Agriculture Committee on Nov. 29th, 2011

[The Chair, Conservative, Larry Miller]

We call our meeting to order. We first have a bit of committee business, a notice of motion by Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

I appreciate the indulgence of the committee, and I thank you, Chair, for your efforts to make this come about. Seemingly, it might even happen from what I understood. So I would move the motion. Hopefully folks have copies. I can read it for the record:

That the Committee invite the Honourable Gerry Ritz, P.C., M.P., Minister for Agriculture and Agri-Food, to appear before the Committee on the Supplementary Estimates (B) 2011–12 prior to December 1, 2011.

I would invite my colleagues to support that. I believe the minister is indeed going to come on December 1 for the second hour, and I appreciate the endeavours of those who made that possible.

[The Chair, Conservative, Larry Miller]

Mr. Lemieux.

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

Thank you very much, Chair. Although we're only discussing the motion today, I did see it when it was circulated by the clerk last week, so I took the initiative to consult with the minister to find an opening in his schedule. He does have an opening on December 1, Thursday, from 4:30 p.m. to 5:30 p.m. So it's very good news that he's available so quickly, and I think my colleagues on the other side will agree that this is a wonderful display of open, transparent, well-intentioned, attentive-detail from the government side and from the parliamentary secretary. Should I go on?

[Some hon. members]

More, more!

[The Chair, Conservative, Larry Miller]

We have witnesses.

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

On the downside, though, Mr. Chair, it would mean limiting the amount of time we have for our witnesses on that day. That's an unfortunate consequence, but having the minister here is good news.

[The Chair, Conservative, Larry Miller]

Just to comment, and it's totally up to you, Mr. Allen, seeing that your motion reads "prior to December 1", I would suggest that either you pull it off the table, if you're comfortable with that, or amend it. That's just a comment.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, for your help and instructions.

In light of the fact that the Minister has agreed to come on December 1, rather than amend it and ask you to do something he's already agreed to do, I think that withdrawing the amendment would be appropriate—albeit I will do that with far fewer adjectives than my honourable colleague the parliamentary secretary used in his response.

[Some hon. members]

Oh, oh!

[Malcolm Allen, NDP, Welland, ON]

But let me be clear for the record that I appreciate the efforts of the parliamentary secretary and the chair—and, indeed, the minister for coming. It's such short notice. Hopefully this will be a lesson for those of us in the steering committee that when the estimates come up again, as they will, all of us will twig to the fact that we really should get that invitation to the minister early enough so that he can plan his schedule—and not hope for an opening.

I thank everybody for their due diligence and their help.

(Motion withdrawn)

[The Chair, Conservative, Larry Miller]

Very good. We'll move on.

Yes, Mr. Storseth.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I would just like to comment for the record—and I'm glad that Mr. Allen has mentioned it ahead of time—that this request is very late notice. I don't want to pooh-pooh all the great cooperation here, but we do have witnesses who have been planning to come for some time. This is going to take away from their time. Hopefully, we can be as expeditious as possible with the minister, because I do think it's important that we hear from Canadians on this study. They were planning on two hours, and they're going to get one.

[The Chair, Conservative, Larry Miller]

The point is noted.

We will now move to our witnesses.

I apologize for the brief delay, but I'd like to welcome and thank all of you for coming here today. We look forward to your testimony.

We are discussing Growing Forward 2, and the competitive part of that. I would appreciate it if you would keep your comments to that topic of competitiveness.

The first witnesses are from the Canadian Vintners Association, Dan Paszkowski and Luke Hartford, for 10 minutes or less, please.

[Dan Paszkowski, President and Chief Executive Officer, Canadian Vintners Association]

Thank you, Mr. Chair. Thank you, members of the committee.

My name is Dan Paszkowski, and I'm the president of the Canadian Vintners Association, better known as the CVA in this presentation. Sitting next to me is Luke Hartford, the vice-president of the CVA.

We are the national association of the Canadian wine industry. We represent the wineries across Canada responsible for more than 90% of annual wine production. Our members are engaged in the entire wine value chain, from grape growing and farm management to harvesting, production, bottling, research, retail sales, and tourism.

