Government Operations Committee on June 14th, 2021

[The Chair (Mr. Robert Kitchen (Souris—Moose Mountain, CPC)), Conservative, Robert Gordon Kitchen]

I call this meeting to order.

Welcome to meeting number 37 of the House of Commons Standing Committee on Government Operations and Estimates. The committee is meeting today from 4:31 p.m. to 5:31 p.m. to hear from witnesses as part of its study of the government’s response to the COVID-19 pandemic.

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

To ensure an orderly meeting, I would like to outline a few rules to follow.

Interpretation in this video conference will work very much like in a regular committee meeting. You have the choice at the bottom of your screen of “floor”, “English” or “French”. Before speaking, please wait until I recognize you by name. When you are ready to speak, you can click on the microphone icon to activate your mike. When you are not speaking, your mike should be on mute.

To raise a point of order during the meeting, committee members should ensure that their microphone is unmuted and say “point of order” to get the chair’s attention.

The clerk and the analysts are participating in the meeting virtually today. If you need to speak with them during the meeting, please email them through the committee email address. The clerk can also be reached on his mobile phone.

For those who are participating in the committee room, please note that masks are required for all staff at all times. MPs may remove their masks only when they are seated.

At this point, we're asking for five minutes of opening statements.

I will now invite Mr. Dyck to make a five minute presentation.

[Tyler Dyck, Chief Executive Officer, Okanagan Spirits Craft Distillery]

Thank you very much.

Hello. My name is Tyler Dyck. Our family owns and operates western Canada's original craft distillery, Okanagan Spirits. I'm also the president of the Craft Distillers Guild of B.C. and the spokesperson for more than 250 craft distilleries right across this great nation. At the heart of our collective lack of preparedness for this pandemic is the overarching issue that—

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

On a point of order, Mr. Chair.

I'm sorry, Mr. Dyck.

There is no interpretation.

[The Chair, Conservative, Robert Gordon Kitchen]

Ms. Vignola, you're not able to get interpretation. Is that correct?

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

I can hear it now, but I could not hear it when Mr. Dyck was speaking.

[Tyler Dyck]

Okay, I can start again.

Should I start from the beginning?

[The Chair, Conservative, Robert Gordon Kitchen]

Yes.

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

I hear it now; excellent.

[Tyler Dyck]

My name is Tyler Dyck. Our family owns and operates western Canada's original craft distillery, Okanagan Spirits. I am also the president of the Craft Distillers Guild of B.C. and the spokesperson for more than 250 craft distilleries right across Canada.

At the heart of our collective lack of preparedness for this pandemic is the overarching issue that, for too long, Canada has abandoned policies that champion value-added made-in-Canada production chains. This, unfortunately, has allowed for an almost total lack of self-sufficiency when catastrophic challenges appear. We have become a nation purchasing the cheapest finished products from afar and have lost most, if not all, capacity to look after ourselves and provide for ourselves when no one else can or will.

This weakness has become brilliantly exposed during COVID-19, especially in regard to an almost total lack of ability to look after our own PPE needs right here at home in Canada. This situation of ill-preparedness could have and should have been avoided, or at least severely reduced, if the sitting and past governments had heeded the calls from Canada's domestic distilling sector to mirror the policies of our greatest trading partners, policies that celebrate and reward start-to-finish domestic industry, calls that we had been making for over a decade.

My hope is that in speaking to you, I can illuminate how important it is for government to meet with our sector so that we can work together to make these changes to allow for an authentic Canadian distilling sector to thrive, not only to avoid being caught in a position of not being able to look after ourselves again but also so that we can collectively reap the massive economic rewards that spin out of supporting made in Canada.

First I'd like to highlight how the lack of a robust domestic industry led to the situation. To set the stage, I want to take you back to the early days of the pandemic. They were scary times. Almost immediately it became apparent that the internationally produced sanitizer we had grown accustomed to depending on was not to be available in Canada.

By this time, dozens of Canadian distilleries, including my own, had already retooled and converted over in an effort to try to fill the void of sanitizer domestically. We did this because we make high-test drinking alcohol. The base for sanitizers is alcohol. If we didn't step in, there would literally be no one else.

Most of us at that time did this entirely with our own funds, without any help or assistance from local government. Many of us were donating our sanitizer just to keep our front-line medical heroes safe so that they would be there in times of need.

Initially we worked with provincial and federal government bodies to highlight and remove the areas of red tape so that we would legally be allowed to produce and, in many cases, continue to produce the sanitizer to fill the growing demand.

