Agriculture Committee on Feb. 16th, 2021

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone.

I call this meeting to order. Welcome to meeting number 17 of the House of Commons Standing Committee on Agriculture and Agri-Food.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on October 24, 2020, the committee is resuming its study on processing capacity.

Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021; therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

I would like to take this opportunity to remind all participants in this meeting that screenshots and taking photos of your screen are not permitted.

To ensure that the meeting runs smoothly, I'd like to share certain rules with you.

Members and witnesses can speak in the official language of their choice. Interpretation services are available for this meeting. At the bottom of your screen, you have the choice of floor, English or French.

Before taking the floor, wait until I recognize your name. If you're participating by video conference, click on the microphone to turn off mute mode. The microphones of the participants in the room will, as usual, be monitored by the proceedings and verification officer.

I want to remind you that all remarks from members and witnesses must be addressed to the chair.

When you aren't speaking, please mute your microphone.

With regard to the speaking list, the committee clerk and I will do our best to maintain the order of speaking for all members, whether they're participating in the meeting in person or remotely.

Before welcoming our witnesses, I have some information to share with you.

The second witness panel for today has been moved to the February 25 meeting from 3:30 to 4:30. It will be followed by a committee business meeting from 4:30 to 5:30. This will give us a chance to discuss drafting instructions for the report on processing capacity. We will also have the upcoming study on the environmental impact of agriculture. Recommendations for the processing capacity report are due by February 26 at 5 p.m. eastern and must be sent to the clerk.

For today's meeting, apparently we can do the full hour, if it is the wish of the committee to do the full hour, or we can go to our regular time, which would have been 6:30. If everybody is okay with doing the full hour, we can do that today.

Maybe I should ask those who cannot stay for the full hour to raise their hands. I think, Madam Clerk, we have unanimous support to stay for the full hour.

With that, I will welcome the witnesses we have here today.

From the Canadian Federation of Independent Grocers, we have Mr. Gary Sands, senior vice-president. Welcome, Mr. Sands, to our committee.

From Olymel, we have back again—I think he has the right equipment, and we're ready to hear him once more—Mr. Richard Davies, senior vice-president, sales and marketing.

You have up to seven and a half minutes each for your opening statements.

We'll start with Mr. Sands for seven and a half minutes.

Go ahead, Mr. Sands.

[Gary Sands, Senior Vice-President, Canadian Federation of Independent Grocers]

Thank you, Chair.

As you've said, my name is Gary Sands. I'm the senior vice-president of the Canadian Federation of Independent Grocers. On behalf of the CFIG, I want to thank the committee for the invitation for us to participate in your hearings this afternoon.

I'll give you just a quick synopsis of our association. We represent independent grocers across the country. Independent grocers account for about $13 billion in sales in Canada. There are approximately 6,900 independent grocery stores across the country.

In particular, I want to draw your attention to the fact that our members serve a myriad of communities in this country that are rural and sometimes remote and also supply indigenous communities. As such, independent grocers are a critical linchpin in ensuring food security for much of the country.

Notwithstanding that, independent grocers compete on a landscape that is overly consolidated at the retail level. At the same time, grocery retail operates on overall margins of an average 1.5% for both chains and independents. Yet within that context, you should note that many of the costs absorbed by retail grocers in the case of the large chains are pushed off their books and onto the supplier community.

Of course, the imposition of fees, surcharges, penalties or invoice reductions—whatever the catchphrase of the month is—poses a huge burden on the rest of the food supply chain. Suppliers argue that this also—and I quote from one of their briefs—“stands as a major hurdle to expansion and growth”.

We agree with the suppliers on that point, but I would also point out that this puts the independent retail grocers in all those communities at a decided competitive disadvantage, in that the plethora of costs normally associated with running a grocery store in the case of the independents are borne by them entirely, so it is natural that for many groups in the agri-food sector there has been alignment around conveying to government that we have a problem and we need to find a solution.

Let me also be clear, though, that over the years independents have also encountered a lack of fair dealing on the part of some suppliers. Refusals to provide fair supply or fair pricing were encountered pre-COVID, during COVID and will continue post-COVID unless we begin, together, to find reasonable responses that can provide a course correction for our agri-food industry.