Our industry is a growing one. It is changing amid a global revolution in grape growing, wine production, wine marketing, and consumer tastes. Our members have made significant long-term investments that are inherently tied to terroir or the land. Newly planted vineyards need up to four years to provide a harvest, and unlike other manufacturing businesses, once planted, the vineyard cannot simply get up and move to another country. We are very much tied to the land.

Today, we have more than 400 grape-based wineries producing in six provinces across Canada. We support over 1,000 grape growers and roughly 11,500 jobs.

Canada is a fast-growing wine market, with total annual sales of approximately 460 million litres, valued at almost $6 billion. Since 2003, per capita consumption has grown by almost 40% to 16.2 litres, about 20 bottles per person, which makes Canada an extremely attractive market for any country to sell their wine products in.

We have a growing and sophisticated wine consumer base, but imported wines dominate with 68% of total wine sales. This foreign domination is the exact reverse of most other major wine-producing countries, such as Spain, where domestic wines account for 96% of market share, and Italy, where they account for 94%.

The future of the Canadian wine industry depends, in large part, on continuously adapting to changing domestic and global markets. Twenty years ago, in response to foreign competition and the signing of the Canada–U.S. Free Trade Agreement, Canadian winemakers made significant innovations, including a switch to higher quality grapes, the establishment of VQA standards, the development of wine country tourism, and the promotion of icewine.

Increased foreign competition transformed the Canadian wine industry and enhanced the competitiveness of the Canadian grape and wine sector. This did not come without a cost. Today, foreign competition has reduced Canadian wine sales from 49% in 1987, before free trade, to its current level of 32%. It remains an industry goal to once again command 50% of total wine sales by the year 2020.

While innovation will continue to be a critical driver behind our success, our immediate challenge is to improve access to both domestic and international markets, grow our consumer base, and provide our winemakers with the same oenological tools and approval processes to match our international competition.

A key priority of GF2 must be the unrestricted interprovincial movement of goods. Interprovincial barriers to wine trade are alive and strong in Canada. It remains illegal to deliver or ship wine across provincial borders due to federal legislation known as the Importation of Intoxicating Liquors Act, a law passed in 1928.

Canadian consumers increasingly expect and want to purchase wines in the manner of their choosing, whether at liquor boards, winery tasting rooms, wine clubs, or over the Internet. Today’s consumer wants convenience and a greater choice of Canadian wines.

Wine savvy consumers are part of a rapidly growing interactive social network, and social media offers wineries an effective tool for achieving our e-commerce goals. Yet our ability to effectively use these modern marketing tools is largely restricted by the federal law.

It was not the intent 80 years ago for federal law to discourage interprovincial trade, impede Canada’s competitiveness, and restrict market growth. Yet the unfortunate consequence is that an out-of-province Canadian tourist cannot visit a winery and take wine home with him or herself. Furthermore, out-of-province consumers cannot order our wines directly from their homes.

It is vital that the IILA be sufficiently amended, as proposed in Bill C-311, with the goal of establishing a reasonable personal exemption to permit Canadian wine consumers to order and have wine shipped directly to their residence from an out-of-province winery. Consumer interest and exposure to Canadian wines would stimulate new sales and tourism opportunities and create increased opportunities for jobs, economic growth, and additional federal and provincial tax revenues.

The Canadian wine industry has benefited from Agriculture and Agri-Food Canada’s AgriMarketing program, known as AMP, and its predecessors dating back to 2000. AMP activities have supported participation in prestigious international wine competitions, development of promotional materials, and attracted respective influencers, including foreign wine writers and sommeliers, to experience Canada’s wine and wine regions.

AMP has also supported the Canadian wine industry’s engagement in international trade policy discussions. These efforts have helped support harmonization of national and international standards, elimination of barriers to trade, and promoted the sharing of information to ensure science-based decision-making. In addition, AMP has helped improve market share in traditional markets, expand exports into emerging markets, promote Canadian wines in Canadian embassies and consulates around the world, and provided brand exposure to elevate our international sales profile.

