Special Committee on Cooperatives Committee on July 25th, 2012

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

Thank you for joining us.

The success of cooperatives in Quebec and across Canada had been brought up a number of times. Witnesses have been saying for days that cooperatives are a success story.

I have listened to your testimony carefully. We can ascertain that Agropur's financial situation is excellent. You have paid out $230 million to your members over five years, and a witness said that the return on investment was 11% last year. That's amazing. That's much higher than what bank investments or investments in other financial sectors yield.

In addition, according to a study carried out in Quebec, I think, cooperatives are twice as strong as private companies during a period of economic crisis like the one we are currently going through.

However, we should also remember that the federal government has a $23-billion deficit. That's a lot of money, as it accounts for 10% of the government's revenue.

Canadians are demanding that we balance our books. The way I think of it, it's much like how members of the co-ops would demand that their co-ops balance their books. We've seen the success and the fruit of this program that CDI has been operating for 10 years. We're hearing it today from you.

There has been an increase in Quebec. You said that over 595 new cooperatives have been created over the past five years. That's a great success, but we need to resolve our spending problems.

I basically know the answer to the question, but does Agropur operate with an annual deficit equivalent to 10% of its revenues?

[Serge Riendeau]

No.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

If Agropur did operate with a deficit of 10% would its members demand that expenses be reviewed so that the books could be balanced so that the co-op could survive, thrive, grow, etc.?

[Serge Riendeau]

Basically, the purpose of the cooperative model is to meet members' demands. When cooperatives create wealth, they share it with their members.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

If a co-op has a 10% deficit, there will be no wealth. Members' investments would certainly be at risk. The cooperative must therefore review its spending and balance its financial situation. That is what the government is doing.

I would also like to say that no cuts were made to the CDI. The initiative merely reached the end of its natural life. The CDI was in place for two five-year periods. Very positive results were seen after five years. The government must now review its spending and balance its budget.

In closing, I would like to ask another question about the funding of other projects. According to some witnesses, it is still difficult to find money to carry out or expand certain important projects, implement initiatives and strengthen cooperatives. However, I believe, Mr. Riendeau, that you said that you put $550 million dollars aside for future capital investments in projects. I would like to know whether the other cooperatives are in a position to do the same thing. Rather than returning a large portion of their revenue to their members, could cooperatives put a little bit of that money aside each year in order to create a venture capital fund to help them carry out future projects?

[Serge Riendeau]

Agropur has not always been in such a good financial position as it is now. We exercised great discipline over the past few years. In order to be able to pay dividends to our members and in order for them to be in a position to give part to the cooperative, the company first has to make money. That is the first criterion. The company therefore has to be competitive and present in the markets and we must meet the needs of our customers and consumers. As with any company, that is the first step.

I cannot speak for other cooperatives because I am not familiar with their situations, but in our case, most of our surplus earnings are given to our members. In return, the members leave part in the cooperative to be used as working capital. There is also a general reserve. We therefore combine the two. The cooperative can use some of the surplus earnings and the capital held by the members to help it to grow.

That is why we included in our brief examples of support for cooperatives when the phenomenon you just spoke about occurs. We would therefore like to see the renewal of the measure that allows deferred taxes to be paid when the capital is redeemed or when the members receive it, rather than when it is issued. This would make it possible to better capitalize cooperatives and such a measure would not cost the government very much money. It is inexpensive assistance that would help cooperatives generate revenue and develop more quickly. This is one of our requests and, in our opinion, it makes sense for both the company and the government.

[The Chair, Conservative, Blake Richards]

Thank you very much.

We'll move now to Madam Freeman.

You have the floor now for five minutes.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chair.

If you'll allow me, Mr. Chair, I'll make a quick a comment to the remarks that I think my colleague Monsieur Lemieux was talking about earlier—my colleague from across la rivière des Outaouais.

I find it interesting that $4 million is not seen as a good return on investment when, in a recession, these are areas and regions where jobs will be created. In an area like yours and mine, where we do see companies leave and cooperatives formed as a result, that does keep jobs in our regions at a time when we need them. And they do form because these jobs are leaving. That's why I think that $4 million, when you're making choices in a budget during a recession, is well worth the investment.

That's my little comment.

I will now move to Madame Bédard and Monsieur Riendeau.

I am pleased that the representatives from Agropur are here. The Oka cheese factory is located in my riding. It is a good example. The purchase of the Oka Abbey helped to create and maintain jobs in the region. This is a good example of what a cooperative can do and how it can benefit our regions.

Agropur is a large international cooperative that has been around for 75 years. It has remained competitive, as demonstrated by its growth and success. In your opinion, what role must cooperatives play in innovation within cooperatives and in the operation of the market?

Is my question clear?

[Serge Riendeau]

Yes. It is all a matter of competitiveness. Regardless of the sector, the company must be competitive, whether we are talking about innovation or something else.

In the past few years, Agropur was the only dairy company to invest several million dollars in a research and development centre to support innovation, find new ways of encouraging Canadians to consume dairy products and meet Canadians' needs. I would like to specify that we did this without any financial assistance from the federal or provincial government. We could have perhaps done more had we received assistance. We could have developed other aspects. However, this centre gives us the opportunity to innovate and to remain one of the most competitive dairy companies. That is what we are trying to achieve and this was one way for us to expand.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

That is very interesting. Research and development is always needed to keep up with new technologies. The cooperatives have been fairly successful in doing that themselves, which is always good. One difference between cooperatives and other types of companies is the manner in which they are able to better develop themselves. Is that correct?

