Evidence of meeting #76 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was spirits.

A recording is available from Parliament.

MPs speaking

Also speaking

Jan Westcott  President, Spirits Canada
Shirley-Ann George  President, Alliance of Canadian Wine Consumers
Brian Alger  Chief Executive Officer, The Pop Shoppe
Terry David Mulligan  As an Individual

April 25th, 2013 / 11:55 a.m.

President, Spirits Canada

Jan Westcott

The United States is our largest market. Europe would be number two. Asia is number three. One of the struggles that we have, in addition to the ones I talked about, is that our principal or traditional export markets are all struggling. The U.S. is in tough shape. Europe is in tough shape. Our largest market in Asia is Japan, and after the tsunami and the difficulties that they've had, there are difficult circumstances. We're hanging in and we're working hard, but it's a tough environment out there.

Noon

Conservative

Blake Richards Conservative Wild Rose, AB

What about domestic consumption? What percentage of our domestic consumption is Canadian spirits and what percentage is imported into Canada?

Noon

President, Spirits Canada

Jan Westcott

I think we're around 65% domestic, so to our good fortune, Canadians still prefer Canadian whisky. We drink everything, but we still prefer Canadian whisky. As I said, we make significant amounts of vodka in this country, and we're also very large in the liqueurs business.

Noon

Conservative

Blake Richards Conservative Wild Rose, AB

Export-wise, obviously our government has done a lot of work to try to open up new markets for a variety of Canadian products. We've been quite successful in negotiating free trade agreements and negotiating specific trade arrangements with a variety of countries. Can you tell me the impact that's had on your business and whether you have any example of specific successes that your members have seen as a result of opening up trade negotiations?

Noon

President, Spirits Canada

Jan Westcott

I mentioned Colombia. I think that is going to be a very significant success story for us, both in terms of selling our products in Colombia, and, just as importantly, as a stepping stone into the wider Latin America marketplace.

As for some of the other deals that have been done, we supported Panama. These have just been done, and as you know, in a trade deal, each country gets five to seven years to phase out the discriminatory practices. In most of those cases we're in the first one, two, or three years, and so companies are sitting there saying okay, when do we get the same tax rates as Pisco in Peru, for example? Right now, disco has very low taxes, and imported spirits have very high taxes.

I'll give you one example. In the late eighties Canada and a couple of other countries took Japan to the forerunner of the WTO, to the GATT, because Japan was treating its domestic products more favourably. They were successful. That market opened up for Canada, and in fact the leading product we were selling in Japan was 20-year-old CC, which we were selling for about a hundred bucks a bottle and we were very successful. So, yes, there's—

Noon

Conservative

Blake Richards Conservative Wild Rose, AB

Sorry to cut you off there—

Noon

Conservative

The Chair Conservative Merv Tweed

I have to stop you there too.

Noon

Conservative

Blake Richards Conservative Wild Rose, AB

Can I ask one very brief—

Noon

Conservative

The Chair Conservative Merv Tweed

You can have a very brief question in 20 seconds.

Noon

Conservative

Blake Richards Conservative Wild Rose, AB

What kind of impact do you think some of the agreements will have in the next few years once they are fully realized, and what will that mean for farmers in terms of their grain sales to distillers?

Noon

President, Spirits Canada

Jan Westcott

We are the most successful whisky in the largest, most profitable and, some would say, most discerning beverage alcohol market in the United States. I think we can replicate that success in other markets.

As Canada negotiates these things, they are all exciting opportunities for us, some more than others. We are doing $0.5 billion worth of sales; I think we could easily do $1 billion as we go forward in years to come.

Noon

Conservative

Blake Richards Conservative Wild Rose, AB

Excellent, thank you.

Noon

Conservative

The Chair Conservative Merv Tweed

With that, I will end the meeting. I just want to make one comment.

It seems very interesting that this committee has heard a lot of delegations talk about interprovincial trade barriers, and yet you're talking about accessing the Latin American market through one country, through a free trade deal. It almost sounds as if that is going to be easier than making those transitions across Canada. I regret to have to say that.

Thank you very much for your comments today. I hope many of the things you've said will be reflected in our report at the end.

We are going to take a two-minute recess while we reset the clocks. Be back in your chairs as quickly as possible.