While we were doing this, we continually told these government officials and their staff that our distillers could not continue to do this all on their own—they couldn't pay for this all out of their own pockets—but that there was a made-in-Canada solution that would allow us to continue. All we would need would be for the governments, both provincial and federal, to cover the base production cost of the raw materials—no profits, just the base production cost of the hand sanitizer produced and donated in Canada to our Canadian front-line heroes. This would not only allow us to meet a major portion of the domestic demand for sanitizer but also keep Canadian producers working instead of being paid to be at home on CERB.

The response from the federal side was crickets, and when there was a reply, that reply was, “Apply online through our national procurement site for obtaining PPE contracts.” When I reiterated that we were not looking for a fat paycheque or a contract but merely an opportunity that would keep Canadians working as well as provide much-needed sanitizer, again I was directed to tell our members to apply online.

Many of the distillers did, but others, frustrated by the process, just stopped producing. Unfortunately, to my knowledge, almost none of our members have received any help in covering the expenses associated with their altruistic efforts or have received government contracts. Even more shocking, as we found out later only through a CBC investigative series, when contracts were awarded both provincially and federally to companies for that hand sanitizer, they were awarded to foreign companies with little to no domestic presence or to massive corporations. They were basically purchasing non-domestically produced alcohol for the basis for sanitizer. This meant little to no value-added domestic production and hundreds of millions of taxpayers' dollars were going to for-profit production, with most of those dollars leaving the country.

My goal today is not to talk about hurt feelings and missed opportunities. More importantly, it is to call on this government to change course when it comes to supporting and championing domestic industry, domestic industry that, if supported, not only will be there in a far more robust fashion to do its part when the next crisis emerges but also will restore this country's ability to rely on itself as a nation.

On behalf of the hundreds of authentic farm-to-flask distilleries right across this wonderful country, I thank you for your time and thoughtful consideration of this submission.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I have a point of order, Mr. Chair.

I'm getting reports that the dial-in number and ParlVU may not be working.

Can we confirm that?

[The Chair, Conservative, Robert Gordon Kitchen]

We have been looking into that.

Mr. Clerk.

[The Clerk of the Committee, Mr. Paul Cardegna]

Yes, Mr. Chair, we were told that the dial-in phone lines are, unfortunately, not working. The only way for us to get them working would be to suspend the meeting to reset them. In light of the fact that people who can't use the phone lines can listen to ParlVU, my advice to you is that we continue the meeting.

Again, that's entirely up to you or the committee to decide. I believe, with the storm going on outside, there have been some problems with the phone lines.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Clerk.

Thank you for the point of order, Mr. Drouin.

I think, in light of how late it is and just the challenges we have—it is a bit of a challenging meeting.... As the clerk has indicated, people could join in with ParlVU, so I think we will continue.

Thank you.

With that, we will now go to our second speaker—I apologize if I pronounce your name incorrectly—Mr. Guitor.

[Gerry Guitor, President and Chief Executive Officer, Spirit of York Distillery Inc.]

Thank you, Mr. Chair.

My name is Germain Guitor, or Gerry for my Anglo friends, and I'm the founder and president of Spirit of York Distillery, located in the Distillery District in Toronto.

First of all, I want to thank all of you for the invitation to speak to you this afternoon. It really is an honour to be here today to share our company's experience during COVID-19. I hope that our story provides this committee some useful insights and helps in guiding any future federal response to these types of national crises. My story won't be as eloquent as Mr. Dyck's. This will be more of a personal story, but I'll walk you through what we experienced during this COVID period.

When the pandemic hit the shores, Spirit of York was one of the first commercial enterprises to pivot to help our communities, and arguably, the first distillery in the country to start shifting operations to produce hand sanitizer to satisfy the incredibly high demand. Our intent was to help front-line staff, the needy and the vulnerable. This effort was consistent with our company values to give back to the community, as the distillery contributes 10% of our profits to assist social and cultural groups in our home province.

As you can imagine, as the first company to pivot, we received a tremendous amount of attention from local, national and international media. In addition to taking advantage of these media opportunities to challenge the business community to get engaged in helping our communities through this tragedy, I openly shared the World Health Organization sanitizer formula we uncovered, in the media and in the hundreds of subsequent calls received from across Canada and all over the world. Suddenly we were bombarded with individuals who volunteered to help and a great many companies that offered tools and assistance. Companies started donating labels, bottling machines and raw materials.

We started by producing hand sanitizer in a small 140-millilitre format that was being sold for three dollars, with all net proceeds going to Ontario food banks. We would distribute these at the front of our distillery, with the product being free for the elderly and for those who could not afford it.

