Agriculture Committee on April 23rd, 2009

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

Thank you very much. Your presence here is very timely.

You mentioned credit cards and Interac. Actually, at the instigation of two managers of independent grocers in my riding and others, I wrote a letter to both the Minister of Industry and the Minister of Finance to explain the situation. I would encourage all of my colleagues to do the same, because I think everybody's on board. I think we just have to make sure we get that, so we don't allow Interac to crank up those rates.

You may or may not know, but I'm in the process of doing a tour across the country on food security and food sovereignty. I know that Wayne's party, the Liberal Party, has undertaken consultations. We've had a number of recommendations in our committee in the past where everybody's been on board about food security and all of that. I think it's safe to say that everybody is on board with the idea of supporting local agriculture and local small business, but we just have to find ways of doing that.

One of the threads from my hearings is that there are obstacles. One of them, of course, is the trade agreements, where we've seen statistics on the reduced numbers of producers because of the free flow of produce coming in from the States and Mexico. The other one, of course, is the distribution system, which you touched upon. Another example I was told in Sudbury is that a potato grower has to ship her potatoes to Toronto so they can come back to stores in Sudbury. We have the same phenomenon in British Columbia, and the recommendation is that governments will somehow have to do something about that.

You mentioned the Competition Bureau within the existing system—and we can fix that. But what other steps could we take, either the federal or provincial governments, to ensure that local producers have a market for their produce, that you folks are able to buy produce—and not only the independent grocers, but the big chains also? You've given some other suggestions in regard to the terminals. What specifically could we do today at this level to keep you folks in business with as much local produce from, and support for, local farmers as possible?

[John Scott]

I'll let Gary handle that one.

[Gary Sands]

I think one thing—and we talked about this the previous time we were before the committee—is that there's certainly a need to have a mutual recognition of the provincial and federal meat inspection systems. In our view, this is being used—and the chairman will be aware of this in his own riding—by corporate retailers as an excuse to prevent local franchisees from buying local meat. It's not a food safety issue. That's one thing we believe could happen immediately.

I'm not exactly sure what the solution would be, but I also think there is a challenge that should put to the on-farm community, with all due respect to them. Again, I think the on-farm community has been slow to recognize the potential that exists with the independents out there. And that's why we're happy to be here today, because we think that raising that potential with this committee is very helpful, because I'm sure those groups will be reading this report.

But there is a tremendous market opportunity with the independents. What we're trying to figure out is how can we put those groups together, our independents and the retailers together.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

But then you have the fidelity clause. If you have a fidelity clause, and then we have volume.... Often farmers are told, well, you can't produce this volume, so we can't buy from you. How do you react to that?

[John Scott]

With regard to Mr. Sands' point on volume, there are two issues with volume. There is volume, and there is quality, and you have to be honest. We'd love to say that the quality in fruits and vegetables produced in Canada is always great, but some of it is not. The farmers have to take some responsibility for that. I'm on the Vineland horticultural board, and I'm very pleased to be part of it. We're trying to investigate ways to ensure that you have a higher-level, consistent crop across the country.

Gary's right: there are huge markets, particularly in that independent sector, that are not being exploited by large sectors of our agriculture community. Frankly, we don't beat you up on price either, which is pretty interesting.

The second thing is fidelity agreements. Sir, you're going to have to start using your bully pulpit. There are going to have to be discussions with the majors who franchise in this country. You will have to sit down and ask those folks to loosen up on their fidelity agreements as they affect fresh fruits and vegetables, or item X or item Y.

You understand why there are fidelity agreements. It is because they need certain volumes through those warehouses. We have a very efficient, very good retail food system in Canada, and I'm not shooting at that, but if you want to sell more fruits and vegetables at the local level, you need to somehow find some way to deal with those fidelity agreements. The only way you can deal with them is for governments to negotiate with them. That's my guess, anyway.

[Gary Sands]

I'll very quickly point out to you that when New Brunswick passed franchise legislation a couple of years ago, one of the reasons they brought forward the legislation was their frustration with precisely this issue.

When Sobeys bought the Oshawa Group, in the Maritimes some companies that were local suppliers went out of business within months. Two of those companies had been in business for almost a hundred years, but because of the fidelity agreements, once the sales took place, that was it. Those retailers were no longer in a position to be allowed to buy. That was a very....

We're trying to connect the dots for people. As John said, on a lot of these fidelity agreements we need this committee and others to be getting on the bully pulpit to be pounding on this stuff, because it's not good.

[John Scott]

Nobody knows more than the chair about the cheese company in his own riding that had for years sold cheese. It was not unlike what you're talking about. For years he'd gone store to store and sold cheese. All of a sudden one day, as a result of the last amalgamation, somebody said, “Well, you can't sell cheese any more. Not only that, you're going to have to pay us a percentage of what you've sold over the last five years in order to even be listed.”

Those kinds of things have happened. That was a while ago. It's not a recent example, but you remember the impact on that cheese company. It was quite dramatic. Those kinds of things....

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Scott. That's a good point.

We'll go to Mr. Shipley for seven minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

Thank you very much for being interesting. I'm learning a bit from your being here today.

You talked about the food terminal. There's one that we're all very familiar with, the one in Toronto. Can you help everybody reading and watching this to understand a little bit about that? You said that they should have terminals in different parts of the country, which on the surface seems like something that would be good for everyone. How does that happen?