Noon

Conservative

The Chair Conservative Merv Tweed

Welcome back, everyone.

Joining us for the second hour, from The Pop Shoppe, is Mr. Brian Alger, chief executive officer. Welcome. Joining us by video conference from Vancouver, British Columbia—I hope the weather is nice out there— is Terry David Mulligan, as an individual but who is well known to us all. Welcome.

We will ask you to make an opening presentation of roughly seven to ten minutes each, and then we will move to questions from the floor.

Mr. Alger, we'll start with you.

Noon

Brian Alger Chief Executive Officer, The Pop Shoppe

Thank you for allowing me to be here today. My name is Brian Alger. I'm the CEO and brand owner of The Pop Shoppe.

I'd like to give you a little background on Poppe Shoppe. We're a niche-market company. The Poppe Shoppe originally started in 1969 in London, Ontario, with two young entrepreneurs who saw a need in the marketplace for affordably priced soft drinks. The idea was rather simple: a small satellite bottling operation located in a retail setting would allow them to produce on-site and sell directly to consumers.

The concept was an instant success. Pop Shoppe began to look at expansion immediately. Using a franchise system, Pop Shoppe's expansion was rapid. Within a few short years, Pop Shoppe outlets spanned Canada and ranged into parts of the U.S.

In 1977, the company went public. Pop Shoppe enjoyed success well into the eighties. At the height of the company's success, they were selling over a million bottles a day. But during that time, we began to see the introduction of competitively priced private-label soft drinks. Larger soft drink producers took notice and began what is now known as the “cola wars”. Pop Shoppe's model of stand-alone stores just selling soft drinks now became inconvenient for consumers to travel to. This, coupled with a losing price battle, made it impossible for Pop Shoppe to survive. However, what did remain was the truly iconic Canadian brand with a tremendous amount of brand equity.

As a serial entrepreneur, I saw an opportunity in 2005 to resurrect the iconic Canadian brand. After gaining an understanding of the soft drink market, I concluded that the area of the market in which Pop Shoppe could flourish was in the premium category. In 2006 I launched Pop Shoppe. We are a premium-positioned, single-served pop sold in glass bottles. Pop Shoppe can be found in big-box stores, convenient stores, and various types of food service operations all across Canada and parts of the U.S.

During the launch of Pop Shoppe, I encountered a number of challenges, as you would expect during the start-up of any new business. We've been able to overcome most of those challenges. However, in 2010, I began to see a shift in the consumer's attitudes towards processed foods, and I began to look at ways to make Pop Shoppe products healthier. In particular, we saw an ad campaign against the use of high-fructose corn syrup in soft drinks.

At that time I began to look at our current sweetener, high-fructose corn syrup. High-fructose corn syrup is a byproduct of corn, which contains more fructose than real sugar. Real sugar is made of sucrose, which comes from sugar cane or sugar beets. Sucrose contains equal amounts of fructose and glucose. High-fructose corn syrup does not. As a result, it's much sweeter than real sugar and so less is needed to sweeten products.

High-fructose corn syrup is widely used in the production of processed foods such as soft drinks, candies, condiments, and baked goods. High- fructose corn syrup is primarily used because of its low cost. Quite simply, it's more affordable because of the abundance of corn in North America, and it's also easier to blend and to transport, because it's a liquid. Its sweetness helps to stabilize processed foods. Currently, the U.S. has the world's highest consumption rate of high-fructose corn syrup, but Canada is close behind, along with Hungary, Slovakia, Bulgaria, and Belgium.

A closer look at high-fructose corn syrup revealed some alarming studies. One such study found evidence that the body struggles to metabolize large amounts of fructose that does not come from fruit, and there is a risk of Type 2 diabetes because fructose and sucrose are not metabolically equivalent.

Other studies suggest high-fructose corn syrup may play a role in contributing to hypertension and kidney disease. When high-fructose corn syrup is ingested, blood glucose levels spike faster and subsequently drop faster, making the body crave more sweetness. This is why some argue that high-fructose corn syrup contributes more to weight gain and appetite functions than real sugar.

