Agriculture Committee on May 14th, 2012

[Voices]

Oh, oh!

[The Chair, Conservative, Larry Miller]

Well, there's that, too. I mean, we all know as producers, whether a hen is in a cage or out on a floor.... It's not doing a bit of good. So we have to be careful how far the market drives it.

Rory, you mentioned it. The consumer has to have that good information, and sometimes it's overkill, there's no doubt.

That's my rant of the day, by the way, Brian.

Mr. Lemieux.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thanks, Chair.

I can tell you right now that five minutes will not be enough, but I'll do the best I can.

Maple Leaf Foods, you're involved in a lot of different aspects of the food sector. I'm wondering if, just for the benefit of the committee, you could explain what types of products you buy, from who and in what form. The second part of my question will be, what kinds of products do you sell, in what form, and to what customer base? The consumer would see Maple Leaf and think cold cuts, but you do far more than that, and you're buying what from who in order to sell what to who?

We're looking at the supply chain here, so I'd like to understand how far back you're reaching in the supply chain and who you're buying it from, and how far forward you're reaching in the supply chain and who you're selling to, and what kinds of commodities are in between.

[Rory McAlpine]

The company, as it's structured today—and it was consolidated organizationally a few years ago—focuses on three areas: protein, bakery and agribusiness. Protein is mostly pork and poultry, certainly only those species in terms of primary slaughter of birds and hogs. From that we produce various processed or prepared meat products and meals and so on based on those proteins. We also buy some beef and even some lamb, I think, to put into some products, which then get turned into protein-based consumer foods.

In the bakery segment, it's Canada Bread, which is a major commercial fresh and frozen bakery manufacturer in Canada, the United States, and the U.K. We're producing a wide variety of national brands. Dempster's is the most common national brand for bread, but there are a lot of regional brands found in different provinces.

The agribusiness piece of the company is, first and foremost, the hog production that we have in Manitoba, as well as the Rothsay rendering business, which includes biodiesel production and some feed production, although we sold the major feed business several years ago.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

So if we're looking at the red meat sector, first of all, you own your own source of pork supply.

[Rory McAlpine]

Right.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Do you slaughter that as well?

[Rory McAlpine]

Yes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

And then you simply feed that product into your processing plants.

[Rory McAlpine]

That's right.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

When you're selling, are you just selling packaged foods, or do you sell the slaughtered hog, not processed—

[Rory McAlpine]

Yes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

He's just sold in bulk to someone else.

[Rory McAlpine]

That's right. Both of those scenarios are in our production.

On the hog side, in our major plant in Brandon, Manitoba, we source less than 20% of the total hog supply from our own farms for that plant. The other 80% comes from hog producers across western Canada.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

That's interesting. Why 20%? Is that considered to be a better cost value to Maple Leaf, or is it considered to be break even but you want to keep a hand in raising hogs, or is it more expensive but you have better control over that product? I'm interested in that division and why you wouldn't be zero or 100%.

[Rory McAlpine]

It is a risk management strategy. It's about having a procurement model that certainly guarantees you and gives you insight partly to the pricing and the cost structure that is relevant to producing hogs. It's also having the flexibility to source and take advantage of market circumstances to get access to cheaper hogs at any given time.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

All right.

[Rory McAlpine]

It is fundamentally a procurement risk management strategy.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Okay. That I get.

In terms of who you're selling your product to—and I don't just mean processed packaged product, but let's say, and we'll go back to the pork market, you're moving product through your plants—are you selling, dollar-wise, primarily to a customer, meaning the customer we'd find in Sobeys, Loeb's, etc., or are you selling primarily to the restaurant industry, or is it to processors who will process it further? What kind of ratio...?

[Rory McAlpine]

It's all of those things. Most of what we ship to the United States is for further processing. It's whole muscle, it's carcass, it's product that then will get turned into value-added meats by a U.S. company.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

By someone else.

[Rory McAlpine]

That's right. But otherwise, in the domestic market, and some export, it's food service, retail, institutional, and, under multiple banners and brands, consumer-ready, both fresh and frozen ready-to-eat, meat products.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Are you able to divide the consumer from everything else? Is there a percentage that's sold directly to consumers?

[Rory McAlpine]

I'll get that for you.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

It's just out of interest.