Agriculture Committee on May 14th, 2012

[Rory McAlpine]

My guess would be maybe 80% would be consumer. In terms of hams, bacon, deli, and then other value-added meats, probably, from our total system, it would be something like 80%.

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

Okay. So it's very focused on the consumer and not so much—

[Rory McAlpine]

Yes. The business model is one to try to reduce our exposure to commodity risk. When the dollar went to par and we were so reliant on exports, we found that we had a business model that frankly wasn't sustainable. We're trying to build it into a more vertically integrated, value-adding operation, such that we can protect the stability of the business and the profitability of the business, first domestically and then from there internationally.

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

Can you give me a concrete example of that? Give me a concrete example of where you've gone more vertical and how is this protecting the business, in a sense?

[Rory McAlpine]

In the supply chain, what we've done now...we used to have hog farms that we owned or that had different contractual relationships for hog production in Alberta, Manitoba, and Ontario. It's now just Manitoba. Of those hogs I mentioned, the 20%, we own them 100%. So it's a clear, simple business model.

We have now consolidated all our slaughter into one plant in Brandon, Manitoba, a state-of-the art, double-shifted scale facility. We do still have a smaller plant in Lethbridge, which is shipping product to Japan, and it just fills a unique opportunity in that way, but we've consolidated all of the slaughter.

Then this half a billion I mentioned is all about shifting to centres of excellence in production of bacon, hams, boxed meats, deli, sausage—all of those items now will be in dedicated facilities. We used to produce multiple SKUs across multiple plants, and the business model was just not sustainable in the new commercial reality.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Côté, you have five minutes.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

My thanks to the witnesses for answering our questions.

Mr. Read, you mentioned that the price of certain cuts of beef is sometimes very high and that it might be a problem for consumers.

My riding of Beauport—Limoilou is an urban one, right in Quebec City. When I go grocery shopping with my wife and people recognize me, they generally talk to me about two things: first, the weather and then the price of food. The price of food in general is one of the questions that concerns my constituents a lot. Now, the Canfax data tells us that the retail price of beef is going up while demand is going down.

Can you explain that to me? Then I might perhaps be able to give my constituents a reasonable answer.

[Brian A. Read]

That's a good thing, but they're not going up quickly enough for a meat processor.

We've got ourselves in a global shortage of protein. We've had a major drought in a major part of the United States. It was the Mexican drought that came up through Texas and chewed up their cow herd pretty heavily. Will they go back into the cow business? Who knows. Farming's not a bad business.

We've got the same problem. We had the same problem in northern Alberta, and Quebec benefited from it. The cows came across the country, stayed in Ontario, and some went into Quebec and created cow-calf operations. We thought those cows would come back to northern Alberta, as you can attest to, and they never did. You people got into farming.

The Canadian consumer is used to disposing of product, like not finishing their plates. You can go into restaurants, you can sit at your own kitchen table, and you can even evaluate a head of lettuce in any one of our fridges; if we don't eat it all, it's okay. If you go to Japan or other Asian markets, nothing is thrown away. You'll sit at a table for two or three hours and you'll eat everything that was served to you. It will be to the bare bones, even to the degree where they'll cook the bones to make soup. Maybe we need a culture change in Canada so that we're not quite so wasteful. It might not be quite so expensive. That would be my answer.

We've had the luxury of disposing of food in this country and in the United States. The United States may be even worse. The portions are so big down there that you just can't get by the first quarter. I think they have to learn how to manage their food better. It's not going to get cheaper. We're dealing with record feed costs.

From grain to canola, right across this country, China is lining up to buy our product. You're not going to feed cattle cheaper. I doubt you're going to feed hogs cheaper. That's today's reality, and we are sensitive to that. We're nervous because agriculture is the number one employer in this country; if it's not, it's close to. That's a good thing, but it also means less income for our general population. The automotive industry paid much better than my industry ever did, so there's also less disposable....

It's not too bad if you live in a government community or a university community where people are still making good money, but if you're in a blue-collar community, where you come from, it affects them. I think we just have to be less wasteful. I think there's an opportunity for us to eat just as well but not to throw quite as much away.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you for that explanation.

[Brian A. Read]

Sorry.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Great. But the data in front of me seems to show that beef exports to the United States are going up, whether live or processed. That is not counting the effects of integration and some realignment of slaughter capacity.

Can those factors also contribute to price increases that are adversely affecting Canadian consumers?

[Brian A. Read]

We want to put some numbers together because we believe that exporting product, meat as well as livestock, makes the food more competitive for our Canadian consumers, but that's an assumption. We have to spend some time working on it, because from a taxpayer's standpoint, and checkoff dollars from the cattle industry, millions of dollars a year are contributed to marketing. Whether it be marketing exports, marketing beef around the world, we feel that it allows our infrastructure to be more effective, and it makes us more efficient so we can compete globally, which in return should give us cheaper beef in Canada. If we were to reduce our herd and just feed the domestic marketplace, you'd see a stronger price of beef in this country.