Based on these findings, the decision was made to switch from high-fructose corn syrup to a more natural cane sugar. This became a challenge for a number of reasons. First was the reformulation of each flavour we produced. The conversion rate of high-fructose corn syrup to cane sugar was not equal. An outside agency was brought in to assist in the timely and expensive process. The larger cost, however, was the cane sugar itself. Our sweetener costs rose almost 50%. We know that in some cases consumers are willing to pay more for items that are better for them, but that doesn't seem to be the case when it comes to soft drinks, pop in particular.

In addition to the higher costs, availability can be an issue. Because there's a lack of producers using cane sugar, the supply isn't always available. This can create significant delays in production.

However, even in the face of supply chain issues and higher costs, I'm happy to say that today all Pop Shoppe products are made with cane sugar. I feel good about the change. I also feel that it's the responsibility of manufacturers, in partnership with the government, to make all reasonable attempts to manufacture their products in the healthiest possible manner. As a nation, we would all benefit from this initiative.

I feel that the government can play a significant role in the following ways: by providing incentives to brands, such as ours, that choose to eliminate high-fructose corn syrup from their products, or similar switches; by offering subsidies to manufacturers to help offset the higher cost of organic or healthier raw materials, which would be of tremendous help, especially to smaller companies such as ours; and by giving participating products access to feature-friendly, approved labels, such as "certified organic" icons, or perhaps even partner with national grocery stores to help promote these products, with specified shelf-space.

To conclude, I believe that it should be easier for brands who are trying to offer healthier choices for consumers, and that they should be rewarded for doing so,

Thank you.

12:10 p.m.

Conservative

The Chair Conservative Merv Tweed

Thank you, very much.

Mr. Mulligan, I'll turn it over to you, for the next 10 minutes.

Welcome.

12:10 p.m.

Terry David Mulligan As an Individual

Thank you so much for including me in this discussion.

I doubt I'll need 10 minutes.

My take on this is different from all the other folks you've heard from, except for Shirley-Ann. I'm not a corporate type of person, but I do have information that I think would be of interest to you.

I've been hosting Tasting Room Radio, a weekly one-hour food and wine-driven show that started in the Okanagan. It's heard province-wide in Alberta, throughout the Okanagan, and in Vancouver, Victoria, and Vancouver Island.

Not only do I conduct the interviews with the winemakers, growers, and principals of the wineries, but I also edit the interviews. As a result, I listen to them over and over again, shortening them down to a proper size. The information that comes from listening to their saying what they have to say is information that I want to impart to you today.

Two years ago, as a media observer, I attended a meeting at the very beginning of the Vancouver International Wine Festival. I was stunned when I listened to the conversations in the room. The top winemakers, small and large, along with some of the principals and owners, were all having the same conversation they'd had for years. They asked, "How do we get our wines across Canada, how do we work with the liquor boards, and how do we not live under the dark cloud that is the threat of the liquor boards?" This was simply because none of them could stand up and challenge the liquor boards across the country because their products would mysteriously disappear from the shelves.

I realized that they were in a bind, that they wanted to say something, and that they wanted to change the liquor laws that were written in 1928 during Prohibition. Because I had no affiliation with any winery, I stood up and I said, "I'll go".

Then along came the Banff Food and Wine Festival, and I went to the border. I wrote to the liquor control board offices in Victoria as well as to their headquarters in Edmonton and said, "This is what I'm doing and why". I had lunch with the RCMP—they bought—and then I went to the border. The only people who met me there were the media, God bless them. They got the story out and it started things rolling. Shirley-Ann then picked up on it and we ended down the way, in my small part, with Bill C-311.

To my astonishment, after the bill had been unanimously passed in both houses, Alberta refused to honour it. The Liberal B.C. government said, "We'd love to see Ontario wines in British Columbia", and they opened the doors. Ontario said, "Nah, we don't want to see B.C. wines here on a regular basis; we're not quite there yet". It just caused a lot of anger.

Strangely enough, Alberta is the best customer that we have outside of British Columbia. We buy a lot of our own wines. My show is heard in Alberta and I'm constantly getting feedback from Alberta customers and clients saying, "Why are we always being put in the situation where we don't know if we're breaking the law by bringing wines from the Okanagan back into Alberta". It's ironic because we see Tourism of B.C. saying, "Yeah, come on in, this is wine country, come on in", and then when customers get here, they say, "But, you can't take your wines back".

If you can help in any small way, to work with your provincial counterparts to clear up these hurdles, you will have done a great thing for this country.

