Agriculture Committee on March 26th, 2013

[Blake Richards, Conservative, Wild Rose, AB]

I noted you mentioned the impact on tourism. I had some stats from the Insight 2013 Conference that indicated that the tourism economic impact generated from this sector was about $476 million. I know you mentioned in your remarks about $1.2 million in revenue.

I think that was also including employment revenue related to the tourism industry. But whichever figure you use, certainly there's no doubt there's a big tourism-related impact, and certainly no other agricultural sector would have that kind of impact on tourism, without any question.

I was curious if you could briefly tell me if there are any tourism-related policies that you think could help to grow the wine business in Canada.

[Patrick Gedge]

Maybe I'd start and then pass it on to Murray, who lives tourism every day of his life.

One of the things we've seen from other jurisdictions when they've done economic impact analyses is the importance of tourism. We suspected before this that it would be very important, particularly in Ontario and British Columbia, given how close we are to the border and how important tourism is in general.

When the figures came out, I think even we were surprised by the overall economic impact and how important it is. You see a high correlation between tourism to winery regions and overnight stays, and of course as we all know in tourism, your real key is to get people to stay overnight because that's when the real dollars and revenues increase for the economy.

The key for wineries....If you're the smallest of the smallest winery, you're number one and in a lot of cases your only distribution is at your cellar door, it's right there. So the lifeblood of a small winery is someone coming through that door and buying right from the tourism facility.

That's also why they have to make those investments in terms of the winery being visitor-friendly and tourism-friendly. You have to make that investment because that's where they're going to sell when they start their business. Even for the larger wineries, they've made the investments over time because we're in the hospitality business as well. Wine and food, and regional food and regional wine, all sort of interconnect together as being extremely important.

When we talked in our presentation about having a domestic marketing program, that is really all about trying to own more of our market, and part of that is to increase the focus on tourism in wine regions because if we can do that, then we can start to see the dollars work their way through the entire value chain.

[Murray Marshall]

Patrick is bang on. Within our industry we have a specific committee that's dedicated to the agri-tourism side. As an industry, we view it as one of our most enhanced opportunities to create a first impression with consumers. With people who get to the winery door, we have an opportunity to make them advocates, not only for our wine that we produce ourselves as individual wineries, but also for our regions. Whether that's Ontario, where my businesses reside, or the Okanagan Valley, Quebec, or Nova Scotia as well. Getting the people to the door and getting them to extend their stay in our region builds those champions and advocates for your brand inside the marketplace. Your ability to sustain their call of mind and remind them of the experience they had on-site is important.

We benchmark training at individual wineries in terms of what they're doing and how they're doing it. Education is hugely important for those staff components. Partnering with other tourism activities, whether in Niagara, the Shaw Festival....Prince Edward County has developed a tremendous regional tourism program. We think it is fundamental. It couldn't be more simple for us.

[The Chair, Conservative, Merv Tweed]

You're out of time.

Mr. Atamanenko.

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

Thank you, gentlemen, for sharing your concerns. As you probably know, I represent some of the wine industry in southern Okanagan. I'm sure those folks share the concerns that you folks are sharing, Mr. Gedge and Mr. Marshall.

Just so I'm clear, your alliance would be part of the Canadian Vintners Association. Is that correct?

[Murray Marshall]

Yes, absolutely.

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

My first question is on this idea of the excise tax exemption. Often when I've met with the Canadian Vintners Association and other folks from my area this was certainly a recommendation. My policy always is to follow up, and make the minister aware of that as just another way of doing that, which I'm sure other folks here have done.

Have you seen any movement on this? That's the first question.

Second, should this be one of our recommendations to the minister as a result of the study?

[Murray Marshall]

We're going to tag team this answer.

We continue to be able to make the economic case and bring forward to government what is a very direct line in terms of opportunity in the marketplace and the ability to not only extend our existing market share but to drive our market share as a result of an appropriate.... It's not to say what exists today isn't appropriate but it's the only word I can use. Today the total content of a blended wine, which by law has a minimum of 30% Canadian content, receives a foreign excise tax. In certain circumstances that blend is much more than 30% Canadian, but once 1% is imported content the whole bottle attracts the foreign excise tax.