[John Scott]

First of all, the Ontario terminal is an Ontario government project. It was built in the late 1950s. It was built by the Ontario government. It is managed by a board of directors appointed by that government. You can either rent space in hard walls and display your product there, or you can be part of a huge farmers market in the main parking lot. It ebbs and flows, but it goes all winter long. It's a pretty interesting thing to do.

The way it works is that in the middle of the night, product is brought in by various brokers or by primary producers themselves. The buying starts at 3 a.m. It's an interesting thing, and if anybody wants to come down, I'd be happy to take you. They buy their allotted product, they fill their tractor-trailers up, and they're in their stores later on that day.

This has gone so far, sir, that at the current time we have stores in Newfoundland buying out of that terminal. They have a buyer on contract who buys the product, and it goes to Newfoundland three days a week. We have them in Thunder Bay. That's the impact of that terminal.

Where else would you have the volume? To my mind, in Canada there would be only two other places: Montreal and Vancouver.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay. It's set up by the Province of Ontario, has a provincial identity, and a board of directors appointed by the province. You're at this committee, though, saying we should have more. I'm trying to get some direction on federal responsibility. If they were to go into Montreal, would it be another provincial one, or if they were to be in Vancouver, would it be another B.C one?

[John Scott]

I can't answer that.

[Gary Sands]

I think it would be great. We've seen the provinces and the federal government, under the APF, work together in a number of areas. For our sector, it would be....

Pardon me?

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

They have in a few areas.

[Gary Sands]

Yes. We think it would be wonderful if the federal government and the province were to partner on developing food terminals in Montreal and Vancouver, which would be great for the whole chain. It would be good for everyone and would stop the silliness we have now whereby we have Nova Scotia retailers coming to Toronto to buy blueberries.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I'm not disagreeing with the principle of having more. But using the APF that was brought in for CAIS is not the way to be going, because now we're locked into it; we can't get out of it. There's a formula that just doesn't work and locks in the federal government to it.

I was trying to understand how that terminal would be set up and confirm how the major terminal that's in Toronto would go. Actually, I've gone by it, but I've not been into it. One of our local grocers leaves at about two o'clock in the morning to drive down, buy the stuff, and bring it back.

We always talk about the Wal-Mart phenomenon. We also talk about food safety. There's no connection between those, in terms of a detriment of food safety with them, but if you're talking about consumers wanting to “buy local”—consumers who want to have Canadian products—I would suggest that likely Wal-Mart is not the place to go to buy them.

My question is, what are you finding concerning independent grocers? We hear that consumers want to buy local, to buy Canadian. What are you finding? Is that a true statement?

[John Scott]

Yes.

There are different levels, of course. If there weren't room for the majors—the Superstores, the Wal-Marts, and the Costcos—they wouldn't be there. There's a group of consumers who are going to buy price all day long.

But you bring up an interesting point. I actually do a seminar on this. You don't want to hear it; however, consumers are coming up currently in four key areas. I think this is really important, and we're just seeing it happen. One is consumers after value, whatever that means—it's not necessarily price. For example, we have a company that took most of the salt out of their soup. Despite the fact that the company's soups are priced a little higher than some of the others, those soups are selling very well.

That's the second point. Consumers are after health and wellness. They read labels. They appreciate the “front of pack” symbols that give nutritional facts. They read them, they know them, they ask great questions, despite the recession.

The number three thing is that consumers are changing their habits in terms of discretionary buying. A year ago, 50% of consumers bought their lunch at the grocery store. Today, it's 80% who buy their lunch at the grocery store. Now there is a pre-planned purchase. I know that's hurt a lot of restaurants; that's the effect of a recession.

But here comes the nub of your question, sir. The consumer has not walked away from local purchasing or sustainability; in fact, the sales of independent grocers across Canada who specialize in it—and I can go by name across the country—are up since the recession started. As I said earlier in my opening remarks, a lot of what the consumer is doing is cutting back on quantity and sticking with value and “better for you” products.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I'll follow up the interesting exchange with Mr. Bellavance.

We had in one of my towns an independent and one of the majors, in the area where a product is continually grown. The main grocery store said the same thing you're saying: “No, it has to come from....” In this town—it's not a large city or anything—this store said, “Either you're going to buy it or the people in this area won't buy from you.”

We went to the independent. They will take our product, and that actually happened. So when you go to the major chain, which says no, they can't.... Actually, if you have the support in the town in that area, and they did—this is not a 100,000-person town, but it's a few-thousand-person town.... They said, “This is how it's going to be: either you're going to be a part of this town or you're not.” So they actually changed it. I don't know how this works in the big picture, but sometimes pressure by the local consumer...because it's still the consumer.

I don't know what we can do to help.

You talk about the fidelity agreements. Are these independent agreements that are made? If it was a fidelity agreement.... But you said “agreements”. Is each one different?

[John Scott]

Not necessarily, but I was talking about fidelity agreements related only to franchise grocers.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay.

[John Scott]

Franchises are run by Loblaw Companies, the Sobey company, Metro.... There are three or four of them in Canada, and those are the ones that have fidelity agreements. But if you're independent—

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Are they all the same, though, with—?

[John Scott]

No, they're different. They offer different flexibility in different markets.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

So there's a competitive aspect to it.

[John Scott]

Absolutely.