We immediately started donating and distributing sanitizer to local police departments, fire stations, hospitals, community organizations and homes for the elderly. We would even courier sanitizer weekly to the federal government's COVID-19 response at the government operations centre. Because of their role as the lead organization for the coordinated federal response, it was important to help them out in any way we could to ensure that they received support to assist them in maintaining a safe working environment. Over time, we donated tens of thousands of litres of sanitizer.

Suddenly we were getting phone calls from large corporations with critical front-line employees seeking to buy large volumes of hand sanitizer. We were very careful to price our products fairly to ensure that we did not come across as taking advantage of the situation. Again, 10% of the revenue generated from these sales was donated to the food bank. We even took some of the revenue to produce an ad to recognize and thank front-line employees and first responders, which garnered almost a million views across Canada.

All of a sudden, sanitizer became a significant venture for us. Luckily, we kept honing our supply chain to allow us to meet the ever-increasing demand.

This initiative allowed us to hire a significant number of recently unemployed hospitality staff who wanted to work rather than collect CERB. At its peak, we had 50 incremental staff to whom we were paying wages significantly higher than minimum wage. The venture also generated incremental income that allowed us to keep donating sanitizer. We rented another facility to satisfy the ever-increasing demand. It had become a virtuous cycle: sell sanitizer to large corporations, hire unemployed staff, donate sanitizer to first responders and the needy and generate money for the food bank. To this day, we still continue to supply sanitizer to private corporations.

However, when it came to supplying the federal government, we quickly realized it was a whole other game. We started getting a number of phone calls from brokers and sub-brokers, individuals who wanted to buy cheap and sell high to the government. They would tell us that they had connections with the federal government, thereby the ability to bypass the procurement system, and were looking to source very large quantities of hand sanitizer. We would supply pricing and then we would never hear from them again. This probably happened at least a dozen times, and I'm being conservative. It was very difficult to know who was and who wasn't legitimate.

We entered our information, a Canadian company with the ability to supply hand sanitizer, in the federal government's purchasing portal. We tried reaching out several times and the guidance was always to ensure that we were identified as a supplier in the portal, which we were. We kept monitoring and waiting for a call to tender, which never came. No one ever contacted us from the federal government to see if it was possible to supply; yet the calls from these brokers kept coming in.

We would then see bottled sanitizers being distributed that were clearly imported from overseas, with local labels, and were told of huge bulk purchases, with contracts being fulfilled with product originating mostly from Asia. In retrospect, it was disappointing that the federal government didn't see the benefit of purchasing locally to satisfy its needs.

I'm not sure those mandated with purchasing decisions were aware that they were being supplied by either importers of overseas-manufactured product or foreign bulk sanitizer. I believe somebody—or somebodies—made tremendous amounts of money acting as an agent for a foreign-manufactured product. Somehow, someone failed to understand that many Canadian companies had pivoted to satisfy the sanitizer demand. Someone missed that these Canadian-based companies would buy raw materials from Canadian farmers, transform the product into sanitizer using Canadian manufacturing sites, buy packaging, labels, bottles and other raw materials from local suppliers, employ local employees, oftentimes the recently unemployed looking for work, and support local distributors and transporters. It was Canadian sanitizer produced by Canadian companies.

I'm not suggesting there was some form of questionable conduct. I know it was a challenging time for everyone to secure supply. People and organizations were scrambling. However, I'm not sure it takes a Ph.D. in economics to understand the benefit of the economic multiplier effect in having truly supported a burgeoning Canadian industry. Also, there may have been a failure to realize the positive social impact of companies like mine, and like Mr. Dyck's, that were donating sanitizer to front-line employees and to the needy in their local communities.

I believe the federal government not only overpaid for their sanitizer needs but also missed a great opportunity to reinvest in local economies and create economic multiples, thus reducing the financial burden on our government and taxpayers, creating employment, and allowing these companies to continue to selflessly contribute to their communities. As I mentioned, I suspect that a few companies made a lot of money due to our failure to understand what was possible in this crisis situation. It would be an interesting case study to understand the cost, both the real cost and the opportunity cost, of the federal government's decision to supply from overseas.

In closing, I think it's important to recognize that Health Canada was a significant and positive contributor during this crisis. They legitimized us quickly by providing product and site licences. They provided guidance on packaging when required and moved quickly to remove companies who were using ingredients that were potentially dangerous. Although there's much to learn about the government's procurement process, I believe Health Canada should be recognized for how they positively handled the sanitizer supply issue.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Guitor.

We will now start with questions.

Mr. McCauley, you have six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Mr. Chair.

