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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 33 - Evidence - Meeting of April 25, 2013


OTTAWA, Thursday, April 25, 2013

The Standing Senate Committee on Agriculture and Forestry met this day at 8:04 a.m. to examine and report on research and innovation efforts in the agricultural sector (topic: traceability).

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Honourable senators, there is one thing before we move on to our witness this morning, Mr. McAlpine from Maple Leaf Foods.

[Translation]

I would like to bring the following fact to your attention.

[English]

I need to inform you that the position of deputy chair of the committee is now vacant. It is also my duty as chair to preside over the election of deputy chair. Therefore, I am ready to receive a motion to that effect.

Are there any nominations for deputy chair?

The chair will now recognize Senator Plett.

Senator Plett: Thank you, chair. I would like to nominate Senator Terry Mercer for the deputy chair position.

The Chair: Senator Terry Mercer, do you accept the position of deputy chair of the Standing Senate Committee on Agriculture and Forestry?

Senator Mercer: Yes, I do, chair. Thank you.

The Chair: Thank you, Senator Mercer. On behalf of all the senators I would also like to thank the previous deputy chair, Senator Robichaud.

[Translation]

I want to thank him for his special interest in agriculture and forestry.

[English]

Is it your pleasure, honourable senators, to adopt the motion with the comments made by the chair?

Hon. Senators: Agreed.

The Chair: Thank you. Therefore, I declare the motion carried.

[Translation]

This morning, we are welcoming Rory McAlpine.

[English]

He is the vice-president of government and industry relations. Before I introduce Mr. McAlpine officially, I want to thank him for accepting our invitation.

My name is Percy Mockler, senator from New Brunswick and chair of the Standing Senate Committee on Agriculture and Forestry. At this time, I would like to ask senators to introduce themselves.

Senator Mercer: I am Senator Terry Mercer from Nova Scotia.

Senator Merchant: Pana Merchant, Saskatchewan.

Senator Callbeck: Catherine Callbeck, Prince Edward Island.

[Translation]

Senator Tardif: Good morning. I am Claudette Tardif from Alberta.

[English]

Senator Plett: Good morning. I am Don Plett and I am from Manitoba.

Senator Buth: JoAnne Buth from Manitoba.

Senator Black: Doug Black from Alberta.

[Translation]

Senator Maltais: Ghislain Maltais.

[English]

The Chair: Mr. McAlpine, in the order of reference from the Senate of Canada, the Standing Senate Committee on Agriculture was authorized to examine and report on research and innovation efforts in the agricultural sector. In particular, the committee was authorized to examine research and development efforts in the context of developing new markets domestically and internationally, enhancing agricultural sustainability and also improving food diversity, security and traceability.

That said, honourable senators, Mr. McAlpine is Vice-President, Government and Industry Relations, Maple Leaf Foods. I would like to thank you, Mr. McAlpine, and please bring to the attention of Mr. McCain that we were well received when we visited Canada Bread in Saint John, which I know is under the Maple Leaf Group. Maple Leaf Foods is a consumer package food company with operations across Canada, the United States, United Kingdom, Asia and Mexico. It is a multinational corporation comprising three major groups: the meat products group; bakery products group and agribusiness group, which includes rendering; biodiesel production and ag production operations.

Mr. McAlpine, I will be asking you to make your presentation to be followed by questions from the senators. We know you have a very hectic schedule. Taking the time to come and share your comments, vision and recommendations will enable us, no doubt, to move forward and continue to be the best country in the world when it comes to agriculture.

[Translation]

Go ahead, sir.

[English]

Rory McAlpine, Vice-President, Government and Industry Relations, Maple Leaf Foods: Thank you for giving us this opportunity to contribute to your study.

[Translation]

I would also like to thank you for your work on Bill S-11.

[English]

That is the Safe Food for Canadians Act.

[Translation]

That was the topic discussed during my last visit.

[English]

I am grateful that you were able to see that legislation accomplished, and I want to thank you for the visit to the Canada Bread bakery, which I hope was informative.