In light of fierce global competition, GF2 should continue to support AMP through a well-funded, timely, and business friendly program that is cognizant of the reality of business operations.

Foreign wine producers around the world are financially supported by their national and regional governments, for both export and domestic marketing programs, to support wine sales and economic development. For example, EU wine reform dedicated $1.2 billion to support the marketing of wine over the period 2008 to 2012. Our foreign competitors are using government funding for their marketing efforts in Canada. Annually, wine producing nations hold country-specific wine tastings in major centres across Canada to build brand and country exposure. These successful ventures have resulted in market share growth and the development of relationships with key retailers, namely the liquor boards.

To help the Canadian wine industry cultivate a stronger internal market, we recommend that the federal government officially proclaim the week leading up to Thanksgiving Day as National Wine and Food Week. This would provide the impetus for farm producers, industry associations, communities, retailers, restaurants, and all Canadians to “go local” and take notice of the excellent wine and food that farm businesses across Canada have to offer. This will also open the door for new domestic sales opportunities and generate greater demand for home-grown products, with significant economic spinoffs for local businesses.

Proclamation of a national wine and food week should be supported by federal sponsorship of domestic market development activities. For example, past programs, such as Canada à la carte, were very successful in promoting Canadian wine and food products across the country. Alternatively, adding a domestic component to the AMP would also support the same objective.

Finally, Canada has strengthened its relationship with key international partners and continues to harmonize technical requirements and standards. Additives and processing aids are a critical part of the Canadian wine industry’s future competitiveness, and Growing Forward 2 should seek opportunities to revise the current approval processes to allow for international equivalences based on sound science. This is particularly true for wine additives or processing aids that are not approved for use by Canadian winemakers but are permitted for use in foreign wines sold in Canada under existing oenological practices agreements.

The federal government needs to identify and track where Canada is behind other wine producing countries and dedicate resources toward greater harmonization in support of competitiveness and jobs.

Thank you. I look forward to your questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Now, from the Organic Farming Institute of British Columbia, we have Kevin and Annamarie Klippenstein.

Ten minutes or less, please.

[Kevin Klippenstein, Chair, Organic Farming Institute of British Columbia]

Mr. Chair and honourable members, thank you for inviting me here today.

My name is Kevin Klippenstein. I'm the chair of the Organic Farming Institute of B.C. We're situated in Cawston, B.C., the organic capital of Canada.

The institute has created three courses to date: introduction to organic soil management and nutrient cycles, organic soil management practices and transitioning to organic methods, and organic soil management field training. We're also now working on developing another course on ground crops, to be completed by spring 2012.

My wife, Annamarie, and I also run a successful organic market garden in B.C., which we started from scratch 10 years ago on five acres of land. We now farm 40 acres of mixed fruit and vegetables, selling everything at Vancouver farmers' markets. On November 18, we were recognized as Canada's outstanding young farmer of the year for 2011.

Organic agriculture offers compelling solutions for today's challenges in agriculture. Organic is a low-input system that has much to offer all agriculture in terms of innovative methods to reduce input costs and reliance among producers. Organic relies on the science of crop rotation, nutrient cycling, and integrated pest management. It is shown to increase biodiversity and resilience on and around the farm, to sequester carbon in the soil and reduce energy usage on the farm, and can lead to lower nutrient runoff into our waterways. These are challenges that all agriculture seeks to address.

I believe one priority area for Growing Forward 2 is to encourage young and new farmers into the industry. Organic production tends to offer an attractive financial model with a market growth, high customer demand, and fair income for farm families. Organic farming attracts a high number of new entrants to farming, which in turn requires significant knowledge transfer, infrastructure supports, and extension services. The Organic Farming Institute has begun creating courses because we found an educational need and wanted to fill that gap.