To ensure that we maintain and indeed enhance the stability and strength of our value chain, it is imperative that all governments, federal and provincial, turn their attention to identifying barriers. If what we have all heard over the past year from governments—that we are all in this together—is sincere, then together we need to turn our attention to the imbalances of the industry and the marketplace.

The view of the CFIG is that the solution to the goals identified by this committee lies in developing a grocery code of conduct. I want to make a point here of stressing that we are saying a “grocery code”, not a retail code, as some in the supply chain are wont to do.

Have independent grocers encountered problems with suppliers over the years? As I said previously, you bet we have. The principles that many groups in the agri-food industry are espousing as being required as practices that the retail chains should follow should also apply to them. Principles around fair dealing should not be selectively and subjectively written and applied to just one part of the supply chain. I would be fascinated to hear from any organizations representing suppliers as to why that should not be the case.

When our members are told by suppliers that they will not be supplied with products because suppliers have hit their targets with some chains, that is not fair. In turn, lack of fair supply is also, for many communities, an issue of food security. Our members are tired of sometimes paying more for mainstream products that are sold in chains for less than the independents themselves have to pay as the cost determined by the supplier, and then being told by sales reps many times that they've hit their sales quotas with the chains, so no price negotiation is possible. This is not by any means always due to the chains enjoying a large-scale advantage. Suppliers could refuse to play in that sandbox, and a couple have.

Even in the supply-managed sectors of the agri-food chain, there have been issues around securing fair access. I recall one instance in the early months of the pandemic when we received letters from egg producers, the federal Minister of Agriculture and a couple of provincial ministers—from B.C. and Ontario—asking us to encourage our members not to limit supplies of eggs purchased by customers. Our response was to send back pictures that our members had sent us of empty store shelves where the eggs should be.

I'm not singling out the egg producers. This kind of thing happened in other areas. I'm just using it to illustrate that what the producers are saying to governments and what our members are seeing are two different things.

The positive for us, out of those kinds of examples, is that there has been a heightened awareness and understanding of the challenges our members face by both government and many other sectors in the supply chain.

There is one key point I want this committee to understand about independent grocers: We buy local, support local community initiatives, and we hire local, because we are local. We live in the communities we serve. Independents can also play a role in increasing capacity, because, as they continue to remind producers and processors, they happily will act as incubators to test new products and innovations in-store.

Our association also runs the two largest retail grocery trade shows and conferences in Canada. Working with the Ontario government, through those venues, we have significantly enhanced buying opportunities, interprovincially as well, for Canada's small and medium-sized suppliers and retailers.

In closing, we commend Ottawa, the provinces and the territories for establishing a working group to review issues in this industry and to recommend a course of action. The co-chairs of this FPT working group have been responsive and collaborative, and are genuinely interested in finding solutions.

If we can develop a grocery code of conduct, that will be a positive development and, I would suggest, a generational change for our food industry. However, that code should be a made-in-Canada code—not one, for example, modelled on the U.K. code, but one that is balanced, applies to all, and benefits all: retailers, suppliers, wholesalers, processors and farmers.

It will not mean that government should be running a retail store or any other part of the supply chain, nor has it in other countries with a code of conduct. It also will not, as some suggest, level the playing field. The level of consolidation in Canada already makes that impossible. What our members and the communities they serve want is the right to be able to at least stay on that playing field.

Thank you for your attention. I hope I hit the seven and a half minutes.

[The Chair, Liberal, Pat Finnigan]

You still have 17 seconds, but that's close enough. Thank you, Mr. Sands.

We'll move to Olymel, with Mr. Richard Davies.

You have seven and a half minutes. Go ahead, please.

[Richard Davies, Senior Vice-President, Sales and Marketing, Olymel L.P.]

Thank you, Mr. Chair.

Honourable members of the House of Commons Standing Committee on Agriculture and Agri-Food, thank you for your second invitation.

My name is Richard Davies. I'm the senior vice-president of sales and marketing at Olymel, whose majority shareholder is the Sollio Cooperative Group, formerly known as La Coop fédérée.

Olymel is Canada's leading pork producer and the leading exporter of pork meat. Many countries recognize its meat as being of superior quality. We export our products to over 65 countries.

Olymel has deep roots in Quebec. It's also firmly established in Ontario, Saskatchewan, Alberta and New Brunswick. We provide direct employment to 15,000 Canadians. Our annual sales are around $4.5 billion. We generate considerable economic benefits for our regions. The entire value chain of our sectors is also very significant.

