Evidence of meeting #53 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was post.
A video is available from Parliament.
11:25 a.m.
Partner, Advisory Services, Ernst & Young
Thank you for the question.
No, I do not think that that would be the case. If the moratorium—which dates from 1996 or 1994—were lifted, corrected or amended, Canada Post could continue its presence in a number of areas. Currently, the business model is quite rigid. Lifting or modifying the moratorium could give Canada Post more flexibility, which could work better financially.
11:25 a.m.
Conservative
11:25 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Thank you.
Mr. Lanctôt, you are a former senior manager with Canada Post. Is that correct?
11:25 a.m.
Partner, Advisory Services, Ernst & Young
Yes, that's correct, as my colleague mentioned at the beginning, although it was reported that I was a chief financial officer, which was not the case. I was actually a general manager in finance. I'm glad that people gave me a promotion, but that was not the case.
11:25 a.m.
Voices
Oh, oh!
11:25 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Thanks for clarifying that.
Clearly that background does give you a lot of insight and expertise, which are very much welcomed by the committee. I bring it up because the rationale for having management consultants, of course, is to get an independent and fresh perspective. It's important to be clear that you also have the perspective of Canada Post management, which is certainly an important perspective for this committee. I wanted to make sure that we had it clearly on the record.
11:25 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Mr. Spear, your firm, Oliver Wyman, also produced a report entitled “Shipping and Logistics 2016”, which I believe projected a huge increase globally in grocery purchases online and presented this as a huge business opportunity. You didn't see it as being an opportunity for Canada Post, and I wonder why that is.
11:30 a.m.
Partner, Transportation Practice, Oliver Wyman
Without referring to the report specifically—I would have to refresh myself on that one—we look at the grocery business as particularly competitive and also more challenging to serve because of the perishability of the goods being shipped. Therefore, the logistics systems required to serve grocery and those required to serve parcel and mail are not necessarily compatible.
11:30 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Okay. Just to clarify, the report in question was called “Transport & Logistics 2016”. I think I may have used the word “shipping” a moment ago.
Certainly, the grocery business itself is very competitive, but we're talking about the logistics of delivering groceries. Canada Post does have some very quick delivery, but is it your sense that perhaps it's just not quick enough to get into that business in an effective way?
11:30 a.m.
Partner, Transportation Practice, Oliver Wyman
It's not just a matter of speed, and it's not out of the question, but it is a matter of the needs of perishable goods versus dry goods, retail, parts, industrial products, and apparel, the primary commodity groups that Canada Post is shipping, versus perishable goods.
11:30 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Okay. That's fair enough.
One of the things that I wondered about in reading your report is that often it seemed that you would conclude that Canada Post lacked a capability to do something and therefore shouldn't pursue that option. Whereas at other times you would observe that Canada Post actually had an advantage in a certain area, but you then concluded that it shouldn't use that advantage because it would be unfair to private competitors. It seemed that Canada Post couldn't win. Either they lacked the capability, or if they had the capability, you didn't want them to use it.
11:30 a.m.
Partner, Transportation Practice, Oliver Wyman
You'd have to point to a specific advantage that you're referring to. I do agree that there were a number of potential market opportunities or potential initiatives that would involve subsidizing Canada Post and putting them in competition with private market participants, which we did question as to the fairness, but it's certainly a policy decision and not our decision. If there are specific initiatives you want to refer to, I can try to address them.
11:30 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Sure.
To get into specifics, maybe let's talk about payday lending. It seemed that two objections were that Canada Post wouldn't have a source of funds, which struck me as a very strange objection given that it's a federal crown corporation. The second objection was that it wouldn't have the capacity to make collections, which again seems very strange in view of the fact that it's part of the federal government. Canada student loans has very good collections because it's done by the Canada Revenue Agency.
It seems to me that Canada Post would actually be exceptionally well positioned to engage in payday lending. It's just that you don't think it would be appropriate for it to utilize those advantages.
11:30 a.m.
Partner, Transportation Practice, Oliver Wyman
I have a couple of points of clarification. One, Canada Post today isn't a bank. While it is a government crown corporation, it doesn't have open access to borrow. That could be a change, and that would require a change to the banking regulation for this industry and this country, but that is an option, certainly.
I wouldn't comment on its ability to make collections per se, but it's also true that making loans, assessing consumer credit risk, are not activities that are part of the capabilities that Canada Post has today. There's also some question about the practices of payday lending as an industry and whether that would be of interest to Canada Post as a crown corporation.
11:30 a.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
I guess, by definition, it's true that Canada Post doesn't have that expertise right now because it's not currently in the business.
There are other post offices around the world that have postal banking as a big part of their enterprises. I think in your report you consulted with La Poste and Royal Mail. Is that right?
11:30 a.m.
Partner, Transportation Practice, Oliver Wyman
We're familiar with La Poste and Royal Mail from their own success in the market, or activities in the market.
We've also done work with some of the post offices around the world, and in certain cases, even some of the banks. We certainly have one of the largest banking practices among management consultancies in the world.
However, one of the key observations we made in the report was that in other countries where postal banking had really taken root, we saw a tendency towards either direct subsidization, as in the case of La Poste where it has an exclusive franchise on certain types of bond, or they had established themselves in markets long ago with a physical branch presence, which was much more of a necessity and an underserved need than we see today in Canada. The cost of banking was significantly higher than we see today in Canada. Also, it predated the move to electronic banking, which now negates some of the value of having a significant branch presence.
11:35 a.m.
Conservative
The Chair Conservative Tom Lukiwski
I'm sorry, Mr. Weir, we're out of time, but we will have other opportunities. These gentlemen are with us for the next hour and a half or so.
Mr. Whalen, you're up next on my list. I understand that you'll be asking questions that you prefer to be in camera.
11:35 a.m.
Conservative
The Chair Conservative Tom Lukiwski
Mr. Grewal, you will get a five-minute round in camera as well.
Mr. McCauley, I understand you'd like yours in public?
11:35 a.m.
Conservative
