Government Operations Committee on June 14th, 2021

[Matthew Green, NDP, Hamilton Centre, ON]

My apologies. It was for the 40% whisky specifically.

Just so that I am clear, what I am trying to do in this very short time that we have is find things that we can control. If you're saying there isn't a number that we can make you guys whole with, at least to know what it was, then maybe we could look at this excise tax on distilleries and do something at tax time here.

[Tyler Dyck]

I think that is the way forward, because otherwise it's like a patchwork quilt of “let's give these guys 100,000 and let's do this.” Really, for the longevity of our industry, it makes sense to allow us to have the same taxation advantages that our partners we compete against south of the border have. It creates jobs and they almost all utilize 100% Canadian grain, so it is a massive boon for us. You're going to give up one dollar in tax and you're going to gain back seven in domestic economic development.

It's a no-brainer for that. That, for us, long term allows all of our distilleries to grow to a point where we can, the next time that this happens, step in in a much more robust fashion, but also be much more competitive exporting candidates to the world.

[Matthew Green, NDP, Hamilton Centre, ON]

I have a minute. I want to make sure we're clear on this while I have my rounds because they reduce in time.

Mr. Dyck, not only is it about ending the escalator on it, but it is also about rolling it back so that it's more competitive. If you were to do that, notwithstanding that for me the motivation would be the contribution you've made here, how long would you want that for? Would you want that forever?

[Tyler Dyck]

Yes. Well, what happens is that the U.S. just reduced theirs permanently, so they are at one-seventh of our taxation rate on the first 100,000 proof gallons. Now, that's only a day or so production at Jack Daniel's, so it's not huge. It's a small volume, but what it has done is created 1,000 new distillery starts across the country. That's how you do it. You give a little bit at the front end and you allow all of us to grow to four, five or six times our size where we're employing 100 or 200 people in each of these spaces across Canada using 100% grains.

That's how you create a great Canada first economic renewal, and that's how you reward Canadians for doing the right thing in this pandemic situation. We'll be there to do it again.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you. I'm very glad to get to the heart of the matter.

Thank you, Mr. Chair.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We'll now go to our second round of questions.

We'll start with Mr. Paul-Hus for five minutes.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon to the witnesses.

Mr. Guitor, I'd like to know whether, as a producer-distiller, your feeling right now is that you were shortchanged by the government? As far as the industry is concerned, the government sent a message that it was going to respond quickly, but in the end it didn't give anybody anything.

[Gerry Guitor]

I must admit it was a bit surprising.

We did everything we could to convert our facilities. I may not be in the same position as my colleague, because we sold a lot of disinfectant. That said, I found it surprising that we didn't have access to the federal government. I was surprised, and more importantly disappointed, to see the amount of product that was purchased overseas. It was a total shock.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

People from different industries, including those making masks, made the same comments. Everyone was listing their offer on buyandsell.gc.ca, a government site, but no one was responding to them. Yet other people had contracts in less than a week.

Do you think there was a normal lane and a fast lane?

[Gerry Guitor]

Yes, absolutely.

People would call me every day and say they had a contact, that they were going to be able to get in. They would ask me how much 100,000 litres of ethanol costs. We would give them the price. This happened two or three times a day.

We were on the site, we had applied, but we never got a tender. To be very honest, I have to say that my brother was working in the federal government, on the response to COVID‑19, but he couldn't get involved. When I asked him what was happening, he put me in touch with people to make sure I was on the right track. But there was nothing. It's all about your contacts.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

When you have a contact, it can work, but when you don't, you're left spinning in the void.

In the beginning, the government [Technical difficulty—Editor]; we understand that. The situation was urgent.

However, when the government asked everyone in Canada to make an effort, everyone did. When we realized that they were buying products from China or elsewhere in the world, we didn't understand why, since Canada has products to offer. It's problematic, obviously.

Mr. Dyck, you mentioned on December 11 that it was obscene. That's what we read in an article. You mentioned that everyone had set up their equipment, their production and you had kept your staff instead of asking for subsidies.

In your opinion, did the government fail to help SMEs? On the one hand, some SMEs closed down and applied for subsidies and waited. On the other hand, and this is your case, you made a big effort, but you lost out?

Is that how you see it?

[Tyler Dyck]

Yes, I do think it ends, speaking not just for ourselves but also on behalf of the other distillers. I think they feel very disheartened. This is not the Canada they stand for. I think we're all brought up to treat people well and to do our best, and with the idea that if we do good things it's not that we're doing them for a reward, but that there might be some recognition. However, when that recognition goes to big multinationals that are just that much more sophisticated, I think if you asked most people out here, they'd say, “Well, they must have had contacts in government.” That's a cynical stance, and I always hate that portion of it, but I don't know how else to explain it. You have people doing the right thing who are asking for really nothing other than to be allowed to continue doing the right thing. It's hard to explain.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Indeed, it is very difficult to understand.

My next question will be to Mr. Guitor or Mr. Dyck.

I read in an article that Irving received a multi-million dollar contract although they were not in this industry. Is this a perfect example of how, when you have direct contacts, you get contracts? On your side, you had done everything to offer help, you had even provided hundreds of thousands of free bottles, in a heartfelt gesture, and in the end you received nothing.

[Gerry Guitor]

This was not big news. The distilleries had made the change to be able to meet the demand. It is just a bit surprising that no one tried to contact us to see if we could meet the demand.

Mostly I wonder how much extra money the government had to pay by using these brokers who went out and got products. It didn't contribute to the economy, it didn't hire people, it didn't build businesses or support local farmers.

I have to say it's a little disappointing, as I always say.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

That is indeed disappointing.

I think my speaking time is up.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Paul-Hus.