When I started farming 10 years ago, there was not much out there for organic agriculture courses. We need mentorship and apprenticeship programs for young people to get into the industry. We personally have created a successful on-farm mentorship program on our farm, which has been running for the last five years with no government support and has turned out over 20 young farmers already. Growing Forward 2 should address support for such programs. Agriculture Canada also needs to keep supportive programs such as Outstanding Young Farmer to recognize leaders in agriculture and help promote excellence in agriculture.

A second priority area is to improve infrastructure and services to the organic industry. Growing Forward needs to bring back the organic extension agent. Extension services and outreach will [Inaudible--Editor]...to grow with the organic community and its public support. It is essential to new and young farmers who are just finding their way around certification and the regulations that must be followed, and also to the seasoned farmers who are diversifying to help diminish risk.

Growing Forward should put funds towards physical infrastructure at the farm level to help with such things as season extension technologies, including hoop houses, greenhouses, and geothermal and solar technologies; and items such as food processing equipment that enhance the ability of farmers to help store their crops, such as coolers, freezers, and dryers. The reason our farm has succeeded is that we have put up our own coolers, freezers, and dryers on farm winter storage. We use hoop houses to extend the growing season and solar and geothermal on our farm, which enable us to sell our produce year round.

A third priority is to support the establishment of permanent farmers' markets. Farmers' markets enable small family farms to be competitive in the marketplace by providing a place for farmers to sell products locally, reducing the carbon footprint. Selling at farmers' markets allows for more return directly to the farmer, thus helping farmers to farm year round and not depend on outside employment to sustain the farm.

Look at us, for example. Since we started farming 10 years ago, we have sold 99% of everything we grow through farmers' markets. That is what helped us to succeed by creating year round cashflow. Local farm markets are now responsible for over $1 billion in sales across the country. That generates more than $3 billion in economic spinoffs. I know that this year alone, Vancouver's top four markets have done over $4 million in sales already.

Permanent infrastructure is very important for helping new and current farmers to be competitive, but it is absolutely critical in B.C., where a majority of produce grown is for the export market. Very little infrastructure exists for large B.C. producers to sell to the domestic population. Nearly no infrastructure exists outside of a few small distributors and small buyers in insecure outdoor farmers' markets for small growers to sell domestically. Without ready, secure outlets and markets to sell domestically, small farmers have no security to build their farm business, develop products, or clientele, etc.

In B.C., this is especially pronounced, as there are over 20,000 small farmers across the province. This is the way farming developed in B.C., on small lots and where only a small percentage of land was arable. B.C. has more small farmers than any other province in Canada. As you know, it has among the highest cost per acre of any region or province. For small farmers to be competitive, new domestic markets must be cultivated, and new infrastructure is required to allow that to happen.

A fourth priority is to level the playing field in the B.C. organic industry by regulating the word “organic”. This is an uneven playing field and there is consumer confusion in the B.C. organic marketplace due to the implementation of the national regulations. Currently in B.C., nationally certified operations can refer to their product only as “organic”. Any non-organic operation, regardless of their practices, can also refer to their product as “organic”, unless deemed false and misleading by CFIA. Regionally certified operators can and do continue to use the phrase "certified organic" in an effort to distinguish their products from those making unsubstantiated claims. We feel that in Growing Forward 2, there needs to be more marketing put in place to bring awareness to organic practices.

A fifth priority is in regard to GMOs. Genetically modified organisms or genetically engineered crops need to be extinguished. We still do not know all of the implications of these items or what they will do to our food. It is vital to farmers that they can save their own seed. The ability of some large corporations to own seed, or DNA in seeds—which can then move into another farmer's field—makes it really hard for farmers to save their own seed.

The input of GMOs has caused conflict in the organic industry, as the farmers fear cross-contamination. For example, we grow over 200 varieties of tomatoes. As you may or may not know, there is a tomato on the market that has a fish gene in it to make it last longer on the store shelf. We do not want that gene passed into our fields and contaminating our seeds. With over 250 varieties of tomatoes, they are a show-stopper at the markets and a major income source for our farm. If they are crossed with a fish or animal gene, we would lose our organic certification and our reputation in the marketplace. We cannot legalize contamination from unapproved GM foods. Low-level presence is unacceptable and unjustifiable.