First, I would like to give you a few comments about the Maple Leaf perspective on research and innovation, and then move towards the more specific topic of traceability, which I know is the main issue for today.

The Business Development Bank of Canada defines innovation as:

Innovation is really about responding to change in a creative way. It's about generating new ideas, conducting R&D, improving processes or revamping products and services. At another level, it's also about a mindset in your business: one where your staff, whether in the executive offices or on the shop floor, are always focused on continuous improvement and constantly thinking outside of the box.

Based on that definition, I think I can say frankly and modestly that the current transformation of Maple Leaf Foods fits that definition rather well. Let me start with food safety.

As you know, we had a terrible tragedy in our company in 2008 as a result of the listeriosis crisis and contamination of our products. No other part of our business or culture has changed more profoundly as a result of that. Consistent with that BDC definition, we have totally revamped our food safety leadership, strategy, performance management, process and product technologies, environmental testing and our third-party certification. We have truly embraced continuous improvement in food safety.

Second is the transformation of our manufacturing network in Canada. We are spending $760 million between 2010 and 2014 to achieve this. This is probably the largest-ever investment in a Canadian agri-food business. It includes the new state-of-the-art bakery in Hamilton. It includes a radical restructuring of our meat operations, including major investments in Saskatoon, Winnipeg, Hamilton and Brampton. It includes a restructured and simplified national supply chain with fewer product SKUs, or stock-keeping units, centralized procurement and new distribution centres in Saskatoon and in Aberfoyle, Ontario.

If you have any doubt about the extent of this innovation, the meats plant that is under construction in Hamilton really tells the story. This is a phenomenal facility. It is half-built. It is the size of 10 football fields in footprint. It will employ the latest in world-class technology and automation, everything from a continuous cook-chill system at the front end to robotics in packaging and palatizing at the end. Many of these are first-to-Canada innovations that will allow us to improve productivity, increase throughput, have longer runs, fewer changeovers, improved yield, lower cost, lower overhead and increased storage and distribution efficiency.

The other innovation element to talk about is product innovation. Of course, that is what is most visible to the consumer. This started with our investment in a new ThinkFOOD! Innovation Centre. It is a $12 million facility in Mississauga, Ontario, where all of our product development experts and nutritionists, microbiologists and so on work together, assessing all the issues that are affecting consumer food choices today.

What they are doing is, frankly, not rocket science. This is not basic science, but it is innovation in a very material way. For example, they are responding to what Canadians want to eat, from prepared meats with 100 per cent natural ingredients, to precooked sausages made safer with high pressure processing, to portion packed prime chicken and Schneiders bacon, to nutritionally superior smart white breads, to fresh cooking sauces with no artificial preservatives, colours or flavours.

Sodium reduction is a very hot topic; we are all over that. In fact, at this point we believe close to 25 per cent of our bakery products and a third of our meat products now meet the Health Canada guidelines for sodium reduction, and we are aiming to convert to those targets as many products as we can by 2016.

Sustainability is another major area of innovation for the company. We are about to issue our first ever sustainability report as a corporation, something that we probably should have done sooner. It is not that we have not been investing; we really have not been reporting it publicly. That report will highlight $96 million in capital, $244 million in operating expenses on environmental programs since 2001. We have diverted across 40 facilities 95 per cent of waste from landfill. In fact, we have three bakeries in the U.K. now that are zero waste; no waste at all, of organic, plastic or whatever, goes into landfill.

Finally, informatics, we are 80 per cent complete on the installation of an SAP informatics system across the business, replacing 40 legacy systems at a cost of $93 million.

Let me now turn to the issue of public investment in agri-food science and technology. What I have described is a story about innovation, not particularly invention, and I think there is an important difference. Our challenge, frankly, is to scour Canada and the world for the best ideas and to apply them with rigour and cost control, but underlying this premise is the availability of new ideas and public-private investment in the pre-commercial generation of those new ideas — in other words, the research component of your study.

