Agriculture Committee on April 19th, 2023

[Denise Allen]

Thank you for that question.

When I speak to my members, I hear very common and recurring themes around supply chain risk and the exorbitant increases they're facing in terms of warehouse spacing availability, price per square foot, and even the ability to transport their goods to market. More than 70% of our industry needs to transport their goods from various locations—many of them rural—to transportation hubs across a couple of modes of transportation in order for those goods to reach market. That stands for both domestic and export.

They're looking at incredible increases and disruption in all modes of transportation, in particular the trucking industry, which is, again, looking at severe labour shortages as well.

When I speak to my members, it's largely around the supply chain, and then followed very closely by government regulations, taxation, and access to competitively priced inputs that they add value to and then create a product and get it to market. Labour, of course, is another huge issue.

All of this is under the understanding that the supply chain is probably the biggest concern for them.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you for that.

People in the agri-food sector often talk about plants being outdated and the need to automate more and more processes to deal with the labour shortage and efficiency issues. It's clear that processing facilities aren't able to keep up.

Should the government invest in that area?

[Denise Allen]

Thank you.

Yes, that's a very good point with respect to investment.

In the last couple of years—maybe three years since the onset of the pandemic—the average small operator has had to invest unplanned capital into their operations to deal with everything COVID- related, from PPE to infrastructure changes, to health and safety measures, to education, to support for their employees. Those were all unplanned and came as a trade-off versus being able to modernize their plant and equipment through either automation or various other investments that would make them more efficient within the plant walls, or to produce a safer product, or, like you say, to replace some aspect of the manual labour that exists on the floor.

Those come at an expense. It would be a very welcome indication from the government that you'd be willing to invest and help our sector, especially small and medium-sized enterprises, with the type of investment that has been foregone in the last couple of years through all of the raises that we've seen in the prices of inputs, as well as in COVID-19 management. Your willingness to invest in the innovation and automation of our plants would create an immediate effect and a very strong return for our domestic food supply.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Ms. Allen.

My last question is for the Consumers Council of Canada representative.

Lower prices require as few monopolies as possible and as much competition as possible. When the Competition Bureau officials were here, they talked about the bureau's inability to obtain certain information from companies in the retail sector because of a lack of authority.

Would you recommend giving the Competition Bureau more powers, so it can fulfill its role more effectively?

[The Chair, Liberal, Kody Blois]

Respond in about 30 seconds, please, Mr. Whitehurst.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

You can answer with a yes or no.

[Ken Whitehurst]

The answer would be yes—or to some institution. We've suggested a Canadian consumer advocate, because the Competition Bureau hasn't been very effective in implementing even some of the other acts it's responsible for, which we pointed out in our presentation. There doesn't seem to be an adequate culture of oversight and enforcement on lots of marketplace issues.

We do have some concerns about the placement of certain responsibilities there, but for sure we've advocated strongly in other forums that there are significant changes that need to happen to the Competition Act, and many of those kinds of changes might be a better way to provide support for smaller and medium-sized producers.

[The Chair, Liberal, Kody Blois]

Mr. Whitehurst, we're going to leave it at that.

Thank you so much. I gave you an extra minute to try to let the response play out.

Mr. Davies, you have up to five minutes, please.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Mr. Whitehurst, I think anybody who's been in a grocery store in the last six months would know exactly what you testified to about shrinkflation. It seems like, after food producers were caught drastically raising prices, they responded by then shrinking the quantities. I'm wondering if you could give me a bit of a sense of how ubiquitous or common that is.

[Ken Whitehurst]

What we would say is that it's one thing that's happening. We're always conscious that packaging sizes can be changed to fit needs of consumer demand; it's not always the case that a package size changes just to optimize profit by way of trickery.

Certainly it's been ubiquitous in terms of how many changes have been made. We're definitely hearing from lots of consumers who are concerned about a wide range of “gaming” activities at retail. They're really angry about it. They're really angry at a time when inflation is high. They are also very much questioning a lot of the public stories about what's happening with food prices, given that they're seeing certain things in their own purchasing, like fuel prices, relatively stabilize, yet we're continuing to see increases. For example, transportation keeps getting cited as an increased cost.

Maybe part of it is that we're captured in the rhetoric of what happened, and now we have a future before us. For sure, consumers are contacting us, and it's not only because they're angry about their own pocketbooks and feeling that competitive pricing is being denied to them. For seniors, for instance, shrinkflation is one problem. Another problem is, “We won't sell you anything but multiple units of a product at the lowest price.” People are also angry about that, because there are some people who would like to buy smaller unit sizes, but retail selling practices are denying them the opportunity to buy the product at a reasonable price. It negates the—

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm sorry, Mr. Whitehurst; I have to jump in. I have a few other questions I want to ask you.

[Ken Whitehurst]

Yes.

[Don Davies, NDP, Vancouver Kingsway, BC]

I think you said that Quebec is the only province that regulates unit pricing. Can you briefly explain how it does that? Do you have any suggestions about whether that should be adopted across the country?

[Ken Whitehurst]

We do think that it should be adopted across the country. We would point out that Canada's other major G7 or OECD trading partners pretty much have unit pricing, and they have unit pricing specifications so that they don't get the manipulation of how unit prices are presented at retail. There's a great opportunity to make it easier for people when they shop to look on shelves and be able to compare among products.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Ms. Allen, I think you commented favourably about how you'd like to see some changes made to the way the Competition Bureau implements competition policy. One specific suggestion that's been made is that the test be amended to no longer require that the bureau approve that a firm acted with anti-competitive intent, but merely prove that the actions had an anti-competitive effect. Is that something you and your members would support?

