events but had no option to temporarily freeze repayments. Under Sustainable CAP, the program introduced an option for conditional repayment based on a gross revenue threshold and removed the requirement for projects applying in the last year of the program funding cycle to complete their project before the cycle ends in 2028.

These design changes are expected to result in fewer defaulted loans and increased success in meeting performance targets. Adjustments were also made to increase accessibility by including an additional 10% funding allotment for firms that are 50% owned or led by members of underrepresented and marginalized groups.

6.0 Performance

6.1 Performance measurement

The process for gathering AgriInnovate performance information is clear. For up to 5 years following project completion, a member of the Directorate's performance team emails all program recipients requesting an annual performance report and then follows up approximately 2 weeks after the due date, if a performance report has not been received. Program data shows that most program recipients (83%) submitted performance measurement data through this process.

There were challenges, limitations and gaps in performance measurement under CAP

Performance measurement challenges, limitations and gaps made it difficult to fully assess the impact of the program. Although 83% of recipients submitted performance data, participating firms were not required to report on all the indicators, leading to data gaps. In addition, due to the absence of open-ended questions in the performance reports used under CAP, recipients were limited in their ability to describe how their projects were successful, what lessons were learned or what challenges they faced. Further, performance reports included no questions relevant to Gender-based Analysis Plus to assess reach and impact on underrepresented and marginalized groups. However, this information was not required under the CAP iteration of the program.

The previous iteration of the program required recipients to report for 5 years after program completion and this caused challenges when setting CAP indicator targets. Targets had to be set using an incomplete dataset, meaning 2 out of the 5 years of Growing Forward 2 results.^{note 8} For example, the target for number of products, processes, practices, services and technologies supported by the program that were demonstrated was 15. However, there were only 4 funded projects which were categorized as demonstration projects under AgriInnovate.^{note 9} The target set for this indicator did not reflect the number of funded demonstration projects.

Finally, the evaluation found that the link between some indicators and outcomes was unclear. For example, the Performance Information Profile (PIP) included an indicator on the number of permanent full-time equivalent positions, which is not necessarily relevant for some innovation projects that will create labour efficiencies. The indicator was, in practice, only collected for projects intending to result in an increase full-time equivalents, but this was not clearly communicated in the PIP. However, changes have already been implemented under Sustainable CAP to rectify this issue. Similarly, the relationship between the percentage increase in the volume of agricultural inputs and the ultimate outcome of increasing firms' competitiveness and productivity is also dependent on the type of project being funded. This indicator is, in practice, only utilized in projects intending to result in an increase in agricultural inputs and translating into increased competitiveness, but this is not specified in the PIP. This lack of a clear articulation of when some indicators will be used may explain some perceived gaps in performance data.

Performance measurement changes have been planned under Sustainable CAP

Planned changes to data collection under Sustainable CAP are expected to improve performance measurement and address data gaps at the project level. For example, qualitative questions were added to the performance reports to capture projects successes, challenges and the lessons learned. A question relevant for Gender-based Analysis Plus was also included in the final performance report to enable funding recipients to explain how their project benefited underrepresented and marginalized groups. Expected outcomes have been updated and 5 new indicators have been added to the program's PIP. The addition of new indicators is anticipated to improve the assessment of performance overall and address some of the issues identified in the evaluation.

In addition, the program plans to gather performance 2 years following project completion, rather than 5. This is in line with other AAFC programs that have similar follow-up timelines for performance reporting, such as the Supply Management Processing Investment Fund. However, capturing data 5 or more years following project completion would likely provide a more accurate assessment of impact due to the long-term nature of the program's innovation projects.

AgriInnovate's PIP includes a methodologically sound quantitative long-term indicator based on the Statistics Canada Linked File Environment (LFE) which measures program impact on a matched sample of firms who received AgriInnovate funding versus firms who did not (see below). Continued use of the LFE as the basis of measuring long-term outcomes is expected to mitigate the risk of attribution challenges associated with other indicators, such as inflation after each additional year of follow-up. Nevertheless, in the absence of a qualitative indicator to capture project success, the evaluation found that there would be an important gap in assessing long-term impact on the agricultural innovation commercialization ecosystem. For example, a company may successfully demonstrate a technology or implement an innovative process for a brief time, but eventually default. Capturing this experience qualitatively in terms of the factors that contributed to the default, or any lessons learned, is valuable information for the sector. This data would likely not be adequately captured only 2 years after funding completion.