Our goal—through education, and through information, and through the ability for us to demonstrate to government what the payback would be—is to apply the 100% taxation issue on the Canadian content.

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

I'm going to interject here because I understand that, and I appreciate that.

You haven't seen any definite movement in this direction yet, so can we help you on that by making this a recommendation?

[Patrick Gedge]

You certainly can. You'll notice we didn't come with a shopping list of 20 things, but have focused on a few specifics.

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

I understand. Thank you.

The next topic is the Consumer Packaging and Labelling Act, and you folks have raised concerns. I'm wondering, Mr. Goetz, if this is a concern to your industry.

[Jim Goetz]

We look forward to continuing to work with members of Parliament on food labelling. It's always quite a contentious issue—

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

It's not labelling. It's the size of the containers. If we deregulate the size of containers, for example, we've met with processors from Quebec, ones that make ketchup and all the other products, and they're really concerned this could be detrimental to the industry. I'm wondering if you have the same concerns.

[Jim Goetz]

Our industry has been advocating for many years to do away with the requirements for importing on the container size simply because we see them as being onerous. Those products eventually do make it to market anyway through other channels and again for consumers to be offered choice, determining what size of container a product comes in we see as little bit outdated, quite frankly.

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

If I understand correctly, then, your position would be contrary to the position of the alliance and also some of the processors we heard from in other processing industries.

Mr. Gedge and Mr. Marshall, you've had discussions with the minister. Have you received any commitment to maintain the regulations as they are? This is a huge issue, and you've given us specific examples. If you haven't received that, would you then also recommend that we make this one of our recommendations in our report?

[Patrick Gedge]

We've certainly had discussions with the minister. I think the minister understands what we're talking about, and understands the potential implications. I can't say we've gotten any indication that the overall philosophy or course of action will change, but I know they're gathering feedback from processors and others right across the country.

We would certainly want that to be part of the recommendations coming from this committee, again, respecting that it is a vulnerability we have as an industry. We now have the economics of the industry, so we can actually do attribution of how important this is from a quantifiable standpoint. It is very, very significant.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Wilks.

[David Wilks, Conservative, Kootenay—Columbia, BC]

Thanks, Mr. Chair.

Thank you to the witnesses for being here today.

Mr. Goetz, from the perspective of government regulation vis-à-vis your industry, are we starting to find the balance with regard to the additives that are put into the drinks? Are we getting there? Are we as close as we're going to get? What types of improvements do you think you could see coming?

[Jim Goetz]

We are getting there, particularly when it comes to, on our end, offering consumers a wide variety of choice. With the approval of stevia, and working closely on a couple of other ingredients that are coming down the pipeline, our industry is being given the tools now to offer Canadians the array of beverages that are offered to consumers in Europe and the United States.

We are getting there. Again, some of the tools that have been put in place for faster approval of ingredients are extremely helpful. We thank the department for putting those processes in place. It's a matter now of ensuring that we follow them. When other ingredients come to the forefront, or are discovered, or are put before Health Canada for review, those tools for fast-tracking them, once the safety of the ingredient has been established by other large jurisdictions, recognized jurisdictions, are tools that will help Canada keep up and be competitive, as well as offer consumers more choice.

[David Wilks, Conservative, Kootenay—Columbia, BC]

Thank you very much.

Mr. Gedge and Mr. Marshall, I have two questions for you.

First, you mentioned that we live in this microclimate with regard to the grape industry, which is true, whether it be the Okanagan Valley, or Ontario in the basin of the Niagara, or, to some degree, in my riding of Kootenay—Columbia. Creston has found a way of finding a grape that works in their area.

Having said that, where do we find the balance between the grape industry and the other fruit industries that are trying to live in the same microclimate, whether it be apple, pear, peach, or any of that? Where do you see that balance?

For my second question, I would revert back to my three years in the drugs section with the RCMP. There seems to be a certain element of our society that's figured out that hydroponics is not a bad thing.

Has the grape industry ever looked at hydroponics from the perspective of being able to grow not only around but outside that microclimate?