On labelling, for competitiveness reasons, all foods should be labelled with ingredients, including GMO and genetically engineered ones. It is the consumer's right to make an educated choice when buying food. Any nutrient label on any packaged or processed food should include any GMO or GE item within the product.

In conclusion, as farmers and educators, we feel that Growing Forward 2 should be putting money towards the following: labelling of GMO and GE products and food; helping farmers save their own seed; educating the consumer on organic at the national and provincial levels; establishing permanent markets and infrastructure to sell domestically; improving infrastructure and services to the organic industry, such as the organic extension agent and physical infrastructure at the farm level; and putting money towards new and young farmers through apprenticeships, mentorship programs, access to land, and educational services.

Thank you. I'm looking forward to answering your questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We now have Dr. David Sparling, a professor at the Richard Ivey School of Business at the University of Western Ontario. Welcome.

[Dr. David Sparling, Professor, Richard Ivey School of Business, University of Western Ontario, As an Individual]

Thank you very much for inviting me.

I do have a presentation, copies of which will be circulated later. I didn't have time to have it translated.

We look at competitiveness from a business school perspective. I also farmed for 20 years, so I also look at it from that perspective. One of the things we do is try to figure out what farming is going to look like in the future and whether farmers are going to be competitive on the global scale, and we then think about the implications of that for Growing Forward. So I'll go through what I think things are going to look like in the future, and then I'll talk about the implications.

To be competitive, Canadian farmers and food companies—and I think we should think about all of that—need to be much more market-focused than they have been in the past. They need to be more international—and that is continuing. They also need to be more connected to their customers, to each other, and to the public. The people sitting beside me are a very good example of how you can build a good business on the basis of that.

We're seeing much more diversified operations in agriculture than we've seen in the past, and not all of that diversification is agriculture related. We're also seeing a shift in the use of resources, because farming is now becoming a multi-million-dollar business, and some farmers are looking at it from the perspective that other businesses do, namely, that they don't have to own all of the resources they use to actually run their business. We're also seeing farmers really looking at becoming much more accountable and much more sustainable. That will continue in the future.

Farmers also have responsibilities to society, and with those come opportunities. On the one hand, we look at feeding nine billion people, and that means there are new markets that are exploding around the world, particularly India and China. There are elements of those that are really attractive. We're finding out a lot more about the relationship between food and health, and that means new opportunities both for farmers and food companies—and that continues to expand.

The whole area of replacing oil is a factor, and not so much in the biofuel space but actually with some really interesting stuff that's is happening in the bioproduct space and with biochemicals, because then you can insert biomass early in the process and you don't have to change the rest of the supply chain.

Then other major factors concern farmers' adaptations as part of the solution to reducing climate change.

If we think about farmers—successful, competitive farmers in the future—we lump them into a couple of categories. Farmers in those categories will have to be very clear and understand how they're competing. Some are playing in global commodity markets: they're in industrial products markets or in energy markets. You're a commodity in that space, and so you need to be cost-focused, very productive, and also responsive to shifts in the global markets. On the other side, you see farmers who are operating in high-value niche markets. In that case, you need to be differentiating your product and you need to be highly innovative. That means continually connecting with consumers, figuring out what they need, and really getting it to them. Both groups are going to have to be sustainable, more sustainable and more accountable than they've been in the past, and health will play a big role, particularly in the niche.

The other thing that is going to make a difference in the future—and I'm not sure everybody gets it in the sector—is that there are really three levels of management that are happening in agriculture. One is traditional farm business management, which I did when I ran my farm and that farmers do right now. We're pretty good at that space, but when it gets up to moving into creating co-operatives, creating networks to connect with organic customers or local food customers, that's a whole different space, because the realities change, and so being able to manage networks and being effective in managing networks...[Inaudible--Editor].