The goal of the Honourable Marie-Claude Bibeau, Minister of Agriculture and Agri-Food, is to increase Canada's total agri-food exports from approximately $67 billion in 2020 to $75 billion by 2025. However, this goal would be easier to achieve if the government, along with the industry, were to pick up the pace in terms of removing barriers that can only hinder the objective.

I'll list some of the issues that our industry is facing, starting with the issue currently described as the mother of all issues: labour.

This issue is critical and essential not only for Olymel, but also for the entire agri-food sector. Even before the current pandemic, we were already facing a serious labour shortage. However, given its growth and major investments in recent years, our company can create thousands of new jobs wherever it operates in Canada.

We provide stable jobs with very competitive conditions in regions that need jobs. For example, we'll need to hire 1,200 people a year over the next few years to deal with the expected turnover rate, the retirement of baby boomers and adverse demographic projections.

We also need to hire an additional 1,200 employees right now to bring our plants up to full capacity and to optimize previous investments. Lastly, we'll need another 1,200 employees to handle opportunities that arise and future projects already in the works. In the coming months, Olymel will need to add the equivalent of 3,000 to 4,000 jobs to the current 15,000 jobs in our regions.

Obviously, the inability to find workers is a major barrier to our development and growth. Without sufficient labour, we'll be forced to abandon certain markets. This will mean fewer jobs and investments. This will also mean that processors from other countries will quickly take our place in foreign markets and here in Canada because of the labour shortage. The entire value chain is affected by the labour shortage. We're already working with local elected officials and regional governments to make new workers even more welcome in regions that want to boost their economies.

In recent years, Olymel has brought in a good contingent of temporary foreign workers. These workers, who come from halfway around the world, are strongly motivated by a search for a better life in Canada. However, the federal government's temporary foreign worker program has a 10% cap per company for this contingent. We've been advocating for years for this cap to be raised to 20%. We also want fewer bureaucratic delays that slow down the program.

Since the start of the pandemic, our employees have done an outstanding job of responding to the call from governments to maintain our processing activities, since these activities are an essential service. We're the natural extension of the livestock farm. Our slaughterhouses are the essential end result of the farmers' activities.

This labour issue is not only crucial, but urgent.

On another note, the current pandemic has prompted us to look ahead at our modernization plans. These plans involve the development of new technology and greater integration of robotics and automation in our operations. Although robotics and automation aren't designed to replace labour, if the industry wants to remain competitive and effective, we must speed up the implementation of these tools, which require major research and investments.

We believe that the Canadian government must assist exporting companies in this area through appropriate and easily accessible support programs that are comparable to the programs provided by the governments of our main competitors.

The barriers to accessing our priority markets constitute another challenge that increasingly limits our export capabilities. For example, our access to the Chinese market has been disrupted for several months. As a result, 70% of Canada’s total production is no longer accessible to the world’s largest market. There are some technical issues that can easily be resolved. However, the current political relationship certainly isn’t helping to resolve the issues and lift the suspensions. Our plant in Red Deer, Alberta has been particularly hard hit since April 28, 2019.

Moreover, right here in Canada, a major issue is developing in the relationship between mass distribution and Canadian processors. The Canadian government could certainly help promote a better balance of power, as requested by most stakeholders in the processing industry. I’m referring here to the attempts by some major retailers to unilaterally impose market conditions on processors that could threaten the processors’ viability.

We believe that the establishment of a code of good practice between the mass distribution and processing stakeholders would be beneficial to everyone, including Canadian consumers. When faced with the same issues, several countries have taken action to address the situation.

Lastly, the current pandemic has forced the companies asked to continue their operations to quickly adapt to new conditions, particularly health conditions. We’ve done everything possible to protect the health of our employees, although we haven’t been able to avoid periodic outbreaks. We believe, as the Canadian Meat Council already advocated last December, that food processing employees, particularly in the meat sector, should have priority access to a vaccine, as is already the case in other sectors.

I’ve provided a broad summary to stay within my allotted speaking time. Of course, Olymel is willing to give you more information on the issues addressed.

Thank you for listening. I’m ready to answer your questions in English or French.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Davies.

We’ll now move on to the questions.

To start our first round of questioning, we have Ms. Rood.

Go ahead, Ms. Rood. You have six minutes.

