Agriculture Committee on May 15th, 2020

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Can you very briefly, because I want to get another question in, tell me why the existing government programs are not adequate? When we asked the government in the previous Parliament, they said that they were working on something and that there were existing provisions. Why is that inadequate, and why do we have to move to a deemed trust?

[Ron Lemaire]

In short, the other programs don't satisfy the bankruptcy issue.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I will happily remind the government that we still have this issue and hopefully we can use this crisis to really illustrate the position that your industry is in and really move ahead with that, so thank you for those comments.

My last question will be to the United Potato Growers of Canada. Mr. MacIsaac, you really illustrated the tremendous hurdles that your industry is facing right now. There are a lot of options, and none of them look really good. I know the government has come forward with that $50 million, and it's welcome, but we may need to see more.

I'm just looking at the Herculean efforts we need to employ to move 760 million pounds of potatoes. How do we go about doing that? Do we need to employ a large-scale freight service? It may not all be able to be used as food, but one thing is for sure: those potatoes can't remain where they are.

[Kevin MacIsaac]

That's very true. The issue is that it has to be done right now, because we're heading into another growing season. Potatoes like this are being removed from storage and used in some other way, and it can cause problems for our new crop coming on. That's our concern, but it's a task that can be done. It's a costly one to do, but that's why we need some funding to do it.

The most important thing is that we need to get that material removed from the marketplace now. New crop will soon be coming on in B.C. and in Ontario in a very short amount of time, so we need to have that gone.

[The Chair, Liberal, Pat Finnigan]

Time is up, thank you.

That's it for this panel. I want to thank the Canadian Horticultural Council, the Canadian Produce Marketing Association and the United Potato Growers of Canada for this very interesting conversation.

If everybody can set their clock and be back in five minutes, we'll start the second panel.

Thank you all.

[The Chair, Liberal, Pat Finnigan]

Welcome back, everyone.

I'd just like to make a few comments for the benefit of the new witnesses.

Before speaking, please wait until I recognize you by name. When you are ready to speak, you can click on the microphone icon to activate it.

Also, interpretation in this video conference will work very much as it does in a regular committee meeting. You have the choice at the bottom of your screen of either floor, English or French. When you intervene, please make sure your language channel is set to the language you intend to speak, and not the floor. This is very important. It will reduce the number of times we need to stop because the interpretation is inaudible for the participants, and it will maximize the time we spend exchanging with each other.

When you're not speaking, please put your microphone on mute.

I would now like to welcome our witnesses for this second hour.

We have from Bio-En Power Inc., Mr. Earl Brubacher, manager.

From Food & Consumer Products of Canada, we have Carla Ventin, senior vice-president, government relations.

From Whyte's Foods Inc., we have Elisabeth Kawaja, president; and Philippe Blondin, vice-president.

Welcome to you all. We will start with up to 10 minutes for opening statements, beginning with Food & Consumer Products of Canada.

Ms. Ventin, go ahead, please.

[Carla Ventin, Senior Vice-President, Government Relations, Food & Consumer Products of Canada]

Thank you, Mr. Chair and members of the committee for the opportunity to present to you today to provide insights into the study on the Canadian response to the COVID-19 pandemic. My name is Carla Ventin, and I am the senior vice-president of government relations for Food & Consumer Products of Canada, based here in Ottawa.

For nearly 60 years, our national industry association has been representing the companies that manufacture and distribute the majority of the food, beverage and consumer goods found on store shelves, in restaurants and in people’s homes.

Our member companies range from small, independently and privately owned companies to large global multinationals, together making about 85% of the products available on grocery and drugstore shelves. FCPC’s membership is truly national, providing value-added jobs to urban and rural Canadians in almost every federal riding of the country.

The food and beverage manufacturing sector is the largest manufacturing employer in Canada. The industry employs more than 300,000 Canadians in high-quality middle-class jobs from coast to coast.

We commend the government on its openness and timeliness in its response to the exceptional circumstances presented by COVID-19. Throughout the pandemic, we have appreciated working collaboratively with the government, and we look forward to playing a central role in Canada’s economic recovery.

We appreciate the government’s public recognition at the highest levels of the importance of the 300,000 workers in the food manufacturing industry across Canada and its formal recognition of grocery, pharmacies, convenience and pet food stores as critical infrastructure. This helps to motivate workers in our industry, and it provides the necessary reassurances to our members to allow them to plan and operate during this unpredictable period.