The one piece that's absolutely critical is this whole piece of industry leadership, because the industry leaders are the people who define research strategies, who define trade strategies, and who interact with you as policy-makers to try to influence policy. From the research we see and in my experience, farmers sometimes have a hard time shifting from being farmers to industry leaders. That's actually one of the reasons we are starting a one-week “I the Executive” development program, strictly aimed at directors of agricultural organizations, because we just see that as a huge need.

What will help farmers compete in the future? It will be market research to understand their customers, both at home and abroad, and then focused market development initiatives.

Some of the policies right now do the following. If you go into a new market, we'll support you; but if you're just developing in the same market, we're not going to. That doesn't make any sense, if you're trying to really extract value from a Chinese market, for example.

We need support for innovation in both products and processes, and the process piece is one we don't tend to pick up as much. The work we've done with food processors shows they're doing of an equal amount of both.

I recommend investment in new technology, new products, and risk management tools that address real risks quickly and effectively, and maybe don't waste money on other things.

To me, one of the things that I would like to see is a shift in focus and investment, from putting almost all of our money into BRM programs, to really talking about some of the new opportunities. Whenever we talk as a group, what you hear are all kinds of discussions about new opportunities, new markets, and issues with regulation. When people look ahead, they don't think farm income. They think it's a basis, but they don't think this is where their future is going to be determined.

We've done a fair amount of looking at farm income. Just to give you a sample of the sorts of differences involved between large and small farms, if you take the smallest farms under $100,000—there are 73,000 of them—and compare them to the 2,000 biggest at $2.5 million and over, you will see the shrinking of the smallest and big growth in the largest. One of the things that you see from those 73,000 farmers is that they sold about $2.9 billion in product. The 2,000 biggest ones sold almost $12 billion. For the smaller farmers, it takes almost $18 of assets to produce $1 of revenue; for the larger ones, it's takes $2.31 to produce a $1 of revenue. From a competitiveness perspective, that's a significant imbalance. Also, when we look at off-farm income, the smallest farmers as a percentage of sales are at about 111%. They earn more off-farm than they actually sell on-farm. For the largest farms, it's about 0.5%. So there's a very big difference there.

That means you really need to think differently about policy, because there's no way in you-know-what that one policy will address the competitiveness of both those groups. We do see small farmers who are competitive, if they connect to attractive markets; but, as a class, they basically always lose money. There's this population curve that looks like this, and there's an income curve that looks like this.

Also, if you think ahead in terms of investment and how this is going to change in the future, you will see that the largest farms—the ones over $1 million—are investing almost $300,000. The biggest ones are investing over $500,000. The smallest farms are investing $7,000 to $10,000 a year on average. So you know that difference is going to continue.

We're getting a little concerned about the level of debt that farms are taking on, and the extent to which land is being bid up.

What should we do to be more competitive? I think we need to ask ourselves if we want to put all of our money, or most of our money, into BRM programs. I think we should shift some of it into investing more in innovation, into improving productivity at all levels, and into research and development. By this I mean some of the basic research like crop research and animal research. We're moving out of that space, but I still think that's an important underpinning. We need to invest in new market development and also in food industrial processing.

What works? It's really a matter of focusing on key objectives and key markets. We've seen some good examples of that. I'll talk about them later.

It's important to be regionally connected within a national framework. One of the things we've noticed is that national frameworks are great for setting policy, but that the regional or provincial adaptation councils, and things like that, seem to be a very good model, because you have industry players who know the sector, who know the businesses and can help direct investment.

I'm a researcher. I'm well-funded, but there's a small pool of money, about $1.25 million, that goes to fund five networks across the country. I know that's up to be cut. I wonder why you wouldn't want some of the smartest people in the country doing research on policy questions relating to agriculture. I don't quite see that it makes a lot of sense.

We also need improved access to StatsCanada data. That place is a big problem in terms of its funding....