Mr. Dyck and Mr. Guitor, thanks very much for joining us today, and thanks for your stories.

Mr. Guitor, I grew up in the hotel and restaurant business. A lot of my friends are still suffering badly from this. I'm really appreciative of the efforts you made to reach out and hire hospitality workers. Thank you very much.

Mr. Dyck, my wife used to have a wine distribution and spirits distribution business in B.C., and is still involved in the industry in Alberta. She wanted to pass on her compliments on the absinthes, bitters and fruit brandies that you do. While I'm saying that, there is a distillery in my riding, Hansen Distillery, that does incredible whiskies and moonshine. I'll give a shout-out to them at the same time.

Again, gentlemen, thanks for providing the information. I know that my colleagues on the government side as well as the NDP and the Bloc probably agree and want to move forward with this. I think you'll find some friendly faces asking questions today. Obviously, we want to see these items addressed.

I'm wondering if either one of you could let us know who you reached out to within the government.

Mr. Dyck, I think you said that you reached out several times and just heard crickets. Did you go through the procurement process, filling out the forms and applying online to sell the product? I'm just wondering where the roadblock was.

[Tyler Dyck]

As the head of the Craft Distillers Guild of B.C., I work with a lot of our distillers across Canada. A lot of the early-stages stuff was working with government to remove roadblocks. If you remember, in the early stages there was even a question—Spirit of York was going to be caught up in this as well—of what happens when we use our own products for making sanitizer. The federal government was still charging us $12.61 a litre on that. Were we going to have to pay it [Technical difficulty—Editor] have to happen?

A lot of the stuff I was dealing with in terms of government was about what sorts of roadblocks needed to be removed. It was also at the provincial level immediately, and then at the federal, saying, “Hey, there are some really great opportunities here to have a made-in-Canada solution.” As my colleague stated, it was already occurring. Letters went out [Technical difficulty—Editor] PM's Office at the federal level, because I deal with excise a lot federally. I was dealing with the Ministry of Agriculture and the Ministry of Finance, sending letters through just saying that this made good economic sense.

We have a structure in place across Canada—it's maybe not as robust as it could be—of 250-plus distilleries. A lot of them were already starting to pivot or were following the lead of Spirit of York and Okanagan Spirits and were going ahead despite the rules that were blocking them.

I think it's fair to say that we reached out to almost everyone we possibly could. Yes, we encouraged all of our members to go through the federal procurement site and the provincial ones.

[Kelly McCauley, Conservative, Edmonton West, AB]

Did anyone that you're aware of have any luck selling to the federal government ?

[Tyler Dyck]

Not that I'm aware of, and for our members out here in B.C., some of them actually, when.... You have to remember that in the early days you couldn't even buy NGS, the base material alcohol for sanitizer, so most of us were using our own. Instead of making whisky, we were making gin. We were converting over.

There were a few companies across Canada, and a couple in B.C. in particular, that went out and after a few months managed to get their hands on a few hundred thousand litres of internationally made alcohol so that they could produce that here: take that base product and add to it and then distribute it. They did that because they heard two things. They heard the Prime Minister of Canada and the provincial government leaders say, “Thank you, Canadian producers. You have pivoted and have done the right thing.” Just like they were championing all the others—

[Kelly McCauley, Conservative, Edmonton West, AB]

Let me interrupt you there.

How much would it have cost just for your distillery, say, to convert to produce this?

[Tyler Dyck]

We were maybe a little different than some. Early on, a lot of people were making and donating. We donated over half a million dollars in sanitizer, and we continually made donations through shelters and through the hospitals. We were entirely donating. That was mainly because as the head of the organization I was trying to work with government by saying that this is what can happen when you do the right thing and if you get some support for it.

A lot of our other distilleries that originally did that had to pivot and start selling at least a portion. If you look at my esteemed colleagues from out east—we always say “out east” when you're out west here, like us—they made a heroic effort in putting out tens of thousands of litres donation-wise, but they had to pay for it somehow, especially when it came through that there was no help, that there were no contracts being signed, and nobody ever got that, and then you end up finding—

[Kelly McCauley, Conservative, Edmonton West, AB]

You mentioned that you heard crickets. Did people bid on contracts and then just did not hear back? We heard previously that the government was invoking security exemptions in order to sole-source contracts to companies outside of Canada. Did you hear anything?

[Tyler Dyck]

No. I was polling our members all the time, and they would say “still haven't heard anything, still hoping, still haven't heard...”. You have to imagine that after months and months of nothing and—

[Kelly McCauley, Conservative, Edmonton West, AB]

Especially with the amount of money you donated.