[Patrick Gedge]

Let me just comment on the first part.

One of the things we've seen in Niagara, to use that as one example—and Murray mentioned this earlier in terms of tobacco in some parts of the province but also in terms of tender fruit—is a conversion of some of the land from tender fruit to grape growing. At the end of the day, it's really about the economics and the sustainability of an industry. Here we have an industry where we know there's enormous potential mathematically, both in terms of market share as well as consumer demand over time. It becomes a more and more attractive industry for farmers. Again, it's not about farming successfully for one year, three years, five years. It's about farming for 10, 20, 30, 40 years.

I think that conversion is taking place. We just have to make sure that, at the end of the day, we have a sustainable economic industry that is actually selling the wine in the marketplace—because it doesn't do any good to grow the grapes and then not be able to sell it.

[Murray Marshall]

I'll quickly add to that. Fifteen years ago, in the Niagara region there were three fruit-processing facilities. Today there's zero. They've all moved to the United States. The ability to get to the market, for whatever reason, especially in the last few years, to be competitively priced, has been challenging. There's a conversion of those crops—apricot, peach, pear, plum specifically. Today they are moving into vineyard property. Frankly, the economic value on the income per acre, and the availability to sell it into a market that has demand, is driving some of that conversion.

As to research, I sit on the board of the Winery and Grower Alliance of Ontario where we fund, using federal government money, different terms of research. Greenhouse propagation of root stock is very active right now. We're looking at expanding the grape varieties planted in the vineyard, and we're doing all of that work in the greenhouse environment, bench studies. We go out and use test plantings. We're using the University of British Columbia, the University of Guelph, and Brock University, all of which have agricultural programs. Brock has the Cool Climate Oenology and Viticulture Institute. The Niagara College Teaching Winery, a community college based in Niagara, has a vinification program as well as a test vineyard and winery inside the educational facility.

So long term, a continued pioneering spirit, driven by innovation and education, exists in our industry. It's never been stronger. There is a closer tie through all levels of our industry—from the grower, the processor, and now with our government stakeholders. All are working cooperatively.

[The Chair, Conservative, Merv Tweed]

Thank you.

Ms. Raynault, you have the floor.

[Francine Raynault, NDP, Joliette, QC]

Thank you, Mr. Chair.

Thank you to our witnesses for being here today.

Mr. Goetz, in your brief, you said that you didn't wait for government guidelines to make changes and announce the potential calorie content in soft drinks and juices. However, we also know that moderate-income households will often buy a cheaper product because they can't afford a better quality one such as fruit juice. People will buy a fruit drink with a higher sugar content.

Do you think that imposing a tax on certain products will change consumers' habits?

[Jim Goetz]

First, to address the issue of removing certain beverages from schools, we did move on that before. Most of the provinces now have food and beverage guidelines as far as what can or cannot be sold in a school. Our industry, years before even the first province came forward with across-the-board nutrition standards for food and beverages, removed full-calorie beverages, pop, from schools. That was done nationally prior to all of the provinces moving on that.

Regarding taxation, first of all, our products are already taxed. Our products are charged PST, GST, provincial taxes in each of the provinces by jurisdiction.

As far as changing consumer behaviour is concerned, we have a real-world example of where taxes like this were pursued, and that's Denmark. Denmark, in 2011, introduced a fat tax on certain products, which had additional taxation added to certain products that were deemed too high in fat content. They also had plans to introduce what they called a sugar tax, which would apply to both food and beverages, based on their sugar content.

Within two years, Denmark now has reversed that tax because of a number of reasons. First of all, it was proven that it did not change consumer behaviour at all when it came to consumption, except for the fact that consumer behaviour changed as far as driving across the border to Germany to buy products that did not have a tax on them. It also cost Denmark, a small country, 2,400 manufacturing jobs, which left the country.

There have been a couple of other small examples where taxes had been directed toward one product. For example, the State of West Virginia has had what they call a soda tax in place for many years. West Virginia ranks in the top 5% of states with the highest rates of obesity in the United States.

So as far as changing consumer behaviour is concerned, it can change consumer behaviour but not for the intended result, in our opinion.