With our highly integrated North American industry, we are pleased with the government’s commitment to keeping the border open to allow for the free flow of ingredients, products and essential workers. Our members also welcome the government’s efforts to allow for the entry of temporary foreign workers and equipment technicians.

In response to COVID-19, our member companies have pivoted and stepped up to the plate to provide essential products on Canadian grocery and drugstore shelves. However, since March, our members have faced immediate and unprecedented challenges, costs and uncertainties that jeopardize the industry’s long-term viability.

Costs associated with the compliance of new health and safety measures for workers, the purchasing of personal protective equipment, the closure of restaurants, and training of new employees have all risen significantly. As well, the growing uncertainty in securing access to ingredients, packaging, people and PPE has revealed significant and deep-rooted vulnerabilities in the supply chain. These mounting costs and growing uncertainties are not sustainable.

We recently conducted a survey with our members that captures these concerns, costs and impacts. Let's consider a few. Over 50% experience up to a 25% reduction in productivity due to COVID-19 mitigation measures. Seventy-five per cent experienced moderate to significant input cost increases. Twenty-five per cent to 30% anticipate raw material shortages. Thirty-five per cent reported experiencing PPE shortages. Seventy-five per cent are experiencing increased absenteeism in plants, and 40% expect significant training costs as a result.

We are pleased that some of these concerns have been addressed by the government’s $77.5 million announcement on May 5. We believe that this a positive step forward.

We are also pleased that the Prime Minister acknowledged that this represents an initial announcement and that more remains to be done. However, we are really concerned that the $77.5 million won't even cover the costs already incurred by the primary meat processors, leaving nothing else for the rest of the industry that relies on these very ingredients.

We need to work urgently with the government to secure additional and immediate funds to cover mounting pandemic-related costs, which are needed now for our members to keep the doors open and provide food for Canadians.

The challenges that existed before COVID-19 have only gotten worse. Access to labour is the prime example. Before the pandemic, there were approximately 10,000 vacancies in the food and beverage manufacturing sector, and this has only gotten worse. While we appreciate the efforts of the government to introduce relief for affected Canadians, the Canada emergency relief benefit, or CERB, has had an adverse impact on members' ability to fill positions. We wish to partner with the government on a program to help incentivize Canadians to work in our industry.

We'd also like to see additional financial incentives, like a wage top-up or hero's pay for workers in our sector, as well as a retroactive removal of income tax for wage top-ups provided by the private sector. While we appreciate the government's financial commitment of $3 billion on May 7 to provide a wage top-up to essential workers, we also urge the federal government to encourage the provinces to include our industry.

In order to improve our industry's productivity levels, we not only require readily available labour, but we also need to ensure that the workforce we recruit is properly trained. We require support to offset these training costs, which can vary from $2,000 for a production line worker to $5,000 for a highly skilled specialized worker. We therefore suggest an employer training tax credit worth $29 million.

In order to ensure that Canadians continue to have access to essential products on store shelves, we need to work together on a whole-of-government economic recovery plan. With such a significant economic footprint in Canada, it will be critical for our industry to play a central role in rebuilding Canada's economy. The government will need to focus on investments that help build a robust and competitive food and consumer product manufacturing sector, in addition to creating domestic capacity to supply the ongoing increased need for PPE and hand sanitizer.

Part of this will need to involve a serious conversation about the significant government-imposed regulatory costs. We are specifically referring to proposed labelling costs, including front-of-package labelling and potential service fees.

Prior to COVID-19, Health Canada was proposing unprecedented changes to the way our industry makes, packages and sells products. While we support regulations that improve public health and product safety, we are concerned about the host of costly regulatory proposals that do not contribute to these objectives. A comprehensive re-evaluation or rethink of the regulatory agenda in Canada, in collaboration with industry, will be needed.

It's important to note that in the weeks ahead it will be harder than ever to attract and keep investment here in Canada, as other countries are looking to repatriate manufacturing and become more self-reliant. We are already seeing growing pressure for companies in Canada to leave and take their jobs with them. We can't let this happen. Canada needs to step up and build a robust manufacturing sector that provides incentives for companies to stay and create jobs for Canadians.

In summary, our recommendations include the following:

Number one is for emergency funds to help offset COVID-related costs incurred by our industry, the food manufacturers.

Number two is to develop a program to incentivize unemployed Canadians to fill the existing 10,000 vacancies in the food manufacturing industry.

Number three is to work together to upskill and transition unemployed Canadians with the creation of a $29-million employer training tax credit.

Number four is to ensure that international trade, especially with our southern partner, is rules-based and science-based, and allows for the predictable flow of ingredients, products and people.