[Lorraine Bédard]

One of the great things about cooperatives is their sustainability, the desire to be around for a long time. Agropur wants to continue to exist for future generations, for our future members. It is important. Sometimes, we assess certain investments differently or with a more long-term vision than other investor-owned or public companies. We do so because of our desire for sustainability.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Ms. Ferland, in my riding, the CDR is very important. Our representative for the Outaouais-Laurentides region is excellent. We often work with him.

Often hardware stores or markets close. The farmers want to be able to offer their products, but the larger supermarkets do not give them the opportunity to do so. The CDR has often been there. With the cuts that have been announced recently, it is much more difficult to start such cooperatives. We have a few projects—

[The Chair, Conservative, Blake Richards]

Madam Freeman, the time has expired. If you have a question, I will allow you to pose it very quickly.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

How did the CDR use its funds before? How did it help cooperatives that were starting up in the regions?

[The Chair, Conservative, Blake Richards]

I ask that the response be as brief as possible.

[Francine Ferland]

As I explained a bit in my presentation, the CDR is supported through a partnership agreement between the Quebec cooperative movement and the Government of Quebec. The CDI is another thing. It is a federal government program that the CDR used in part but not to support cooperatives in the regions, which is what we are talking about here.

However, I would like to add, somewhat in response to Mr. Lemieux's observation, that one way large cooperatives, such as Agropur, the Coop fédérée, the Desjardins Group or Promutuel groups, provide a lot of support for the cooperative movement is through this partnership agreement with the government. The Quebec government invests money. Under the agreement, the Quebec cooperative movement adds money to support organizations that engage in cooperative development and that support new cooperatives on the ground. The fact that 595 new cooperatives were created in Quebec is not necessarily because of the CDI, but rather, it is because of the partnership agreement. We would like 595 new cooperatives to be created in Canada next year.

Thank you.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

I did not mean that the CDR was funded by the federal government.

[The Chair, Conservative, Blake Richards]

I'm sorry, but we're well over time. We will move now to Mr. Boughen.

You have five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Mr. Chair.

And thanks for sharing your afternoon with us. Certainly your comments and your knowledge are very enlightening.

Picking up on what some of my colleagues said earlier this afternoon, and just lately, and listening to what some of our presenters or witnesses have told us, the co-ops have, for want of better words, a pretty good nest egg in terms of dollars put away for expansion and those kinds of things.

What do you see as the percentage that is reasonable for government to be involved in this business? There are two levels of government, the provincial and the federal governments, involved in start-up costs and other things. Has the co-op movement now reached a point where the government costs or the government input is not as critical as it once was, because there are other sources of funding for start-up co-ops that weren't there years ago? Now co-ops and mutual funds can be earmarked to help get a co-op up and running.

I'm looking at the broad distance, and at the nearer distance, as well, in terms of what a reasonable percentage is. If we talk percentage, then we don't have to worry about the numbers, such as having just a $100,000 involvement for a co-op that's $2 million, or you know, a co-op down here that's just getting started. What would you say would be a reasonable percentage from both levels of government?

[Francine Ferland]

It varies greatly from case to case. The needs are completely different for the start-up of a small cooperative than for the development of a cooperative the size of Agropur, for example.

I will let the Agropur representatives speak about their own situation, but in our sector, we deal with the start-up of new cooperatives. It is true that there are some financial resources available, but the organization that is going to support these cooperative projects also needs support.

There is money to assist with the start-up of the cooperative but those that support these cooperatives help them from the outset. It is very important that the new cooperative get started on the right foot. If not, they will not be included in our survival rate. They will be among those cooperatives that do not make it. The cooperatives that survive do so because they have received the proper support from the outset and they continue to receive good support over the years.

About 84 years ago, Agropur needed such support but did not receive it. The cooperative grew a little, but the situation was different. Today, it is important for people to be well informed of all the options from a legal and financial perspective. There must be financial support for such assistance.

[Ray Boughen, Conservative, Palliser, SK]

What percentage...? If you're talking about an organization that needs $2 million and it's 10% of $2 million, you're talking more dollars than if you're talking about an organization that needs $500,000 for start-up costs. You know what I mean? A percentage is only a kind of input cost needed for the co-ops, if in fact it's needed at all. If it is needed, what do you see as a reasonable percentage of input—10%, 20%, 30%?

[Francine Ferland]

It is difficult to answer your question. You are asking difficult questions. I do not know the magic percentage required to meet the needs of cooperatives. I think that it varies greatly from one case to another and from one organization to another.

[Ray Boughen, Conservative, Palliser, SK]

I'm just picking up on what Pierre said, and what Madam Freeman said as well, in talking about how many dollars were required. There's money needed by both levels of government, so how best can the government spend that money to help more of the population than it's currently doing, or at least as well as it's doing—and co-ops are one of those operations?

I'm a co-op member and have been one for 50 years. I remember when the operation started, it was very tentative, very tight, with not much money available. As far as I know, it received no money from the province or the federal government. It received some help from another co-op. Now that co-op has money running out of its ears; it's certainly not short of dollars. So it found its own dollars for start-up costs. There must have been a percentage there that it used.

So I'm just wondering, if we're talking about government involvement in business, then what percentage is reasonable to start it up, if in fact there are any dollars available at all?

[The Chair, Conservative, Blake Richards]

The time has expired. I'll give you a second or two to finish posing your question, and then I will ask for a brief, brief response.

[Ray Boughen, Conservative, Palliser, SK]

I'd just like to hear, Chair, from the other two panel members, what they think a reasonable number is.