6.3 Effectiveness

The program's immediate, intermediate and ultimate outcomes were examined as part of this evaluation (for the full AgriInnovate logic model, see Annex B). Table 4 summarizes the program's achievement for each outcome and its associated indicators.

Table 4: Achievement of AgriInnovate program outcomes

AgriInnovate increased participating firms' capacity to demonstrate, commercialize and adopt products, processes, practices, services and technologies

AgriInnovate achieved this immediate outcome by supporting the implementation of 91 innovative technologies (products, processes, practices, or systems) and/or services and the creation of 875 permanent full-time equivalent positions. Examples of innovative technologies and/or services supported by the program include:

• purchase and installation of automated processing equipment and sorting technology;
• technological process for selecting animals with higher productivity, feed efficiency and carcass quality; and
• production of new agri-food products, including insect-based animal feed, pea-based tofu, stabilized oat products (flakes, flour and quick oats) and food grade canola protein; and
• technology and processes to provide greater flexibility in the feedstock of biofuels and the use of chilling systems to improve production.

The evaluation found that the program increased the capacity of participating firms in various ways. This included increasing revenues, creating jobs and gaining operational efficiencies through technologies that increase the speed of production processes. Recipients confirmed that the program enabled them to add new positions in quality control, technology engineering, maintenance, marketing and sales. With AgriInnovate support, firms accessed new technology that enabled them to bring new products to market. AgriInnovate also contributed to firms increasing their capacity to adapt and maintain innovative processes through intensive staff training.

Innovative products, processes, practices, services and technologies were commercialized

The program partially achieved its intermediate outcome in the demonstration category, with 7 products, processes, practices, services and technologies demonstrated by funded projects (compared to a target of 15). Despite the low proportion of funded projects (13%) categorized as demonstration projects, the program is on track to achieve the target of 15 by March 31, 2028.

The target for the second intermediate outcome was exceeded: a total of 55 innovative products, processes, practices, services and technologies entered the market, compared to a target of 37. Examples of innovations that entered the market include:

• end products of new production lines and processes such as granola bars or tofu;
• a product that enables organizations to convert locally generated agricultural waste and other low-quality feedstocks into renewable biodiesel; and
• software applications intended to support customer relations and resource planning to enhance operational efficiency.

Funding recipients provided various examples of how AgriInnovate funds supported their firm in commercializing their innovative product, process, practice, service, or technology, such as improving product quality and capabilities; accelerating products to market faster than competitors; and increasing output and scaling up production.

The program increased the competitiveness and productivity of participating firms

AgriInnovate partially achieved its ultimate outcome. The percentage increase in the dollar value of annual export revenues of participating firms was 147%, which is on track to achieve the target of 168%. The target for percentage reduction in total cost per unit target (28%) was not met and is not on track to be met by March 31, 2028. In fact, production costs increased by 7%, on average, due in part to other economic factors described below. Participating firms reported increased volumes of exports and export revenues in performance reports. While the United States was the primary recipient of these exports, firms also noted that they expanded or strengthened commercial relationships with countries within the European Union. The Asian market is also an important recipient of exports resulting from AgriInnovate projects, particularly Japan and China. Evaluation evidence indicates that the growth in export markets supported participating firms' capacity to face competitors that operate outside of Canada; meet and comply with export market requirements; take advantage of growing global demand; and commercialize products of higher export value.

The program achieved its targets for percentage increase in the dollar value of annual domestic revenues of participating firms (110%) and percentage increase in the volume of agricultural inputs (383%). Growth in Canadian domestic markets occurred through:

• increased product value within the supply chain and expansion of firms' product offerings;
• development of new markets, ability to diversify the consumer base and acquisition of new customers;
• maintenance and acquisition of a competitive advantage over local competitors; and
• increased capacity to comply with domestic market requirements.

