Agriculture Committee on April 18th, 2013

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

I'm not as old as Merv.

At any rate, I have a couple of questions. You explained a little bit of this, but what percentages of your product are completely sourced in either Canada or the U.S.? Does anything you sell come from outside of North America?

[Dave McAnerney]

Outside of North America? No.

Again, a significant amount of our business is our apple juice. I think our supply of apples is quite different depending on the crop year. We can see swings of 50% in tonnage available from Canada, but I would say that in a strong crop year in Canada, probably 75% to 80% of our apples are sourced from British Columbia. In a tough year, we could have less than 50% of our apples.

Our fruit snacks are also made with apple inputs from British Columbia. We're manufacturing, in Kelowna, purées from apples as well as juice concentrates, which are inputs into our fruit snacks. One hundred per cent of our fruit snacks, which are now sold throughout North America, are produced in Kelowna.

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

Of the juice industry output that is consumed in North America—let's say even Canada—how much is produced in Canada?

[Dave McAnerney]

I wouldn't have visibility to those numbers. I know that the eastern-based company Lassonde is also an apple processor and would be a large consumer of apples in that part of the world. But beyond that, we are the only two companies I'm aware of that are using locally grown fruit on a large scale.

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

I'm asking, because we see some products that come into Canada, and we don't always know whether they're from North America or maybe from other parts of the world. So you don't have a figure of how much juice that's consumed in Canada is from offshore?

[Dave McAnerney]

I don't have a figure, but it would be significant, because, quite frankly, there are not enough apples and other fruit products grown in Canada to support the demand for product. I assume other manufacturers are relying 100% on imported concentrates.

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

Okay. I have a last question for you, Dave. We want you to be successful. We want Sun-Rype to continue, obviously, in B.C. It's one of those names we grew up with and we're fond of. It's a good product. But what three things would you ask us for today? You mentioned some already—some help financially, possibly, some loans—but if you could have a top-three list to make Sun-Rype successful, what could we do to help you do that? What would three or five or whatever number of things would you name?

[Dave McAnerney]

Again, I think our requests would have to be pragmatic. What we ask for Sun-Rype has to be a good investment for Canada and something that creates jobs. Number one on my list is support for innovation. I think innovative food companies have the ability to grow beyond Canada, to grow on a North American scale and even a global scale. I feel very good about what Sun-Rype has done. I feel very positive about the steps we're taking to grow into the U.S., but at the end of the day there's going to be a relentless pursuit of innovation to meet ongoing and changing consumer needs. So anything the government can do to support innovation, whether that's increasing the amount available through SR and ED credits or by creating employment for students who are focused on innovation, would be number one on the list.

I think beyond that would be to support companies willing to invest in capital expansions. Capital investments drive a significant amount of economic activity and benefit in the regions where we see those investments occurring. I think anything that government can do to support companies willing to invest in Canada is a good investment for Canada.

So those would be numbers one and two on my list. Beyond that, I think we have to make sure there's a level playing field with imported products. I think we hold our Canadian manufacturers to a very high standard—as I think we should—but then I don't believe that's the case for imported products. As a case in point, we go through annual HACCP inspections with CFIA—I think that's a good step—but what are the expectations for someone importing products? As a case in point, there are now globally recognized food safety programs, such as SQF, and to suggest that anyone importing food products into Canada have that certification would seem like a reasonable step to me.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Atamanenko.

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

Thanks to both of you for being here.

I'm going to target my questions to you, Mr. McAnerney. I'm hoping to have some time so my colleague Andrew can ask a few questions. I think he wanted to ask Dan a few questions.

It doesn't make any sense that here we have this overabundance of fruit in our country, and yet we have a struggling industry such as yours. I'd like to thank you and congratulate you for supporting the B.C. apple industry, because that's extremely important. It makes no sense that we've had, as you mentioned, 85 processing plants close in our country or move south. Obviously, this is a spinoff of NAFTA, because we've opened the borders and we have Washington State apples undercutting those of our farmers.

In 2007 our committee made some recommendations and members of all parties supported a recommendation that the federal government give preference to local farmers when making purchases for federal government institutions. The response from the government was that we'd have to be careful because of trade obligations. Assuming we could do this—and other countries have done this—would this help your industry, if there would be a certain amount of juice and other products from your industry that would be supported by federal procurement as part of a national food strategy?

[Dave McAnerney]

I'm not sure how to answer that.

I guess to the first point, do we have an overabundance of fruit? My understanding is that we probably don't have enough. I've talked to retailers who have said they struggle to get enough B.C.-produced apples.

I'm pro free trade. I think it's important that industries are efficient, and they have to be viable. That's why what I'm suggesting that we support capital investments by companies that show growth and innovation. I believe that innovative companies are the ones that will have an ability to expand on a larger scale. Anything that we can do to support local industries is a positive step. As my colleague has suggested, awareness campaigns in the wine industry on the benefits of supporting the local industries would be beneficial.

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

Thank you.

Andrew, go ahead.

[Andrew Cash, NDP, Davenport, ON]

Thank you.

I have a couple of questions about the discrepancies in the price of wine coming into Canada from very far away. You mentioned Australian wine. I think for many casual wine drinkers, especially where I come from in Toronto, we've got all these choices of Australian wine and very few choices of Canadian wine in, for example, the LCBO. The price point becomes prohibitive. If you're going to spend $15, you're likely going to spend it on Australian wine. It breaks my heart, to be quite honest, because I know there are great Canadian wines from Ontario. I see on the chart here that the wine industry in Ontario is significant.