Number five is to develop a domestic manufacturing strategy in collaboration with industry and provincial governments that builds a robust consumer products and PPE manufacturing sector in Canada.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Ventin.

Now we'll go to Whyte's Foods Incorporated. Elisabeth Kawaja and Mr. Philippe Blondin, between you, you have up to 10 minutes. Go ahead.

[Elisabeth Kawaja, President, Whyte's Foods Inc.]

Thank you, everyone.

First, I would like to thank the members of the committee for inviting Whyte's Foods here today. It's an honour for Philippe Blondin and me to be able to share this information with you and hopefully represent the voice of our industry.

We are the largest pickle and pepper manufacturer in Canada, and are also sadly one of the last. Our company began just outside Montreal in 1892. Since that time, we have not only been manufacturing and selling food to the Canadian market, but we have been employers, buyers and charitable givers to our community.

Since our company was founded, we've purchased the Mrs. Whyte's brand, the Coronation brand from Kraft Foods, and finally the Strub's brand in 2012 out of bankruptcy. Each of these pickle and pepper manufacturers struggled to remain alive in Canada for decades prior to our acquisition of them. In 2011, the Bick's brand left Canada and moved to the United States. We are, in effect, the last one standing in our industry.

Two years ago we decided to open a new facility. We saw many advantages to operating south of the border, including lower minimum wages and often less restrictive business environments; however, we chose to stay in Canada. We have always chosen Canada. We are now, as I said, more or less the only ones left in Canada in our industry, and we are so proud to still be here.

Our relationship to the communities in which we work runs deep. In Saint-Louis, we are the town's largest employer. In Wallaceburg, we're providing jobs in a previously extremely underemployed region of Chatham-Kent. We buy from local farmers and view ourselves as members of the community. We have always taken our role as corporate citizen extremely seriously. We support local charities both financially and with our human resources. Without us, jobs in the cities in which we operate would be lost. Many Quebec and Ontario farmers would be unable to sell their crops, and the communities we call our own would suffer significantly.

The agriculture and agri-food sectors are Canada's largest employers. It's easy to forget this from our urban centres, but we are the engine of our national economy and we are rooted in our national identity. Imagine the Canadian landscape without our farmers and without our rural communities. We're here today to make clear that an omission to help us during this challenging time will make that sad vision a reality: a Canada with far fewer farmers, with significant unemployment, with rural decay, and with an entirely imported food supply.

Starting a business like ours takes significant investment and, for those who are not as committed to Canada and to our farmers as we are, there is little reason to be here. Operating out of Ohio or Michigan is cheaper and provides easy access to our markets. Without the support of our government, losses that result from the pandemic to the agri-food sector will not likely be gained back in years to come. As we at Whyte's are pivoting to be retail packers, Canada will be forced to pivot into being exclusively an importer of agricultural goods. I hope you agree with us that this is not the Canada any of us recognizes or desires.

As a company that views itself as a community member, we prioritize the safety of our team above all else. We have slowed production in order to maintain social distance, bought as much PPE as we could and engaged in training and safety precautions everywhere possible. This is costly and time-consuming. We, like all of you, are aware not only of the closure of meat-packing plants in Canada, but also of many non-meat food manufacturers in the United States that have closed due to COVID but have received less press.

The risks of the virus hitting our plant, and us having to shut our doors during crop, are very real. We are doing all we can to avoid this, and to make our team feel safe coming to work each day. We would have it no other way, but we need help to continue to do this. We have invested $52 million in our facilities in Canada in the last few years, including $23 million in our new facility in Chatham-Kent.

Prime Minister Trudeau recently said that more needs to be done, when he referred to the programs being offered to sustain the agricultural industry in Canada. We are here to echo very clearly that yes, indeed, more needs to be done. We have lost our food-service sector, which has left companies like ours to fight in a crazy game of survival in which we are forced to become almost entirely retail providers.

As anyone who understands food manufacturing knows, this is neither easy nor cheap. We are facing staggering wage increases to combat current unemployment subsidies, and receiving notifications from retailers about their commitment to maintaining current prices. We have inventory that was planned for restaurants but that will go to waste. We are awaiting a rapidly approaching single annual crop in Canada and have neither the manpower nor the resources to equip ourselves to process it in time. This likely means that the shelves of our grocery stores will see shortages as we move into the fall. I would encourage you to look through the middle aisles of your grocery store and note how many items require product from local farmers and food processors like us. Any company like ours that produces both retail and food service, which is most of us, is very likely to be unable to transition quickly enough to fill those shelves and replace the food service business we have lost. Add to this that profits from food service sales are gone and you can begin to imagine our reality: lost margins, massive operational expenses as we transition, increased wage costs and wage shortages, inventory going into the garbage and little room to increase prices.