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

Thank you, Mr. Chair.

Thank you to the witnesses for appearing here today. I really appreciate your taking the time to come back again, Mr. Davies.

I had a hard time hearing some of the translation. I apologize if I am going to repeat something that you said, but I couldn't hear the translation very well.

Today, we learned that your plant in Red Deer, Alberta is going to temporarily be shutting down for an undisclosed or unidentified period of time due to an outbreak of COVID-19. I know you had an outbreak in one of your plants in Quebec earlier in the pandemic, almost a year ago now.

Hog producers in Ontario have been struggling to find capacity. I've talked to a lot of producers in my own riding and areas who have been actually shipping their hogs all the way to Alberta for processing. Having this plant shut down is obviously going to have another recourse...and a backlog for these producers.

Of course, the health and safety of the workers is paramount, and we know that companies have been doing everything they can to ensure the health and safety of the workers. Could you clarify for us, and put on the record, the reason why the plant is shutting down? Are you planning to shut it down to clean and sanitize everything? From what I understand, you're not sure where the outbreak came from. Or is it just that there is a shortage of labour to keep the plant running, even for fewer shifts, because of the number of people who are affected by this outbreak?

Could you comment on that, and what steps you're taking to clean and...? Is the closure a response to political pressure from the media, or is it actually in response to the fact that you don't have the labour, or you can't guarantee the safety of the workers at this time?

[Richard Davies]

It's a combination of numerous factors. We were in discussions with Alberta Health Services, obviously, trying to find the proper path and the quickest path to get back to normal. Looking at the current situation at the plant, there was a combination of the health of the workers, the number of the positives that needed to be basically grasped and put under control, so that was one thing. There was also another issue with having the critical amount of labour available to be able to pursue operations.

Obviously, we've had close to a year of experience with that. We had issues in Quebec earlier, at the end of March and April 2020. We have experience with health officials, with health specialists, to try to find the right path, the quickest path, to get the plant back up to speed.

We understand the Ontario producers. We're producers ourselves in Saskatchewan. When one day, two days, three days go by, we know the implications it might have at the farms.

We thought that this would be the best path forward to get back to normal as quickly as possible, hopefully sometime next week. This is why we've chosen to take action immediately.

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

Great. Thank you for clarifying that.

I'm going to switch gears and switch over to Mr. Sands.

Mr. Sands, you talked a little bit in your opening remarks about a grocery code of conduct versus a retail code of conduct. I was just looking for some clarification and for you to expand on this a little bit. We've been talking about a grocery code of conduct and we know that the provinces are looking at this right now, and also as it relates to the supply issues.

I come from a very rural riding. I have many independent grocery stores that are not one of the big five. During the pandemic we've seen—as you alluded to with eggs—shortages of things, basics, like flour on the shelves. I'm just wondering if you could quickly touch on, in the next two minutes, why we see these supply shortages going to the independent grocery stores and why the companies might want to supply the main retailers ahead of independent grocers for their orders.

[Gary Sands]

In Ontario, for example, the two biggest wholesalers are Sobeys and Loblaws. For all those independents that you just mentioned in your riding, that's also their retail competitor. So if you're having shortages or high demand, you'd have to have just fallen off a turnip truck not to realize that the chains are going to be first served. That's just the reality of the consolidation that we have in Canada.

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

Is that because of the penalties they would face if they didn't supply those big chains?

[Gary Sands]

It definitely has an impact, but we've seen cases.... I've been with CFIG 18 years and I can tell you we've seen cases over the years where suppliers are doing things that in terms of pricing and supply.... We don't use the term “equal supply"; we're talking about fair supply. One of the principles that suppliers are fond of espousing is that if you have contractor terms of agreement, then that's what you have. We agree. But we've been on the receiving end of that as well, where suppliers will inform us.... Even during COVID, we got an email sent out—I'd better not say the name of the company—from a national producer of, let's just say, product that was important in the context of COVID—saying that they will not be supplying any independents until April because Walmart and Loblaws have asked for it all. And that was in writing.

To us, that's unacceptable. That's the kind of thing that should be covered in a grocery code. If you have contractual arrangements with other independents, honour those as well.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Sands.

Thank you, Ms. Rood.

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

Thank you.

[The Chair, Liberal, Pat Finnigan]

Now we'll go to Mr. Blois, for six minutes.