What can the federal government do to start to change that game?

[Dan Paszkowski]

That's a good question. Look at countries such as Argentina, where they're growing thousands and thousands of hectares of grapes and producing at an extremely low price, given the costs of production and labour. They're able to ship their product to Canada. If they're selling in large volumes, the liquor boards can negotiate quite a low price to meet the sales point that they're trying to reach, and, as wine producers, we have to play that game as well.

You mentioned a $15 per bottle price point. I can take a look at the LCBO, and out of our highest premium wines that are sold at the LCBO, only 7% are over $15 per bottle. The liquor boards demand a price point of whatever that is, $13, $14 per bottle. We've got to do what we can do to meet the demand of the only retailer in the province or in the country. We've got to look at our products and do some blending of our wines to be able to meet the requirements of the retailer. That's the environment that we operate in.

[Andrew Cash, NDP, Davenport, ON]

You mentioned a very interesting little point at the end there that Canadian wine is the only wine available on a VIA train and that it should perhaps be the same on Air Canada. VIA is a crown corporation; Air Canada is not.

Are you suggesting that large national companies that are in the beverage and food business of some sort, whether it's an arena—say, for example, the Bell Centre—or other privately held companies should be encouraged in some way to carry Canadian wine? I'm just trying to understand why you picked out Air Canada.

[Dan Paszkowski]

We encourage everybody in Canada to go local and serve Canadian products, Canadian beverages, where and if possible and if affordable. When I mentioned Air Canada, the request that we put to Air Canada was that they serve at least one white and one red wine, and possibly a dessert wine in first class, and possibly provide a Canadian offering in economy class, which I think, as many of you know, travelling every week, that is not always the case. It may be hit and miss when you get a Canadian wine on Air Canada. Porter Airlines offers Canadian wine. WestJet has moved toward Canadian wines. VIA Rail has gone toward Canadian wines. We're not saying they should only offer Canadian wine but that “You're a Canadian airline. Offer some Canadian wine on all your flights and we'll be able to provide it to you at a competitive price”.

But in terms of sports arenas, etc., no.... Of course, we would like them to be serving Canadian wines, as I think the beer industry would like them to be serving Canadian beers. We believe in our product and we're hopeful that more Canadians will be consuming it if it's more readily available across the country.

The airline industry is a fantastic place to start. With three million tourists going to wineries, there are huge opportunities there for our industry.

[The Chair, Conservative, Merv Tweed]

Mr. Hoback, you have the last comments.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair. I just have a few comments.

One of the things I always find amazing here in Canada.... When you travel abroad and look at their grocery stores—one thing I do when I travel down in Central and South America with ParlAmericas, and so on, is I try to get to a local grocery store and get a feel for what things cost—I'm just amazed at the selection they have from different vineyards, of different types of wines in their grocery stores.

I just wonder about this here in Canada. Do you think the liquor board system the provinces have set up is restricting the quantity of Canadian varieties of wines available to Canadian consumers?

[Dan Paszkowski]

We work well with the liquor boards. We think there are opportunities. The challenge that we have is that 10 years ago we produced a small amount of wine, and now we produce thousands of different brands and products, and most jurisdictions haven't caught up in being able to provide us with that shelf space. We understand the fact that they're going to be selling a product that their consumers want, right? Nobody wants to put a bottle of wine on their shelf and let it sit there for six months. It has to move the same way as a can of peas moves in a retail store.

Part of the challenge we have is that we're a relatively young industry and we don't have the promotional horsepower that some of our foreign competitors have. You're looking at Europe having $255 million over a five-year period to promote their wines in third-country markets. You get the nice magazines paid for by foreign governments that the LCBO or the BCLDB is giving out to the consumers in their jurisdictions. That's what we compete against. So if consumers had better knowledge, they'd buy more wine.

[Randy Hoback, Conservative, Prince Albert, SK]

But I must assume, though, that it must be hard for a new vintner to get market access when you have to go through one stop, whereas if you had, let's say, four or five different companies offering different varieties of wine, wouldn't they have more Canadian varieties on their shelf space?

[Dan Paszkowski]

Yes, it is a challenge for a small vintner because the margins are low in the wine industry. If you're looking at selling your product at your own winery and, outside of the taxes, bringing home 90% of the value of the product you produce versus 35% by selling at the liquor board—which all want a certain amount of volume, which you may not be able to provide—it's very challenging in the earlier years. Small lot programs are available at liquor boards. They do try to support that.

[Randy Hoback, Conservative, Prince Albert, SK]

But it has to be restricted because a liquor board store only has so many square feet.

[Dan Paszkowski]

Absolutely.

[Randy Hoback, Conservative, Prince Albert, SK]

But if we had four or five different grocery stores offering different varieties, again, it gives you a lot more options, other than just one liquor board store.

[Dan Paszkowski]

This is why we're looking for direct-to-consumer delivery. Given that brick-and-mortar stores only have so much shelf space, this would provide an opportunity for consumers to take advantage of those hard-to-get wines that aren't sold at a liquor board but may be at some point in the future. This will assist the liquor boards by giving them an example: if you put it on the shelf, they want it to sell. If Canadians know more about the product, it gives us more opportunity to get our wines onto their shelves, and the liquor boards will know they're going to be successful in trying to move it.