The natural conclusion to this is empty shelves, the destruction of our agri-food industry, significant damage to growers and eventually the loss of rural life. I don't mean to sound bleak, but hungry Canadians and deserted rural towns are the inevitable final chapter of this story if we are not afforded assistance. This assistance needs to be both generous and swift. Our crop is around the corner, and it doesn't come back for another year.

As a result of our large investment in a new plant in southwestern Ontario, we were proudly able to bring a great deal of business back to Canada that was lost to the United States many years ago. Due to this recent growth, and the metric currently used to assess wage subsidies, we cannot qualify for programs like the 75% wage subsidy. We have lost over 40% of our sales compared with last year, but this truth is hidden by the growth brought from our new facility; in other words, what appears to be sales growth is in fact not growth at all when one considers the expenses incurred in the last few months to accommodate much greater growth. Our costs continue to be in line with this anticipated growth from our new facility. We have lost almost all food service sales and are therefore left at a very significant loss, with no government help.

We ask that the parameters around certain programs be more flexible so they can be fair to everyone. Companies like ours that have invested in growth in Canada and are providing more jobs and supporting more growers in Canada than last year cannot be measured against last year’s pre-expansion sales. We need to be measured against what the reasonable growth expectations were when we built a new facility and invested so heavily in Canada. The current metric effectively penalizes us for providing additional jobs and buying more from our farmers. Companies with no planned growth are rewarded for cutting jobs and losing sales. This was not the intent of the wage subsidy, but it is certainly the result of the current system.

In conclusion, we are asking our government for help to cover the costs of wage increases, the changes we made to our operations to accommodate more retail production, the crop we paid for and cannot use, the lost food service inventory and for keeping our team safe. I am asking for help not because this is all about money, but because this business is full of people that my family have worked with for 20, 30, and even 40 years in some cases. These are people I consider friends and care about deeply. This is not just a numbers game: These are human beings who have worked hard their whole lives, who love their work and the community of growers and customers we have all known for a lifetime.

I received an email recently from a colleague who has worked in our plant in Laval for over 30 years. She asked us not to give up on them, because they need us right now, so today I pass along her message: We need you, the Canadian government, on behalf of the Canadian people, to decide that agri-producers, growers, rural communities and the Canadian food supply chain matter enough to keep us alive, and that we, as a company full of loyal, hard-working, smart people, deserve to survive this pandemic.

Thank you for your time.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Kawaja.

Go ahead, Mr. Brubacher, for up to 10 minutes.

[Earl Brubacher, Manager, Operations, Bio-En Power Inc.]

We're a private company, and we're at the other end of the scale of what everybody's talking about, which is supplying food to the population. We are on the other end, where we receive food waste, organic waste, from agri-food waste, processors, grocery stores, outdated products and curbside green bin waste. We put it through a process to extract all the inorganic material. We use the food slurry to make renewable energy under the renewable energy program. It's the same as windmills, solar systems, etc.

We get all this food waste, and our volume has actually gone up with COVID-19, because more people are eating at home. We get more curbside waste than we did before. We've isolated our shifts to two different shifts to separate the workers, and we've locked the plant so the delivery trucks and our people are never in the same space—

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

On a point of order, Mr. Chair.

I apologize for interrupting the witness.

[The Chair, Liberal, Pat Finnigan]

I'm listening, Mr. Perron.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

The French interpretation is particularly painful today, and we're having trouble following it. And for the past 30 or 60 seconds, there has not been any at all.

[The Chair, Liberal, Pat Finnigan]

Yes, I just received a call from the clerk.

I'm sorry, Mr. Brubacher. We're going to have to cut it short because the translators cannot hear with the quality of the voice at this stage. We really apologize for that, but we're going to have to cut it here, because we do have to provide translation.

Again, thank you for being here. Maybe we'll have a chance some other time to hear your testimony.

[Earl Brubacher]

Okay.

[The Chair, Liberal, Pat Finnigan]

With that, we'll go to our rounds of questions.

Ms. Rood, you are up for six minutes. Go ahead.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair, and also to the witnesses for their presentations today.