Go ahead, Mr. Blois.

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

Thank you, Mr. Chair, and thank you to both of our witnesses.

I'm going to start with Mr. Davies.

You mentioned red tape. That's certainly something that speaks to me in terms of measures we can do that don't cost money and can help drive economic growth. Can you give me one specific one in particular, your top red tape production measure that the Government of Canada could put in place to help support you?

[Richard Davies]

The first one is one that we've been after for numerous years, which is to lift the cap on the temporary foreign worker program, for one. The cap is one thing, and also just the way it operates and it works. It's a very extensive, long process to get workers available in the foreign market into the Canadian market. Everybody is willing. We're willing to receive, and they're willing to come. The process needs to be shortened, as I mentioned in my comments.

I would say that would be one good example of where we can get some traction.

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

Beyond labour.... I want to be mindful of time. Is there anything that comes to mind or anything that you might be able to submit to this committee beyond the labour piece, which has been well canvassed?

[Richard Davies]

The rest of the things.... Some of the issues we have are in market access. The people at CFIA were working very well. Obviously, the political realm of the challenges that we have, for instance with China, or outside of that.... I would say, moving forward, try to create a better environment when considering trade with our largest trading partners.

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

We had a witness on one of our last panels who talked about this. As it relates to the supply-managed sector—I know that you have poultry production—there needs to be a mechanism within the pricing component for producers that takes into consideration processors' tight margins, i.e., almost a wholesale price on the poultry side that would take into consideration some of the realities of processors. Is that a view that you share in terms of looking at the price that producers are given? Essentially, you as a processor have no other ability to.... You are a price-taker in Canada, where you're required.... Is that something that resonates with you, or something that could be evaluated?

[Richard Davies]

Obviously, the biggest tool we have in supply management is the supply side. I would say the supply side is a little more difficult right now, in trying to find, with all the stakeholders, the proper level of supply that will guarantee the proper revenue for the different processors. I think that would be the biggest challenge right now. If there's a specific mechanism on pricing, I think we need to let the market define what the values are out there. I would say it's about the ongoing definition of what is proper supply, moving forward, and having the proper voices heard when the allocations are determined. I'm talking more about the chicken side.

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

You mentioned that government obviously has a role in helping to facilitate the automation and some of the investment in the private sector. We've had other witnesses who have said there's plenty of private capital out there that can help fund this, notwithstanding the fact that the government does invest in other sectors to help support them. In your mind, briefly, what does a government program look like in terms of that? Is it tax credits or is it direct funding?

[Richard Davies]

Well, it could be a combination of both. I think my words should be put into context. As a government, when we're trying to establish these aggressive goals for exports, we need to be mindful that we're out there competing. My only point was to make sure that we benchmark and we make sure that, as a government toward the industry, we offer more or less the same level of support so that we level the playing field. That should be put in that context. I don't have specific examples, but over the years I've heard that different countries have been providing different opportunities to some of their industries. My only comment would be to make sure we're out there on a level playing field.

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

I appreciate that.

I don't have enough time to ask you the question, but I would say, Mr. Davies, that if you have any suggestions on comparable jurisdictions where you look at these different programs, that's always helpful to our committee.

I want to go to Mr. Sands next. Certainly, you talked about the role of independent grocers in rural Canada, and Ms. Rood touched on this. I would agree with you. You mentioned incubators. Certainly we have a question as a government about the role government actually plays in that. Is that something where independent grocers and processors or producers can play a role directly? Is there a role for the Government of Canada to be involved in that space at all?

[Gary Sands]

I wouldn't get too complicated about it. From the standpoint of the independents, they're looking for ways to buy local; they're looking to connect. One of the things we've been doing.... Actually, the leader in terms of government action has been the Ontario government. I think I mentioned in my remarks that we have the two largest trade shows in Canada for the retail grocery sector. One of the key components of that is that we facilitate connections between all of our members across the country—and chains—and the small and medium-sized food producers and processors.

One thing that government could do—all governments, other provinces and the feds—is replicate what Ontario is doing. Ontario is helping to promote that. They provide some financial support to those producers and processors to help facilitate that connection. It was supposed to be a one-year program, but it is now going on because it yields so many benefits.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Sands and thank you, Mr. Blois.

Mr. Perron, you now have the floor for six minutes.