In 2011, the Canadian Agricultural Innovation and Regulation Network concluded that for every dollar invested in R&D in agriculture, there are benefits of $10 to $15. Studies consistently rank returns to investment in agri-food research to be among the highest of any sector. The USDA has concluded that publicly supported basic or pre- technology research has the highest return, followed by applied public research, followed by private research. The point is that public investment is the most beneficial in terms of returns on the dollar.

Does this mean, though, that Canada's agri-food sector is doomed to mediocrity if publicly-funded discovery research diminishes? To answer that requires an understanding of how private investment in agricultural research and private control of intellectual property rights has grown, especially in the area of plant biotechnology. It also requires a sober assessment of whether Canada needs to be so self-reliant on its own research in a world, frankly, where China is a world leader in the genetic improvement of wheat, Brazil has cloned over 100 species of animals, and Japan is a world leader in the development of nutraceuticals.

However, regardless of the optimal balance between public and private research, basic versus applied research, the failure by Canada to sustain a strategic, well-funded national agri-food research game plan means losing our ability to differentiate Canadian products based on superior yield, quality, nutritional value, sacrificing the sustainability of our resource base, diminishing the economic efficiency of our supply chains and undermining a science-based regulatory system that we need to assess and respond to risk.

How are we doing? I do see some red flags. First, how is it that the 2007 national science and technology strategy does not even mention agri-food? How did we let that happen? How is it that Agriculture Canada has 50 per cent fewer scientists today than it did in 1992? According to the International Food Policy Research Institute, global spending on agricultural R&D grew by 22 per cent from 2000 to 2008. In Canada, it has remained flat and, of course, has declined in real terms.

Contrast this with Australia, with an industry very similar to Canada's agri-food industry, where public funding with respect to research in the agri-food sector is roughly double what is in Canada, albeit they seem to have a lower level of private investment in agricultural research.

Last year, the only national centres of excellence program supporting food and biomaterial research — this was at the University of Guelph — was terminated.

Of course, you know about the SR&ED tax credit system. That has always struggled to recognize and make eligible expenditures in innovation and food. That program has been cut significantly for all businesses.

It is not all bleak. The agri-food innovation program has been announced as part of Growing Forward 2, the new five-year agri-food policy framework. That commits $698 million over five years. I am pleased to say I am part of the board of directors of a new organization called the Canadian Food Innovation and Prosperity Cluster.

Finally, the food manufacturing industry, not just the commodity groups, came together forming a new legal entity such that we could apply for that funding and get access to money that would help us in innovation beyond the farm gate right through the supply chain, and we are waiting now to see if our funding request will be approved.

However, this cannot disguise the fact that public funding in agri-food research has been declining in real terms. In the U.S. context, President Obama said:

Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine. It may feel like you're flying high at first, but it won't take long before you'll feel the impact.

Finally, let me turn to traceability. You have heard from various industry folks on the topic, including the Canadian Meat Council, about the importance of traceability to managing food safety and animal health. As a major meat processor, Maple Leaf can confirm that traceability, based on good supply chain management, electronic records and so on, is vital in the case of a product recall. We code all of our products, permitting effective identification and tracking of specific products and lots. We value the significant government and industry investment in livestock traceability systems. Our animal health risk profile as a country is much stronger as a result.

However, we also support the comments of Jim Laws of the CMC when he said: ``We support the ability to track meat from the carcass cooler back to the farm of origin for all meat products. However, we believe that it is neither practical, necessary, nor economically feasible to regulate a system to track meat from a retail package back to the animal or farm of origin.''

Very simply, we do not see farm-to-fork traceability of packaged meats or other consumer foods as really a great enhancement to competitiveness, market growth or profitability. In fact, mandated traceability has the potential to foster market fragmentation, a higher SKU count, more deadweight cost and complexity in protein supply chains, both domestically and globally. It may make wealthy consumers feel better about the quality and origin of their food choices, but it does little to enhance yields, reduce waste or improve efficiency as we try to manage a system that will feed 9 billion people in the world by 2050. We have to be careful not to allow the science-based regulatory system for food safety, animal health and environmental sustainability to be undermined by conveying a false perception of superiority on behalf of foods that are traced relative to those that are not.

