Special Committee on Cooperatives Committee on July 10th, 2012

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

Okay. That's good to know. So you have access to that as well.

[Michael Barrett]

Absolutely.

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

When it comes to economic development funds, I guess with Gay Lea we'd be talking at a larger level than just the local CFDC.

Let's talk about FedDev Ontario, or the other ones in other provinces. Does Gay Lea have access to those funds that could—

[Michael Barrett]

We do have access, but I would say our success rate in being able to access those funds is less than 1%. There is difficulty in understanding our model and our membership model, and we have not been very successful in being able to access those funds.

We do have a couple of applications in now, and that may change. But at this point, in the decade that I've been involved in being able to access those funds, I've only been successful once at the provincial and federal levels.

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

With respect to access to capital, this morning we had co-ops and credit unions in front of us, and they seemed to be quite healthy and quite robust. There seems to be a policy of co-ops helping co-ops. It may not be formal, but certainly there's an informal intent that co-ops help co-ops. You're saying that you might have challenges accessing capital through the big banks. Have you had success through the credit unions and the financial co-ops? They seem to be quite solid on the ground. Why wouldn't they support you if that were the case?

[Michael Barrett]

That's a very good question. For example, the last large capital investment we borrowed for was for building a new dryer in Guelph, Ontario. When no one else wanted to build it, the co-op stood forward and filled the need. That's my political announcement.

It was very difficult for the credit union sector to be able to loan us $50 million in one sum. I could get a million dollars here and a couple of million there, but you can't pay a mortgage that way. So unfortunately, or fortunately, if our bank sees it that way, we had to go to the bank to borrow that, with great difficulty and by putting a greater number of my assets up as a lien, which no other organization would have been forced to do. But because they didn't understand the model, I had to put up a lot of my assets as security for that loan. I am glad to say that we paid that loan off in four and a half years, to make sure the banks didn't get as much interest as they deserved.

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

Is it because they don't understand—

[The Chair, Conservative, Blake Richards]

I'm sorry, but your time is long past expired.

We obviously have a very good panel here, because everybody seems to want to take some extra time.

I will now move to Mr. Harris.

[Dan Harris, NDP, Scarborough Southwest, ON]

I'm always up for taking extra time.

I'm actually going to follow a slightly different vein. But I'll follow on what Mr. Lemieux was saying and on your comments, Mr. Barrett.

When you said that your success rate in reaching FedDev and other funds was less than 1%, you mentioned the lack of understanding. You also mentioned, going to the credit unions and banks, a lack of understanding.

Now, that to me would demonstrate that there seems to be a lack of understanding both in the private sector and even in the public sector. Is that the case?

[Michael Barrett]

I think it's one of the greatest opportunities for the cooperative sector to make better hay of the actual success of our model. I came from the multinational petrochemical industry 13 years ago. Today I am a cooperative evangelist, because I have seen the light. I have seen how the model works. Before I joined Gay Lea Foods, I didn't have a clue about what a cooperative was.

[Dan Harris, NDP, Scarborough Southwest, ON]

It does seem to be a big issue. It's one we have already heard from witnesses time and time again today. I would suspect that as we move forward, we'll be hearing it again, which makes it, again, a surprise that CDI and the secretariat have been cut, because these are groups that help to develop co-ops and also help to let our world know about them.

In one of your earlier comments, when you were talking about the potential of supply management in trade deals, you mentioned trying to establish more of a balance in trade deals to ensure that the farmers and everybody are taken care of. To an extent, I think that's what we talk about on this side of the table when we talk about the need for fairer trade and not just freer trade. We certainly need to trade with our partners, but we need to ensure that our own interests are being met. We can only hope that the government, in the negotiations with the European Union and the trans-Pacific partnership, really takes that to heart and makes sure that no stone is left unturned, so that we don't end up with unforeseen consequences that are going to be negative to our markets.

With respect to supply management, you mentioned Denmark, Holland, and New Zealand having strong roles and strong protections and support for co-ops. If something happens, and supply management goes away, do you see the government taking any of those types of steps to secure our market before it's thrown into upheaval?

[Michael Barrett]

My own hope, if we ever move to that route, is that cooperatives have strong representation at the table to help determine what the future of dairy farming will be in Canada. That would be my hope.

Governments that have not taken cooperatives into consideration when designing a future model...that is where the dairy sector certainly has difficulty. It would be my hope that cooperatives would be at the table. You can have retailers and you can have offshore organizations, but you really need to make sure that you have representation from your community sitting there.

[Dan Harris, NDP, Scarborough Southwest, ON]

Gay Lea Foods is obviously much larger than most co-ops. You mentioned some of the statistics, and you seem to be doing very well.

What do your foresee over the next five or ten years to be your biggest challenge to continue to grow and to continue to be sustainable and provide that return for farmers?

[Michael Barrett]

That would be access to capital.

[Dan Harris, NDP, Scarborough Southwest, ON]

It is simply access to capital?

Do you have any suggestions about how to improve that access to capital?

[Michael Barrett]

As was mentioned around the table and by earlier speakers, there is a need to be able to educate industry, banking, etc., on what a cooperative is. The issue we constantly have is the differentiation between members' investment. Banks will see that as debt, and it's not debt; it is equity, because it is generational capital that doesn't leave the cooperative. When they calculate how much money they will loan you, it is always based upon members' investments being debt. So there is a necessity to be able to educate on that differently. We've had members who have been members since 1958. There are grandfathers, fathers, and daughters. It's changing. That needs to change.

[Dan Harris, NDP, Scarborough Southwest, ON]

That's the educational component. Do you see any regulatory or legal changes that might be needed?

[Michael Barrett]

Organizing on a Canadian basis would be a good thing for Gay Lea Foods, but until the regulations change in the sense of relationship to each share class having a vote versus one member, one vote, that's always going to be a restriction for us.

Frank Lowery mentioned that as an issue as well.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you very much.

[The Chair, Conservative, Blake Richards]

Your time has expired on that.

It's time for Mr. Preston, for five minutes.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I thought it was me. Thank you.

Thank you for coming today.

First of all, I now know who to blame for aerosol whipped cream, or who to thank for aerosol whipped cream.

[Voices]

Oh, oh!

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

We could have a whipped cream registry.

I'm reading some material here from the Canadian Co-operative Association. They're saying they have 9,000 co-ops Canada-wide and 18 million members. We discussed earlier that perhaps some of those 18 million members are members in more than one co-op, so it might not be 18 million, but with 34 million people in Canada and 18 million members, I would think awareness shouldn't be a problem. Do you want to comment on that?

[Michael Barrett]

Yes. We can't point the finger at government or everyone. I don't think the cooperative sector is as effective as it needs to be in order to make sure that it has its members create and understand the value as well, but that's an opportunity for us, and as was mentioned, 2012 certainly presents an opportunity for us to be able to do that.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Sure. There is great awareness-building.

That was going to be my next step. I own a couple of franchise restaurants. I'm a member of a franchise organization that had some of the same troubles with approaching banks for capital. Collectively, as the association and as individual businesses, we had to educate the bankers on who we were, what we were, what was equity in our business, and what wasn't. The fact that the sign didn't say “Joe” out front but said somebody else still meant that I owned the business, and we spent some time doing that. We've been very successful. Each of the national banks now has a franchise program for use with most of the major franchise restaurants.

How long will it take for the cooperative sector to get together? Mr. Wrobel was here this morning and seemed to be quite aware of what was happening in the banking sector, although I took him to task on something else, but it doesn't sound as though they're unaware of your sector. It does sound as though they need to know what equity means in your sector and that type of thing. Am I correct there?