Recipients reported gains in competitiveness and productivity through operational efficiencies and business expansion resulting from their AgriInnovate funded projects. Some recipients reported that the program has enabled their companies to better manage production costs, resulting in savings passed on to the customer and increased market share. Environmental efficiencies were also reported by recipients including cleaner technologies; reduction of transportation costs and greenhouse gas emissions; operational savings from the decreased use of water and energy; reduced dependence on feed resources; and reduction of firms' impact on the environment through more efficient production.

Research and analysis directorate study on long-term outcomes demonstrates the program's effectiveness

Using 2013–2017 data from Statistics Canada's LFE and Diversity and Skills Database, the Research and Analysis Directorate at AAFC found that AgriInnovate had a positive impact on recipients' financial performance in terms of total revenues compared to expenses. The net income before tax effect of the program's support for the firms included in this research was estimated to be $200 million.^{note 10} In addition, due to the innovative nature of funded projects, the economic benefits of the program would likely extend far beyond the five-year study period. The causal effects estimated by the study only included projects funded under AgriInnovation Stream C: Enabling Commercialization and Adoption. However, there were few major design changes made in the transition to AgriInnovate. An updated study is currently being conducted and will support the program in articulating its more recent results.

Macroeconomic factors limited program impact

The main factors limiting the achievement of the program's ultimate impacts included macroeconomic forces, such as global economic disruptions due to COVID-19 pandemic, unforeseeable weather and climate events, and inflationary pressures. In 2022, inflation in Canada reached its highest point since the 1980s with consumer prices rising nearly 7%.^{note 11} Supply chain disruptions caused by the Covid-19 pandemic and ensuing increases in commodity prices also created economy-wide pressures. For example, processors experienced increases in operational costs and were required to modify their plants and increase sanitation measures to adhere to public health guidelines.

Drought conditions during the reference period also significantly impacted commodity inputs across Canada. According to Statistics Canada data, the price of raw material inputs increased by 20% in both crop and animal products from 2021 to 2022.^{note 12}

These unforeseeable macroeconomic issues impacted participating firms' ability to install equipment quickly and commercialize their product. This enabled competitors to penetrate markets with their products first. The evaluation found that such factors increased project costs during the evaluation period and were a major consideration in loan defaults in some cases.

7.0 Conclusions and recommendations

There is an ongoing need for federal support for Canadian for-profit firms to undertake innovation projects. Program objectives are well aligned with department and federal priorities to strategically support the agriculture and agri-food sector. Despite funding reductions in successive agricultural policy frameworks, AgriInnovate remains AAFC's primary innovation program targeting for-profit firms across Canada, and the extent to which the program can support federal priorities is unclear. However, there are other programs supporting innovation at other points along the innovation continuum, or in specific subsectors. AgriInnovate works with other programs at AAFC and elsewhere in the federal government to limit the potential for projects to receive duplicative funding. That said, it supports a small number of projects. Additional collaboration efforts within the Canadian agricultural innovation ecosystem would strengthen existing networks and AAFC's ability to advance sector priorities.

AgriInnovate's funding structure presents several features that are attractive to potential applicants. The program also has a robust application assessment process, though its complexity contributes to significant delays in determining the success of applications. Changes to the program under Sustainable CAP to incentivize potential start-ups, SMEs and other underrepresented and marginalized groups with a conditional repayment model are expected to improve outcomes.

Finally, AgriInnovate achieved or is on track to achieve all of its immediate and intermediate outcomes and most of its ultimate outcomes. Funding recipients noted that the program helped them to increase their competitiveness and productivity, and their capacity to demonstrate, commercialize and adopt innovative projects. Changes have already been made under Sustainable CAP to help address data gaps and limitations that were identified in the CAP performance measurement indicators. The PIP currently includes quantitative modelling of long-term impacts, which could be complemented by qualitative information.

