Thank you, Mr. Chair.
Ladies and gentlemen, members of the Standing Committee on Agriculture and Agri-Food, I would like to begin by thanking you for your invitation.
My name is Nicolas Filiatrault, and I am the vice-president of Finance and Administration for the Benny & Co. rotisserie chain. I am pleased to be with you today as part of the committee's study on processing capacity.
Before getting to the heart of the matter, let me introduce our company. Founded in 1960, Benny & Co. is a third-generation family business that has carved out a place for itself in a highly competitive industry by giving priority to a business model that puts local purchasing first. Still 100% owned by members of the Benny family, the chain now employs more than 1,800 people, 36 of whom are family members. Over the past 10 years, the company has grown significantly, from 12 to 64 restaurants, including two in Ontario, and has experienced a 670% increase in sales. Today, Benny & Co. sells more than 10 million roast chicken meals a year.
As part of our operations, we purchase more than four million kilograms of Quebec chicken per year, which represents approximately 50,000 chickens per week. Each year, the company also purchases 500,000 kilograms of all-Canadian secondary processing chicken to supply its rotisseries, as well as 100,000 kilograms of pork. Our rotisserie chain focuses on product quality and proximity, with local sourcing being an integral part of the company's development.
At the beginning of 2021, 85% of the products purchased come from Quebec. When Canadian products such as P.E.I. potatoes and packaging are added to this figure, Canadian sourcing accounts for more than 90% of the chain's total purchases.
As I just mentioned, as major poultry buyers for more than 50 years, we are therefore extremely well placed to observe the pros and cons of supply management in the chicken industry. From the outset, we want to recognize that, for poultry farmers, this model has many advantages, not the least of which is the assurance that they will be able to sell their production at a fair and consistent price.
However, Benny & Co. believes that the principle of supply management shouldn't be extended to processing plants and slaughterhouses through guaranteed supply volume, as this results in additional cost to buyers, primarily those in the food service sector. Indeed, in our opinion, the current management method for allocating slaughterhouse quotas limits competition, innovation and product traceability.
Since the introduction of guaranteed supply volumes in 1994, Benny & Co. has witnessed major changes in the processing sector. When this measure was introduced, it was designed to ensure a volume of supply to slaughterhouses of all sizes, which at first glance seems logical. Unfortunately, since that time, many smaller slaughterhouses have either closed or been bought out by the two largest industry players in Quebec, creating a virtual monopoly of over 95% of the poultry processing market in Quebec.
As in any quasi-monopoly sector, the lack of competitiveness in the poultry processing market negatively affects buyers, including Benny & Co. Indeed, the supply volume system greatly complicates access to slaughter quotas. In this sense, reversing this simple trend is almost impossible without the intervention of legislators and regulatory authorities. Benny & Co. does believe that it is essential to encourage the emergence of medium-sized slaughterhouses. Fostering healthy competition encourages innovation and, more importantly, reduces the risk of breakdowns in the supply chain.
Imagine for a moment that because of the COVID-19 pandemic and outbreaks, the few large slaughterhouses in Quebec are forced to reduce or cease operations. It would have a catastrophic impact on chicken buyers such as Benny & Co. Several times this year, our supply team has had to work extremely hard to ensure that we have enough supply to simply keep our rotisseries running.
The absence of competitiveness in the poultry processing sector has also brought up a major issue for Benny & Co., namely, chicken traceability. Indeed, for our company, being able to determine the origin of the chicken is essential, since it allows us to ensure the quality of our raw material. When the chicken enters the processors premises, we lose track of it. Buyers can't choose their breeders or know where the chicken comes from.
While we know that the chicken we buy comes from Quebec, certain differences in terms of what chickens are fed and how they are raised have a considerable impact on the quality of the product sold to consumers. Contrary to what we might think, it is wrong to believe that all Quebec or Canadian farmers provide exactly the same quality of chicken.
For Benny & Co. and several similar companies, the gradual disappearance of small- and medium-sized slaughterhouses has severed the link with farmers.
Indeed, in the days when small- and medium-sized slaughterhouses were operating on a larger scale, Benny & Co. had the ability to choose the farmers who supplied it. On a large scale, in large slaughterhouses, being able to ensure traceability is an additional operational constraint, so it is obviously not an option for them.
In order to offer exceptional product quality, Benny & Co. carefully selects all the local producers that the company partners with for the purchase of lettuce or cabbage, for example. However, this is impossible for chicken, the most important product on the Benny & Co. menu, due to the refusal of these same large slaughterhouses.
As for secondary processing, we also note a significant consolidation of the market. In this case, there are no barriers to entry, but due to the vertical integration of the production chain, the same two large players find themselves with a very large share of the market. This situation hinders innovation in a sector that is full of opportunities, while there is an increase in demand in the restaurant and retail markets.
In closing, Benny & Co. encourages legislators to put in place measures to promote competitiveness. In our view, we must stop protecting the big players, who don't need additional support or protections. We believe that this is how competitiveness and innovation in the product processing sector will regain importance. It will make the Canadian poultry supply chain more secure and, at the same time, more efficient.
Thank you for your attention. I will be pleased to talk to you in the next few minutes.