Agriculture Committee on Dec. 11th, 2023

[Patrice Léger Bourgoin]

Mr. Lehoux, I would essentially say that's the case from a regulatory standpoint. The statutes are in place and the entire global trade environment is also regulated.

We mainly have to see what human and financial resources the Canadian government devotes to random inspections, to cite only that example. That's what's lacking, in my humble opinion. A lot more inspections should be done at the border to ensure that goods entering Canada are consistent with the laws and regulations in force here, locally. The goal is to ensure fairness among producers, obviously, but also to guarantee food safety and security for consumers.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Léger Bourgoin. Your remarks are very clear. It's not the rules that are lacking; it's more the fact that we don't have the necessary resources to enforce them. This is the first time I've mentioned this to the committee.

I'd like to discuss the introduction of new standards for plastics. What do you at the Association des producteurs maraîchers du Québec think about the introduction of these new rules? What financial impact will they have on businesses?

[Patrice Léger Bourgoin]

They will definitely have an impact on the businesses because new ways of operating in the logistics chain will have to be put in place.

However, the major challenge is the issue of product expiration. As you know, many fruit and vegetable products are extremely fragile. Ontario and Quebec represent approximately 80% of Canada's fruit and vegetable production. Products sometimes have to be transported from Ontario and Quebec to as far away as Vancouver. Producers must ensure that products can avoid damage while in transit and that consumers have access to products of equivalent freshness even after transport.

If we start experiencing problems of product freshness, quality and safety, we'll only succeed in shifting the problem and encouraging food waste. It seems to me the last thing we want in this period of inflation is to encourage food waste.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you very much, Mr. Léger Bourgoin.

I would like to put the same question regarding packaging to Mr. Lemaire.

Would you please tell us briefly what you think the effect of that would be for you? You talked about this earlier, but do you have anything to add, Mr. Lemaire?

[The Chair, Liberal, Kody Blois]

Ron, you're on mute there, fella. We're at time, so keep it tight, if you could.

[Ron Lemaire]

Thank you, Mr. Chair.

Very quickly, there would be a dramatic impact with a 20%-plus cost to food and increased waste. Everything Monsieur Bourgoin mentioned was accurate.

[The Chair, Liberal, Kody Blois]

Okay.

Mr. Louis, you have four minutes, please.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Chair.

I want to thank everyone for being here as well. It's an important discussion.

I'll direct my questions to you, Dr. Stanford. You stated that the latest industry-wide financial data on food retail is showing that the retail profits have doubled since prepandemic norms, and that profits are continuing to grow. You also mentioned that grocery retailers are not capital-intensive. They are not growing, processing or manufacturing the products they sell. You said they purchase products from suppliers, adding their markup and selling to consumers.

What are the main reasons behind this increase? In your opinion, why haven't profit margins narrowed back to prepandemic levels? Is industry concentration or demand inelasticity contributing to the sustained high profits in the food sector?

[Dr. Jim Stanford]

That's a very good question, sir. Thank you for asking it.

I can't profess to have the final answer on it. I think it requires further study, and I know that both your committee and the Competition Bureau itself have been trying to do that. Your tasks would be easier if you had more access to transparent data from the retailers themselves.

I don't mean to underestimate the complexity of running an efficient, modern food retail operation. There is certainly a lot of planning, technology, logistics and entrepreneurship involved, but, in terms of the amount of invested capital in the firms, it's small relative to the total flow of revenue. That's how these companies can make a very high rate of return on equity and generate very healthy returns to their investors, including total return and capital gain. The share prices of most of these firms have risen dramatically since the pandemic, and then the distribution of actual cash, whether through normal dividends or share repurchases....

Why they have been able to sustain those record profits while profitability elsewhere in Canada's economy has been returning towards normal over the past year is a very important question. I'm sure that the concentrated nature of the industry has something to do with it. I am sure that the desperation of consumers to put food on the table—as noted earlier, it is a necessity of life—creates an inelasticity to demand.

I think it requires further study to really identify any more of the specific reasons why this industry, quite uniquely, has been able to sustain the record profits that rose after the pandemic, despite higher food prices and a decline in the quantity of food that Canadians are purchasing.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you for that answer.

An economic report released said that the price of pollution adds 30¢ to a $100 grocery bill. What does that and your data suggest about the impact of carbon pricing on food prices? We've heard that other factors are having a greater effect on grocery prices, factors like climate change, supply chain issues and global energy prices.

Can you comment and expand on that? What we can do here in Canada to mitigate those factors?

[Dr. Jim Stanford]

Energy prices themselves would be a completely higher order of magnitude on the impact on food prices than the carbon price itself. In fact, the increase in energy prices charged by energy producers, including those in Canada on Canadian energy charged to Canadian consumers—which has nothing directly to do with what's happening in the Middle East—means that the impact on food prices was 30 or 40 times greater than the direct impact of the carbon price.

The other point to remember is that even that 30¢ on the $100 estimate is really telling only one side of the story. That is based on tracking the carbon price through the input chain into all of the different factors that end up in the consumer's final basket, but the whole point of the carbon price is to encourage changes in behaviour, to shift towards renewable forms of energy and to conserve energy, both of which will have offsetting impacts on final prices.

Some of the studies internationally that have looked at the overall economic effects of carbon pricing on the whole price level and not just on products that use fossil fuels intensively suggest that there is no net impact on the overall consumer price index or potentially a slight deflationary impact because of the benefits of strong investments in renewable energy on energy costs and energy supply.