Now we'll go to Mr. Kusmierczyk for five minutes.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you, Mr. Chair, and through you I just want to thank our guests today for their tremendous efforts and all of their tremendous work. Here in Windsor—Tecumseh we are home to one of the giant distilleries in North America, Hiram Walker, which converted to producing hand sanitizer that was distributed not just locally but also in Toronto, the GTA, and other large urban centres across Ontario.

Our region is home to small craft distilleries as well. Wolfhead Distillery converted part of its production to hand sanitizer. We do have companies, distilleries, that, very much like you, pivoted and made those changes in order to help out our community and our country in a time of need. I do thank you very much for your efforts.

I want to get a better sense and an understanding from you of what it takes, or what it took, in terms of the process to actually pivot to making hand sanitizer. I never had a chance to actually ask our local distilleries that question. What did the process look like?

[Gerry Guitor]

It was actually easy for us. If you're actually making alcohol, you're already making it 96% proof. The challenge was to find the proper recipe. A lot of distilleries would take 70% ethanol and put it in a bottle and add water. That just wasn't sufficient. We did some research and we found the recipe of the World Health Organization, which was a combination of ethanol, hydrogen peroxide, glycerine and distilled water. Very quickly after we challenged the production team to find a solution, we were able to find that recipe and eventually we evolved it to gel, but the raw ingredients were just there. I think the biggest challenge we had was finding a supply of glycerine and hydrogen peroxide, but luckily we were able to fill the supply chain.

For other challenges we had regarding bottles, spray tops and containers, the industry stepped up. People were calling me—and I hope it was the same for my colleague out west—and they were offering to help us source this stuff. People were offering free labelling machines, free labels.

I know that among our team there were a lot of tears because it was a real community effort. Everybody wanted to contribute. Just as an anecdote, there was a positive contribution to the community. People would come in to buy the $3 sanitizer and give money to the food bank. They'd give us $100 and say, “Give that to the food bank.” Somebody would show up and say, “Here's $50 for one bottle, and I'll pay for the next 12 in line.” It was that kind of community response.

As much as we could get a little cynical, I felt that we saw the best of the community through this experience. Obviously we all hoped we could maybe benefit from the national procurement strategy, but overall for our team it was somewhat of an enriching experience, though I do think we may have missed the opportunity to really help create more robust microdistilleries, especially the farm-to-glass companies like my own and those of my colleagues here.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

That's excellent. I appreciate that as it provides me with a better understanding of what that process looked like and some of the challenges that you both experienced.

I wonder if the quality of the hand sanitizer evolved over time, whether the recipe, as you called it, over time had to be tweaked by you or other distilleries.

I ask that because my wife is a nurse practitioner. As nurses know, hand sanitizer is applied throughout the day countless times, hundreds of times. The trick is that the hand sanitizer has to be strong enough to do what it's designed to do, but at the same time, it has to be sort of gentle on their hands, or kind to their hands, because honestly, they're applying it throughout their entire shift.

I'm just wondering if there were tweaks. Was the recipe changed? Did you get feedback? I want to understand that process a bit.

[Gerry Guitor]

The issue was that it was very uneven. Some distilleries actually followed the World Health Organization and used the proper materials within their products. They used what was considered food grade ethanol, but as it evolved, there were less than.... I don't want to say unsavoury characters, but there were characters who were putting in technical grade ethanol.

Speaking for ourselves, and I'm sure for my colleague, our sanitizer was probably the most expensive sanitizer you can get on the marketplace, because we produce a premium product, but that's okay. Companies like ours decided to do that for the greater good.

No, we followed strict rules. When Health Canada got engaged, we would follow Health Canada. When we evolved to a gel, we would follow that. We wanted to make sure that we were absolutely 100% copacetic with Health Canada. That can't be said for all of those who supplied. It can't be said for people who were using the technical grade just to get some revenue, to generate some cash, or for product coming from overseas that sometimes was also very questionable.

I hope that answers your question.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Kusmierczyk.

Now we'll go to Ms. Vignola for two and a half minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

I'm listening to you, and I have so many questions for you it doesn't make sense. Some of them are not very nice. I'm going to hold back a bit.

With respect to Health Canada, Mr. Dyck and Mr. Guitor, you said that it was difficult to get adequate products, because they came from abroad. They could be anything.

Did you have support from Health Canada to make sure you met the standards, or did you have to figure everything out from scratch?

[Gerry Guitor]

I will speak, and then I will yield the floor to my colleague.

Yes, I have to say that we had some help.

Health Canada looked at the composition and approved it very quickly. Then they looked at the label and made suggestions. What I really can't complain about is Health Canada and their input. We saw products that may not have been compliant, and I noticed that Health Canada was very quick to respond and take them off the market, since it can cause problems if you don't use the right recipe.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

Mr. Dyck, did you have a similar experience?

[Tyler Dyck]

Yes. Actually, Health Canada was great to work with. They very quickly approved things when we pointed out areas that just seemed like unnecessary red tape. They seemed to come up with a workaround, at least a temporary one. They were very easy to work with on that.

Again, hand sanitizer is not rocket science. If you look at what's on the market, the stuff that was being made here in Canada probably far exceeded world standards, and probably 99% of the time it was way better. In fact, when journalists did the exposé on it, I was told through them that a large amount of the government stuff that was bought in these big procurements is still sitting in warehouses because it didn't meet Health Canada standards. Whether that's hearsay or not, that's just a repeat from me, directly from the reporter coming back.

There is a lot of really shady stuff that comes in. I would say that for the producers that were doing it here, if there was a problem, it might have been that they made an honest mistake on something. For the most part, the stuff that you had on your hands here, it actually used to be a whisky. It's got all the nice natural oils in it. The only thing that was very, very difficult with it was seeing my dad cry every night when he looked at something that used to be whisky converted into hand sanitizer.