We have bottlenecks all over the place; look no further than Alberta and Ontario. One or two things that would help would be to embrace the idea of having free trade within Canada, not just with the United Stated, and, additionally, to open up wine sales to the Internet, which everybody is talking about.

For every small winery out there, the wineries that make 3,000 to 5,000 cases of wine, every dollar is accounted for. They need one wine to pay the bills while the other wines are progressing. Usually it's a Sauvignon Blanc or a Pinot Gris, or whatever, but that's the wine they need help with. If we could recognize that, they could pay their bills while all the reds are growing. It would be a wonderful thing if we could target one wine within the portfolio of a small winery and say we're going to support that wine as hard as we can to help the winery pay the bills while it gets the rest of the bottles ready for market.

On the Canadian embassy, I just want to say that Janet Dorozynski is a wonderful supporter of the wine industry, and I applaud her work with the embassies across the world.

Also, on Bill C-311, let's honour it as best we can. That's what it was written for.

I was going to say that no one since 1928 has been charged under the Importation of Intoxicating Liquors Act, but there was one poor schmuck who tried to come across the U.S.-Canada border many years ago. But the threat is always there. The threat is always over top of the wineries, that “We will charge you; we will make your life very uncomfortable”. The liquor boards are seen as bullies. I wish I could say nicer things about them, but they don't like the spotlight; not now and not two years ago.

I'm far more interested in your questions that you have for us here, and that's why I came today.

Thank you.

12:15 p.m.

Conservative

The Chair Conservative Merv Tweed

Thank you very much.

Go ahead, Mr. Atamanenko.

12:20 p.m.

NDP

Alex Atamanenko NDP British Columbia Southern Interior, BC

I thank both of you for being here.

Mr. Mulligan, you've clearly outlined the scenario. We've heard the same concerns from Ms. George earlier on today. Clearly, it's up to the provinces to put this into perspective.

Even before Dan was here and introduced this bill, I'd meet with the vintners, write a letter, give it to the minister, and he would basically say that there wasn't a lot we could do until the provinces lined up. I think the bill has now brought this to the forefront and it's forcing them to do that. Hopefully we can collaborate and solve this once and for all. I don't really have any questions. I think we all know what has to happen here.

I'm going to share my time with my colleague, but I do have one question for Mr. Alger.

Your analysis of sugar and corn and health was very interesting. I commend you for doing that. My question is this. Why are you using cane sugar and not sugar beet from Alberta?

12:20 p.m.

Chief Executive Officer, The Pop Shoppe

Brian Alger

We do use beet sugar as well. We use both, combined cane and beet sugar as well. We spot-buy, which is the way we buy, but we do buy both.

12:20 p.m.

NDP

Alex Atamanenko NDP British Columbia Southern Interior, BC

The second part is that it's my understanding, for right or for wrong, that the sugar beet is genetically modified in Alberta. Does that make any difference?

12:20 p.m.

Chief Executive Officer, The Pop Shoppe

Brian Alger

No it doesn't.

12:20 p.m.

NDP

Alex Atamanenko NDP British Columbia Southern Interior, BC

That's all the questions I have. I'm going to turn my questions over to my honourable colleague.

12:20 p.m.

NDP

Rathika Sitsabaiesan NDP Scarborough—Rouge River, ON

I'm going to follow in that vein.

From what I recall from your opening remarks, you're seeking assistance in having the certified organic label or whatever. Does the fact that you do purchase GMO products affect your ability to be certified?

12:20 p.m.

Chief Executive Officer, The Pop Shoppe

Brian Alger

The difficulty is that it's either one or the other. You're either certified organic or you're not. We kind of fall in between there. We do use some artificial colours and such; we simply need to do that for some of our products, and so we're kind of caught in the middle. There's really no certification that kind of raises us above somebody who uses high-fructose corn syrup and artificial flavours and colours and such. We're kind of caught in the middle there, but there's no real middle ground. It's either that you are certified as organic or you're just like everybody else out there.

It would be nice if there were some sort of distinction made between the two. We make all the effort we can to have as much natural product as we can in our beverages, but in some cases we're just not able to do that. Having said that, it excludes us from being certified as organic. So it would be nice if there were some sort of moniker in there that would at least give us—