We've now merged the Canada Beef Export Federation and the Beef Information Centre into one marketing organization. That's already been their ask. Hopefully we can get those numbers so our consumers can see the value in export. It's a question.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

[Brian A. Read]

Did that answer your question? I'm sorry. I don't have that number.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

That's fine, thank you.

[The Chair, Conservative, Larry Miller]

Okay. Thank you very much.

Mr. Zimmer, you have five minutes.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Thank you for coming today, gentlemen.

I have a question for both of you. You're both in the same industry that has been affected, I guess. We've talked of late about food safety. Our government has introduced certain aspects that essentially make it more efficient without making it any less safe.

We've seen issues within the industry, absolutely. I want to know, from the perspective of the industry itself, whether you can reassure Canadians that your products are safe, and why.

Let's start with Rory. I know it's a big question.

[Rory McAlpine]

It's a big question. As a company that lived the consequences of a major food safety breakdown, we feel that keenly and understand deeply what it takes to be a leader in food safety.

The key is that we always have to make decisions and invest resources based on science. That's first and foremost. And we have to do it, as Brian mentioned, in a non-competitive, non-threatening way. It involves a close partnership between government and industry. It requires a combination of tools. I mentioned earlier the regulatory and legislative changes that I think will be positive.

At the end of the day, though, that just gives you a more modern tool kit. How you employ it, how you then drive outcomes based on that, is a function of your science, your testing, and the resources, both in government and industry, to do all of those things.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Sure.

I meant to preface my question with a comment.

We're a family of six. So when you talk about Kraft Dinner and ground beef, we like it, actually. It's one of our favourites. Just to let you know, we consume a lot of your products, whether it's luncheon meat or whatever. We're “meatetarians” in my house.

Brian, can you follow up on that? I have another question after, so please be brief.

[Brian A. Read]

It's a good question, Bob.

I guess I'm dating myself a bit. I came into this industry a few years ago, and where we were and where we are today.... We now have science in our building. Can you imagine? We're making meat, and we now apply science. We test. We have lot sizes. We test for pathogens. We have an N-60 test method, which was all done with industry working in cooperation with CFIA. If we do find positives, we either cook it to make it safe for you and your children and me, or we dispose of it. There are no grey zones anymore.

We've implemented HACCP programs. In a plant my size, it costs about $1.2 million a year, just for the labour, to manage these programs. Years ago, you never had it. It was a foreman and a bunch of line workers, and you got it in the box as quickly as you could. Now we monitor temperatures. We monitor all processes, all aspects, from animal welfare through to the box, because we want repeat sales, and we cherish our customer base. I can't emphasize that enough.

This committee toured our plant a couple of years ago. And boy, you're welcome to tour it again and spend time. We have a lab in a meat plant. Science has been adopted. It's amazing. There was probably some resistance from people from my era. But there was intrinsic value, and that's the big part. You can't spend it, but it's an intrinsic value. And with the up and coming people we're trying to get in the meat industry, it's even more instilled in them.

Sorry, I may have gone on too long.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

No, that's good. I'll just follow that up with a safe sort of question. Again, it's an efficiency question, because our government sees harmonization as a key to making the system better—not more expensive, but better and more efficient. Essentially, at the end of the day—I've said the word “better” before, but I'll say it again—it just makes it better.

What is your perspective on provincial-federal harmonization of inspection in terms of interprovincial trade? What is your opinion on that, and again, does it affect food safety?

[Brian A. Read]

I'll start where I left off, just because my tongue's still going.

I think CFIA's managing it, and I have to leave it to the regulators. We support the single inspection system. CFIA is making modifications. From a food safety standpoint, they will not drop their standards. I believe they're managing it and are managing it well. It allows for the interprovincial movement of meat, but they have to be at the level of production or the level of manufacturing.

I'll leave that to the pros. From the information I have to date, I think they're managing it very well.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

How about you, Rory?

[Rory McAlpine]

I agree. We definitely support the idea of a single system. The challenge is for smaller establishments. Some of the changes recently proposed would make it easier for some of the smaller players to get their federal registration. That's fair. At the end of the day, I do think it's hard for a well-developed country like Canada to justify anything other than one level of meat hygiene, one level of plant standard, one level of mandatory HACCP and pathogen testing, and so on.

Right now in many provinces we talk about listeria in a plant making ready-to-eat meat. In provincial establishments listeria testing is not mandatory. Of course, we believe it should be. Admittedly, the plant volumes in those cases are relatively small. To really succeed they're going to have to come up to the federal standard.

The one concern is always that we have to maintain confidence in our system for purposes of export. We're so dependent on export, so the system in Canada has to be squeaky clean. It is sometimes hard to explain why we still have two tiers or two levels of inspection in Canada. Certainly, to export, you have to be part of the federal system. That's the basis for our business.

[The Chair, Conservative, Larry Miller]

Okay, thanks.

Both of you mentioned the HACCP program. I'm familiar with it. I'm just wondering, as we have some new members on the committee, if you wouldn't mind just maybe giving a more in-depth explanation on exactly what the HACCP program is.

Would that be Ruth Ellen or Francine?