Recommendations

• Recommendation 1: The Assistant Deputy Ministers of Programs Branch and Strategic Policy Branch should adjust the design of AgriInnovate to better support sector needs as well as manage overcrowding in the innovation program ecosystem.
• Recommendation 2: The Assistant Deputy Minister of Programs Branch should identify and implement changes to the AgriInnovate application review process to increase the timeliness of funding decisions.
• Recommendation 3: The Assistant Deputy Minister Programs Branch, in consultation with the Assistant Deputy Minister of Corporate Management Branch, should revise AgriInnovate's performance measurement approach to include longer term collection of qualitative data to complement the quantitative modelling already planned in the PIP.

Annex A: Evaluation methodology

Literature review

The literature review addressed program relevance by using academic databases and Internet-based search tools to consult peer-reviewed publications in the following areas: innovation, commercialization and venture capital. A thematic review of agricultural innovation literature in relation to current AAFC programming was conducted, as well as an overview of alternate approaches that are taken to support innovation in the agricultural sector. The literature review from the evaluation of the Canadian Agricultural Strategic Priorities Program was used as a resource for this line of evidence.

Document and comparative review

The document review was conducted to support the assessment of program relevance, design, delivery and effectiveness. This review included a broad range of document types, such as the program's foundational and governance documents, department and federal documents outlining Government of Canada priorities, as well as documents with economic statistics relevant to the agricultural sector and the program.

The comparative review included an environmental scan of potential comparator programs domestically and internationally. Analysis of overlap and duplication of similar programming in Canada was conducted. Bilateral CAP agreements with every province and territory were reviewed to inform this line of evidence. The review also identified similar federal agricultural innovation initiatives and approaches used in Australia, Israel, Netherlands, New Zealand, the United States and the United Kingdom.

Database review

A database review was conducted to support the assessment of program design, delivery and effectiveness. The database review included data for all projects submitted between the evaluation period. Most of the analysis for the database review was for all funded AgriInnovate projects, including available indicator data and breakdown of projects by organization size, commodity, amount of AAFC contribution funding, etc.

Project file review

A project file review was conducted to assess program relevance and effectiveness. The review examined project files from all funded projects and a sample of rejected and withdrawn projects. These files included: application forms, business plans, technical reviews, due diligence reports, project recommendation forms, contribution agreements and performance reports.

Key informant interviews

Key informant interviews gathered insights from program stakeholders on the relevance, design, delivery and effectiveness of AgriInnovate. A total of 25 interviews were conducted with AAFC program representatives (5), AAFC non-AgriInnovate program representative and other Federal department representatives (4), funding recipients (10), or funding applicants, both withdrawn and rejected applicants (6). These interviews were conducted between May and July of 2024.

Case studies

4 thematic case studies were used to assess program relevance, design, delivery and effectiveness. Each explored a specific theme: Gender-based Analysis Plus, emerging priorities, small- or medium-sized enterprises and first to industry/Canada. Each case study examined a recipient's experience of the program through the lens of the case study theme. Case studies included an interview and a review of project files and data.

Annex B: AgriInnovate logic model

Activities

Program and recipient activities

• Receive applications
• Review and propose projects/applications for approval or rejection
• Negotiate and prepare contribution agreements
• Process financial claims
• Collect and analyze performance information
• Monitor projects
• Communication with industry
• Construction and/or refurbishing facilities
• Purchasing, installing and commissioning equipment
• Project management
• Training staff
• Marketing
• Prepare project reports

Outputs

Program and recipient outputs

• Applications received
• Approval/rejections letters sent out
• Contribution agreements signed
• Financial claims processed
• AAFC investment
• Documents/records indicating performance information
• Ongoing communication with industry
• Completed applications
• Project plans are developed
• Modernized facilities

Immediate outcome

• Participating firms' capacity to demonstrate, commercialize and adopt products, processes, practices, services and technologies is increased

Intermediate outcome

• Innovative products, processes, practices, services and technologies are commercialized

Ultimate outcome

• The competitiveness and productivity of participating firms is increased.

Annex C: Management response and action plan