If anything, I think that number you threw out is probably too pessimistic and, on a net basis, the impact on food prices will be nothing, if not, in fact, negative.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Stanford.

Thank you, Mr. Louis.

Mr. Perron, you have the floor for two minutes.

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

Thank you very much, Mr. Chair.

I'll continue with you, Mr. Léger Bourgoin.

I'm glad that you clearly stated your position on the reciprocity of standards and the urgent need to devote far more resources to it.

Now let's talk about the code of conduct. You discussed it in your opening statement. Since you were at the bargaining table, I'd like to know how that went.

[Patrice Léger Bourgoin]

I was there with my colleague Ron Lemaire. Without violating any confidentiality agreements, I can tell you they were very constructive discussions. Our colleagues from Sobeys and Metro were there as well. There was a genuine desire to understand the suppliers' situation and to reach a compromise—and I emphasize that word—that would make it possible to put the first code of conduct in place. The code isn't an end in itself; it's a first step toward healthier relations among producers, suppliers and retailers. The goal of the work was ultimately to improve the fate of citizens and consumers.

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

Do you agree with the witnesses who tell us that the code will have no impact on prices and that it's designed instead to improve relations? In my view, if there are fewer fines, production costs will definitely be lower, and selling prices may not be as high.

I'd like to hear your opinion on that.

[Patrice Léger Bourgoin]

I agree with you, Mr. Perron. The reasoning is clear. If the retail chains don't want to revamp their business model or reduce fines and various costs, that definitely won't have a perceptible impact on consumers.

Having said that, I assume that more transparency also results in more embarrassment over business practices. These are publicly traded companies, and they're aware of their social responsibilities and concerned about their image.

I'm pretty sure that what we've seen in Great Britain will be reflected in the Canadian market if we wait a few years.

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

That's great.

Now how do we go about convincing the two recalcitrant companies to abide by the code? Should we tell them it will be revised in a year? Do you have a magic solution?

[Patrice Léger Bourgoin]

If they decide not to comply with it, you should make the code mandatory and adopt a binding new legislative measure.

We negotiated for two years, Mr. Perron. New Zealand, for example, also negotiated for about two years, and that resulted in the passage of an act. So why would that take three, four or five years in Canada? This has to be resolved in 2024.

[The Chair, Liberal, Kody Blois]

That's great.

Mr. MacGregor, you have the floor for two and a half minutes.

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

Thank you, Mr. Chair.

I would like to direct my last question to Mr. Lemaire.

Mr. Lemaire, I was happy to join with a number of my colleagues around this table at the CPMA when you were in Ottawa and we did the MP round table. I do appreciate how sensitive the issue on plastics is for the industry. We heard that very clearly. I remember saying during that panel that in the riding I represent, being a coastal environment, we're very sensitive to the issue of plastic pollution because of microplastics and bioaccumulation and so on. So I think it's a noble intent, but I think you've very well outlined the concerns that the industry has.

That being said, I remember going to Montreal last year. I think it was in April. You were at the Montréal Convention Centre. All kinds of the companies you represent were there, displaying not only the latest technology but also some innovations that were going on in packaging.

I think the big concern is that a lot of the Canadians I speak to are just wondering how we can keep plastics from going into the waste stream and how we can encourage a little bit more recycling and reusing. I think this is probably a good moment for you to outline some of the important steps that your members are already taking in this regard. I did see some pretty great demonstrations. They may not be product-ready yet, but it does show that there are companies making a lot effort in this.

Perhaps you can take the next minute to talk a little bit about that.

[Ron Lemaire]

Thank you, Mr. MacGregor. You hit it right on the head. The industry has been progressive. We have been working, actually since before 2018, to drive change in sustainable packaging. But there's a lot more complexity to where we're going compared with what the policy framework is suggesting under P2.

Right now we've looked at increased recycled content in our plastic materials. That is why we need to look at a systems approach in our recycling framework across the country to more effectively collect and recycle. We've looked at a 17% reduction in the ratio of food weight to packaging. We've looked at leveraging the golden design rules, effectively, to drive those across the country and have effective and sustainable solutions. We've worked with Agriculture Canada to launch an online platform to provide the food industry with direction on how to create sustainable packaging. We've looked at lightweighting, where you remove 30% of the material in the package so that it can be more effective and more sustainable in the marketplace.

These are just some of the pieces toward creating a circular economy. The industry is being very progressive to get there. The challenge is that to move to a total elimination is a step too far for anyone, not only in Canada but also on a global level.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Lemaire and Mr. MacGregor.

Colleagues, that brings us to the end of the second panel.

I want to say a few things.

First of all, of course, on your behalf to our witnesses, thank you for taking the time to be with us this evening to contribute to the study. I want to wish you a merry Christmas, happy holidays and a happy new year. We'll see you in 2024.

On that note, colleagues, we did have a scheduled time on Thursday morning. However, there's uncertainty about when the House may rise. To be fair to our witnesses, in case we were to rise on Wednesday, I'm going to give you your time back on Thursday morning. We will continue in the new year.

With that, if I don't happen to see you in the House, I want to wish everyone a merry Christmas and happy holidays. I hope you have a great time back with your families and your constituents following this week.

Thank you to our translators and to all our staff, as well. Merry Christmas and happy holidays to you.

The meeting is adjourned.