[Ken Whitehurst]

Yes, because the concentration of ownership in a wide range of industries is so far over the mark in Canada that I think you're down to the core elements of whether competition is a method to protect consumers at all.

We are certainly comfortable with the idea that competition should matter. If you listen even to some of the testimony here today, we're talking about solving supply chain problems by having the supply chain, without the involvement of consumers, organize how costs will be passed through to consumers. It's sad that we're even at that point if we're serious about a competitive economy.

If we are at that point, and when we are at that point, our organization feels that consumer representation should be substantially better. In the province of Ontario, for example, we have a monopoly on natural gas and, effectively, have distribution monopolies on electricity. We have regulated pricing and an application process. Our organization actively participates in those processes.

If we can't do something about bringing competition into the markets, then we have to look at what the regulatory offsets are to that. Even in places where we're currently regulated, the consumer representation capacity is very poor. That's one reason we're advocating for a Canadian consumer advocate, not only to have an institution within government that's looking holistically at the interest of consumers, but also to create a connection to civil society to make sure that civil society voices are heard. That's sadly missing today.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Whitehurs and Mr. Davies.

We'll go to Ms. Rood and then we'll go back to the Liberals. That, unfortunately, will be the end of this panel. Then we'll move on to our second panel.

Ms. Rood, it's over to you.

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

Thank you, Chair. Thank you to our witnesses for being here today.

Ms. Allen, you've appeared previously before this committee. You've said something I'm going to quote back to you: “the threat of retailers' escalation of fees and fines places Canada's primary producers at risk, as food processors purchase in excess of 40% of Canada's farm gate output”.

I'm wondering if you can tell us, has grocery price inflation caused food processors to purchase less?

[Denise Allen]

I do not believe that what we're seeing take place in the marketplace has resulted in food producers purchasing less farm gate output. I don't have any data to support that.

In fact, what's happened since the pandemic is that we've seen quite a bit more volume because people are at home, cooking more at home. That drives more volume throughout the supply chain or the food value chain.

My concern for farm gate output is the same for many of the businesses in the value chain. They also are faced, according to reports that I'm receiving, with incredible pressures on everything from transportation of their goods through to fertilizer, through to the impact of the carbon tax and labour costs. With all of those issues, many of them are occurring throughout all of the value chain.

If we are going to make the most of the opportunity ahead of us, as a country, we need to address and understand the circumstances for each value chain member and the relationship between both selling and production and how that product gets to market. We're not always in control of the pricing and whether or not we can control whether or not our product gets to market efficiently.

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

Thank you.

You just noted some of the limitations that food processors face. I'm wondering if you could also comment on what kinds of limitations food processors face when they're dealing with the large grocery chains, in the form of grocer fees and fines?

[Denise Allen]

Certainly, and I'll try to bring it back to the small and medium-sized enterprise and, usually, the multi-generational families who are running them.

Imagine you've done your best to produce a lot of goods according to a forecast provided to you by a retailer. You have a trade agreement in place that states how much you will deliver and when. Those are delivered. You're not in control of when the truck gets there because it's a third party that does that. Also, your slot time in the warehouse is not something you can control. Let's say that isn't perfectly aligned.

By the end of the time of delivery and the invoice that's provided, by the time that invoice is settled—usually with cash terms extending longer and longer as retailers prefer to hold on to the cash longer as part of their cash preservation strategy—you're not always sure of what that payment will look like. As a result, you can't count on your own cash flow planning and your own investment in your business to cover your expenses. You can't be certain that the $100, for example, that you've invoiced the retailer will be settled as $100. With all of those fees and fines and penalties eroding the settlement amount, you could be faced with 80¢ on that $1.00. That makes it very difficult for small players to play. That's the environment we are in.

Then if you layer on all of the other environmental and economic factors, and regulatory factors and taxes, and access to competitively priced inputs, it becomes incredibly difficult for producers to have any level of certainty in their business dealings. That's why we need the code.

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

Thank you.

As you know, I've also been a big proponent of the code for a number of years now. One concern that was raised—and you did touch on it a little bit earlier—was whether or not the code should include a completely transparent dispute resolution mechanism.

We just have about 30 seconds left, so I'm just wondering if you can touch on that and where we are in that process with the code.

[Denise Allen]

Certainly.

Where we are relative to the major milestones that we need to achieve in the coming months is as follows. First is a broad-based industry consultation. The code will go out for consultation. It will be in the marketplace for up to 30 days. We'll be soliciting the feedback of all stakeholders to ensure that we haven't overlooked any major item that needs more consideration, and also get other feedback on the principle-based nature of the code.

We are also looking at an implementation date of January 20, 2024. After we gain feedback from the consultation, it will then be incumbent upon the steering committee to consider the dispute resolution mechanism, which is in its formation right now.

We have a very inclusive process that has retailers at the table. It was really important to have an industry-led solution and have a dispute resolution mechanism that allows for expeditious resolution of issues, and for a mechanism that identifies recurring themes so that in 18 months the code can be revisited and improved upon and there's a continuous improvement cycle.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Allen and Ms. Rood.

For the last question on the panel I'm going to start with Ms. Valdez.

You may be splitting your time with Mr. Louis, but I'll leave that to you. You have up to five minutes.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for joining our committee.

I'll direct my questions through you, Mr. Chair, to Mr. Lynch.

The Minister of Seniors, Kamal Khera, has GIS in her mandate letter, requiring her to increase GIS by $500 for single seniors and $750 for couples starting at age 65. This will help target the most vulnerable seniors in Canada.

I just want to get your thoughts on that.