Ms. Kawaja and Mr. Blondin, I just want to say, coming from Lambton-Kent-Middlesex, where you've opened your new plant, your new facility, in Wallaceburg in my riding, that I know it's been a great addition to the economy there. Wallaceburg has been hurting for many years. It was great to see that kind of investment. I believe you said that $23 million was invested in that processing plant.

The community was excited about these direct new jobs that would come from this processing plant. Also, it was not just about jobs in the processing plant. The farmers were then able to supply you with the produce—like you said, the cucumbers for pickling, the peppers—and they were so excited. I've heard from some of the farmers in my riding who have said that it's great because they can cut down on their costs and they don't have to freight their products to the United States any longer.

As you said, most of the pickling cucumbers go to the U.S. to be processed, so to be able to ship them in Canada and keep our crops here in Canada has been great. We've seen huge reductions on freight from this. It's great to see it freshly harvested from the field and going straight from the field to the factory, whether it's in Wallaceburg or Quebec. Thank you for that investment in our community.

I just wanted to touch on what you said, which was that you've had a hard time with labour, and that's also been a bit of a factor. I'm wondering, with the new programs that have been announced.... I'm not sure how much you rely on students for your labour, but we as a party proposed a plan to try to get students involved in agriculture or agri-processing, because we obviously want to secure our food supply and keep businesses such as yours here in Canada. Would that program be helpful for you if we could match students with jobs in the industry? What is it looking like as far as getting the labour force out there goes?

Also, for the farmers who you deal with on a yearly basis, obviously with production going to be down.... You've alluded to a lot of health and safety processes that have to happen, which slow down production and mean that you can't produce as much through the facility. Also, you rely heavily on food service distribution products versus retail products. How is that going to affect the farmers and their supply chain, knowing that they planned their crop months ago and that at this point they're getting stuff in the ground right now?

[Elisabeth Kawaja]

I will ask Philippe to address that, because I think he's probably best equipped, if that's okay.

[The Chair, Liberal, Pat Finnigan]

Go ahead.

[Philippe Blondin, Vice-President of Procurement, Whyte's Foods Inc.]

With regard to the supply from growers in Ontario, so far the only thing we've changed is that we've had to buy smaller-sized cucumbers. We've cancelled some contracts with pepper growers, because we're carrying some excess inventory that we cannot afford to replace right now.

In general, the requirement is more for retail. With what we've lost on food service, we've gained some on the retail side. We're still going to buy quite a bit of stock from Ontario.

Labour has been a big issue, and it's still a big issue, not only because of the government program for people who don't have jobs, but also from the fact that day care centres and schools are closed. Some of the employees need to stay home to take care of their families. That's been one of the biggest challenges we've had.

We haven't have any cases of COVID-19 in the Wallaceburg plant, but if we get people who have symptoms of the flu, we usually send them home. We don't want to take any chances that they could be contaminating anybody else. We want to keep the business going.

We've had issues with supply from Mexico. They have closed some regions, where workers cannot go to the fields to harvest, which is reducing our supply right now.

This is pretty much where we stand.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Great, thank you.

I appreciate your motto to pack as much as possible...to support Canadian farmers. As we go through this pandemic, we are appreciative of companies that rely on Canadian product to keep our food security going.

I have another question.

You mentioned that you sell to a lot of restaurants. We are seeing a lot of these small businesses struggling right now to pay their bills.

I'm wondering how are you able to cope and if you have experienced any bad debt from restaurants with their not being able to pay their bills during this pandemic for product that has already been shipped. I know that in this industry a lot of things are paid for later, after consumption.

If you could fill us in on that, it would be great.

[Philippe Blondin]

I can give two bits of information on this.

Number one is that a lot of our customers are still not open, so it's very hard to contact them or to get any payment. We're following that closely. We expect that the bad debts will probably be pretty high. We have a lot of companies in the greater Montreal area and also in Toronto, and we still don't know when they are going to reopen.

Also because of the summer crop, like you said, we try to pack as much as possible.... Honestly, right now we have more orders than we can fill, and even more orders than we have capacity in the summertime to do. We will be running at full capacity.

We have also built up inventory that we need to move before crop. We have a lot of inventory right now that has a shorter shelf life—less than a year. We expect a lot of that is going to go to waste, because we're not going to be able to sell it before we get the food services business back.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Blondin, and thank you, Ms. Rood.

Now we will go to Mr. Kody Blois, for up to six minutes.

Go ahead, Mr. Blois.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Thank you to all of our witnesses, and certainly, Mr. Brubacher, for the attempt....

My first questions are for Ms. Kawaja.