Finally, I will make one slightly political observation in this area, if I may. It would seem that one of the most basic and reasonable applications of traceability is to know what foods are imported and what foods are produced domestically. In Canada, we have a very confusing set of regulations and enforcement policies in this regard. At a time when consumers are showing more and more interest in local food and governments are promoting various schemes to facilitate local food choices, the import marking of various foods is very different in different segments, including regulated commodities like meat, fish and dairy, and packaged foods that you find in the middle of the grocery store.

An imported packaged meat product must be marked ``Product of Country X,'' but if the meat is cut and tray packed at the back of the store, it does not need to be marked as such. We strongly encourage that this be fixed and regularized in the labelling provisions that will come in the regulations under the new Safe Food for Canadians Act.

In conclusion, I will mention two key facts. Canada's net trade in value-added processed food products has deteriorated from a deficit of $1 billion in 2004 to a deficit of $6.3 billion in 2011. Our processed food exports have grown, but imports are growing much faster. Since 2005, 54 food manufacturing plants have closed in Ontario and 8,000 jobs have been lost. This does not include the Christie Foods plant that will close in Toronto later this year with a loss of 550 jobs.

For a country rich in agricultural productive capability, we are facing a major loss of competitiveness in our food manufacturing supply chains due to a lack of capital intensity, productivity growth and innovation. Maple Leaf is intent on changing that reality in our business through investments in scale, technology and new product development. Traceability has a role, but a small role. Far more important, for me, are the supports that we provide for research and development, competitive tax policies, well-developed infrastructure, and modern regulations.

The Chair: Thank you very much, Mr. McAlpine.

Senator Mercer: Thank you, Mr. McAlpine, for that thorough presentation. You have covered the waterfront on the issues before us.

You talked about a number of first-to-Canada innovations that you have put in place since the terrible problems we had a few years ago. Where did the first-to-Canada innovations come from and where were they developed? Maybe that will give us a clue as to where we should go.

Mr. McAlpine: In equipment and process technology as well as in product development, for example, new food ingredients, microbials and packaging, most of the innovations come out of the U.S. or Europe. For example, one of the key new pieces of our meat plant being built in Hamilton is a system called Armor Inox. It is a continuous cook- chill system replacing the old smokehouse process for smoked meat, and that comes from France. We have robotics in our plants that come from Japan. Most of the ingredients or food safety innovations and interventions tend to come from the United States.

Senator Mercer: Who paid for the development of the piece of French equipment?

Mr. McAlpine: I do not know. It is a French company, but I do not know whether there was some public investment in that innovation or technology.

Senator Mercer: You spoke about labelling, and you did not mention country-of-origin labelling in exports, which is an issue for many people. You can comment on that if you like, but my main question is with respect to imports. You said that prepackaged imports need to be labelled ``Product of Country X.'' You said that you want the situation of meat being cut at the back of the supermarket or the butcher shop fixed. Does the merchant always know the origin of the meat he has bought before he cuts it? Is it an expense for the retailer to add that labelling at that stage? He will probably have multiple labels. He will have beef from Argentina and pork from someplace else.

Mr. McAlpine: Separate regulations require that prepackaged imported products like seafood, meat, dairy and produce be labelled ``Product Country X.'' For cereal and other dry grocery products, the only requirement is that you indicate that it is imported for or imported by, and generally that would be a large multinational like Kraft, Unilever or what have you, but without indicating what country it comes from.

To your point, anything that is imported in bulk that is subsequently going to be processed in a store or in a facility for redistribution into Canada would have to be identified as ``Product of U.S.A.,'' for example. Many of these products come in large Cryovac bags and arrive at a store for cutting. That package, if the rules are being followed, will identify the country of origin. The in-store labelling is automatic. It includes the weight and the price. To add ``Product of Country X'' and put it on the tray pack is not really an extra step or cost.

