I appreciate the invitation to appear before the standing committee again, this time on the issue of trans fat and the perspective of the restaurant industry.
I want to be very clear that the Canadian Restaurant and Foodservices Association supports the recommendations in the Trans Fat Task Force report. Significant industry progress has been made in meeting the trans fat limits specified in the report. In my short time here today, I'd like to outline some of the hurdles we face as an industry. I also want to bring to your attention one recommendation in particular that requires immediate action by government.
To give you a little background, the Canadian Restaurant and Foodservices Association represents a $50 billion industry with over one million employees and accounts for 4% of GDP. We have 34,500 members across the country, and our members consist of everything from quick-service restaurants to full-service restaurants, hotels, clubs, coffee shops, pubs, as well as institutional feeders in hospitals, schools, and offices.
The commitment within the food service industry to reduce and eliminate trans fat from menu items is very high. Food service operators, in partnership with their suppliers, have been making significant progress. They've worked with their manufacturers and suppliers to identify, research, develop, test, and implement healthier trans fat alternatives.
Some of the company names you will know well that have taken that step include New York Fries, Pizza Pizza, Swiss Chalet, Harvey's, Joey's Only, Wendy's, KFC, Taco Bell, A&W, Starbucks, and White Spot. They are just some of the companies that have successfully eliminated trans fat from their cooking oils and are reducing the trans fat content of many of their menu items.
I also have to say that there is a high degree of frustration amongst some of these companies that have reduced their trans fat use because of their inability to communicate that information to customers. Currently the food and drug regulations prohibit food service operators from promoting restaurant items as trans fat free if the menu item contains two grams of a combination of saturated fat and trans fat. For example, a company may move from trans fat to a high oleic/low linolenic alternative, which is considered a healthier alternative to trans fats, and is breading, frying, and preparing their menu items with these trans fat alternatives. But because some of the products they're preparing have a high amount of naturally occurring saturated fat, for instance chicken thighs, they're not allowed to make a trans fat free claim.
The Trans Fat Task Force recognized this challenge for food service operators and included the following recommendation in its report, under 6.1.2.: “To help the food industry communicate the healthier nature of its products to consumers, the Trans Fat Task Force recommends that the Government of Canada explore the possibility of allowing "trans fat free" claims that are more appropriate for the food service sector.” These companies that have devoted considerable time and resources to laboratory trials and consumer testing to identify healthier alternatives, and continue to invest in higher priced oils and more expensive operating procedures, should not be prohibited from communicating to their customers that they are now using healthier trans fat alternatives.
We encourage you to address this issue as soon as possible so companies that have demonstrated leadership by eliminating trans fat from their operations, and the many other companies that are working toward that objective, are not penalized. Many others are working toward that objective and have been for some time.
To assist and encourage all food service operators to transition their menus out of trans fats, the Canadian Restaurant and Foodservices Association has developed guidelines in a how-to guide. You should all have a copy. It's available in English and French. This guide contains background information on trans fats and step-by-step instructions for operators to use. It's been developed with smaller operators in mind that cannot do the laboratory testing and consumer research on their own, and are very much dependent on their suppliers to work with them and provide viable products made with healthier trans fat alternatives.
I'd like to run through some of the hurdles that food service operators face when they're transitioning out of trans fat.
Like food processors, large food service operators have devoted considerable time and resources to laboratory trials and then in-restaurant testing of trans fat alternatives. They need to find products that meet their brand standard for flavour, texture, crispness, heat retention and so on. When they do these tests, they sometimes run into operational problems. Sometimes there's crumbing. Sometimes the product is too greasy. Sometimes it doesn't meet consumer taste requirements. If that's the case, then they have to begin their laboratory testing all over again with another fat. So the first hurdle is finding a product that has the functionality and quality that their consumers are willing to buy.
The second hurdle, once they have identified those healthier alternatives, is to find a secure, consistent supply of these products to meet their system-wide needs. This means competing against a large number of manufacturers and processors for a very limited supply of these healthier alternatives. This has turned out to be a huge hurdle for food service operators.
Another key challenge for food service operators is managing the complexity of their recipes and ingredients. One full-service restaurant may purchase 400 different ingredients, and some of these ingredients are sourced outside of Canada. For each oil or fat application, whether it's for a sauce, a dressing, a spring roll, a cookie, a doughnut, or a pastry, etc., the trans fat substitute must be tested and the appropriate trans fat alternative must be identified. Sometimes they're different.
Finally, restaurants must find affordable solutions, given the current business climate they're operating in. The combination of decreasing international tourist spending and sluggish domestic spending has restrained real commercial sales growth between 2001 and 2006 to 2.9%. In contrast, grocery store sales have jumped 10.1%.
In addition to these challenges, the costs of operating a restaurant and bar continue to climb. Worker shortages have put upward pressure on labour costs in many parts of the country. In the last two years, average weekly wages in the food service industry have jumped 15% compared to a 6.1% increase in the industrial average. In the most recent survey by Statistics Canada, food service operators found food costs jumped from 33.5% of operating revenue in 2001 to 37.5% in 2004. As a result, rising operating expenses have eroded profit margins from 5.8% in 2001 to 3.6% in 2004.
My reason for outlining these hurdles is not to discourage you from implementing the right recommendations in the report. We think it's a health imperative. We need the federal government to demonstrate leadership in this regard. We support the recommendations, as Sally mentioned.
In contrast to the recently passed New York City bylaw, the recommendations in the task force report are comprehensive. They target the full range of food products in Canada, recognize the challenges with some product applications, and they provide flexibility to permit the development of healthier products. They also simplify compliance and enforcement.
The task force recommendations recognize how costly and impractical it would be to regulate the food service sector on the basis of final products or outputs. Restaurant operators have no means of testing their products. Since they may use different recipes and ingredients for their menu items and their menu items change frequently, there could be a lot of variability in their menu offerings.
Regulating on the basis of inputs means that everything our industry buys and uses would automatically be in compliance. We recognize that this puts our industry at a bit of a disadvantage. It means manufacturers of a frozen meal product can blend down while restaurant operators cannot. Nevertheless, for reasons of simplicity, we support this approach.
The task force spent more than a year studying trans fat, with a focus on the health impacts of lowering them. Work is now required to examine the business, agriculture, trade, and environmental impacts of the recommendations. Government has to fully understand the investment it will require from both industry and government, as well as the cumulative effects of this type of regulation.
To sum up, the food service industry recognizes the health concerns related to trans fat and the need to reduce them significantly. There is a high degree of commitment to implement the recommendations in the Trans Fat Task Force report, but there should be no illusions about the difficulties and the challenges. The size of the food supply system in Canada, the number of players, the complexity of the conversion process, compounded by the limited availability of healthy alternatives and the fragile state of the food service sector all contribute to the enormity of the task.
Thank you.