Some of the challenges include the lack of a national strategy; industry structure, which I mentioned; lagging innovation and productivity. Regulation and interprovincial barriers to trade, I think, are important issues, and they've been raised before. I'm encouraged by the Regulatory Cooperation Council trying to coordinate better with the States. I think that's really good. As for the singular focus on BRM programs, right now is not a bad time to make a switch, since everybody is doing better than they've done for quite a few years. There's a lack of distribution networks to help smaller farmers access organic, local opportunities. We need to build some of those networks. Another challenge is leadership at the industry level. Also of significant risk to the future of competitiveness is the high value of land and the high value of quotas.

Thank you very much.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to questioning.

Mr. Allen, for five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

And thank you, folks, for being with us.

Perhaps I'll start with my friends the vintners, since I'm the Niagara guy around here and I know the wine. I've frequented many of your wineries in that neck of the woods.

You talk about the market-share loss that's been experienced in the last number of years, which I think is a fairly shocking statistic to most Canadians. That a local industry that people see as successful has only 32% of its homegrown market—the smallest market share of any wine industry in the entire world—is quite something.

Could you speak to what we need to be actually doing? The VQA obviously was an important program, but are there some price-point pieces that work into that around how it competes with offshore wines, whose price point is not always the same, and in some cases is less? How do you see those types of programs expanding, or how can we can reinforce them so that we can grow that 32%?

You set a benchmark at 50%. I'd prefer the benchmark to be higher, of course, but I'll let you speak to that.

[Dan Paszkowski]

Thank you very much.

It's 50% by 2020. We'd all like to be higher than 50% going forward, and probably closer to the range that our foreign competition is at, such as Spain, Argentina, Chile, etc. A big problem that we have is the ability to sell our product. Unlike the situation with any other agricultural product, we have limited choices. We can sell it at the farm gate--and hopefully somebody drives down the gravel road. There are a handful of wineries that have licences to have their own retail stores predating the free trade agreement, and there are the liquor boards across Canada.

You might have a couple of hundred, a couple of thousand, people passing through your wine gate in a given year, depending on your location and your size, but there are literally millions of people walking through liquor board retail stores on a daily basis. The unfortunate part is that only 6% of total sales are 100% Canadian wines. There are only two jurisdictions that have greater than 5% of total wine sales in Canada--Ontario and British Columbia. The remaining liquor boards across Canada sell less than 5%. In fact, you will have five jurisdictions in Canada that sell less than 1% of 100% Canadian wines. It is the decision of the retail sector as to what they will sell.

We don't have the opportunity to promote our products across Canada, because consumers cannot bring wine across provincial borders. As much as we attempt to attract tourists—and we do attract tourists, who go home and would like to order some of the fantastic wines they've tried here—or wine connoisseurs who read the wine trade or watch the television programs out there or who look at the medals we're winning and who would like to try those wines, it's illegal for us to ship them to you.

So if you put that package together, it's extremely difficult to build the industry in Canada given the interprovincial trade barriers that are in place.

[Malcolm Allen, NDP, Welland, ON]

You talked about the use of numbers—5%, 6%, and 1%—and you talked about 100%. Those of us who know the area well know that that's a VQA standard that has been developed. Perhaps it would be nice to have on the record what you meant by that. We do sell other wines.

What exactly are those and what are the proportions of what's in that bottle? Some folks are confused by what exactly is in the bottle--Canadian, non-Canadian, and what those ratios are.

[Dan Paszkowski]

Sure. To meet the demand in Canada for wine, we have two parts to our business. Number one is what I've mentioned, the 100% Canadian wine. That would be 100% Nova Scotia wine, a 100% Quebec wine, or a VQA wine in Ontario and British Columbia. The other side of our business, representing about 26% of total sales, is international Canadian blends. That represents about 85% of Canadian wine production in Canada, and it's a combination of both Canadian grapes and wine from foreign countries.

There is no federal regulation of the breakdown in terms of Canadian and foreign content. However, in the Province of Ontario currently, to label your wine a blend of international and Canadian wines, the Ontario government requires you to have 40% Canadian content. That should be about 25% on average after 2015. Other jurisdictions don't have requirements as to the percentage of Canadian content in an international/Canadian wine blend.

[Malcolm Allen, NDP, Welland, ON]

Thank you.