We have had Maple Leaf product in stores that say ``Product of U.S.A.,'' which is just an error. There is always that risk, because people make errors, but to us it would not be very onerous to require that.

Senator Mercer: Thank you.

Senator Plett: Thank you, Mr. McAlpine, for being here. My first question continues along the line of what Senator Mercer was saying. Is this a two-way street? When we export, what do we have to put on the label? Do the same rules apply to export as to import?

Mr. McAlpine: I cannot speak to every country in the world, but I believe that all developed countries have a mandated ``Product of Country X'' requirement for labelling of imports. In the United States, food is regulated by the USDA for meat, eggs and produce commodities, and the Food and Drug Administration regulates everything else. There is a universal requirement in the United States that if it is an imported product, the label must identify from which country it was imported.

The United States has the horrendous mandatory country-of-origin labelling rule, which creates a problem. There is no problem with identifying the country of origin on the pack, but the rules by which origin is determined under that mandatory rule is very egregious, very much a trade restriction, and something we have fought against and won in the WTO. That is a separate problem.

In answer to your question, yes, if we were to do this, we would be consistent across food commodities and consistent with what other all countries generally require.

Senator Plett: Thank you for that. You suggested that you agreed with the testimony we had here, as I believe I do, that food need not necessarily be traced from farm to fork, that tracing a carcass back to a farm should be sufficient. Denmark, however, does have a farm-to-fork traceability system. We were told that it is easier for them because they are a smaller country. Why are they so set on that? Is their food safer as a result of it, or is it just that everyone feels a little safer because it is being traced all the way to the fork?

Mr. McAlpine: I guess I would comment by saying that, first, there has been no shortage of food safety problems in Europe. We have had our problems, too. I really do not believe it should be understood as an issue of food safety, specifically. As I have said, yes, traceability is important in the context of sourcing products, processing and, in the instance of instigating a recall, the need to know, if you are an operator, one step forward and one step back, what you receive from where and what you have sent to a customer. Having lot tracking and electronic records of all of that is vital in order to get hold of a product if there turns out to be a problem.

I have to say that I am not totally well-informed about it, but there is a liability directive in the European Union that has more clearly ascribed legal liability right back to the farm if something is identified in, say, a contaminated meat product that gets out into the market. My guess is that that liability has now incented all of the players in the supply chain to go for mandatory traceability because it avoids them being responsible. They can then say, ``Oh, no, it wasn't me; it was him,'' and so on back down the chain.

To your point, maybe Danish consumers are more willing to pay. My point is that, if there is a market or an attribute of that product that enhances value or quality that the consumer is prepared to pay for and if traceability or identifying via traceability the conditions of, say, animal welfare or whatever that that product was produced under is something that the marketplace will reward, then the private sector would respond and put in place that kind of product-specific, package-specific traceability. Right now, in our environment in North America, people shop for low- cost protein, and we do not see any sort of consumer demand for that. Frankly, Europe is losing market share globally. They have put a lot of regulatory cost on top of their meat and livestock industries, and they are struggling financially, economically, to survive the way they used to. I think there is some real cost that we have to weigh against the benefits.

Senator Plett: My final question is somewhat personal in nature. Your company used to own and, through some of your shifting of assets and so on and so forth, does not own anymore a company called Landmark Nutrition. I was under the impression that what they did there lent itself to being able to trace the food of pork. Because of the mixture of feed that they used, the work that they did there lent itself to traceability. Am I wrong in that?

Mr. McAlpine: I think that you might be referring to a project we had where we were looking at DNA traceability, literally where DNA testing of a piece of meat could be part of a traceability system. We put some effort into that. In the end, it did not go further, or we no longer pursued it. Again, I am not sure of all the reasons. I think that, scientifically, it is possible, but it is very costly. Again, the question is: What will the real value be of doing that? We no longer have that.

Senator Plett: You are absolutely right. I think that is exactly what it was.

Senator Merchant: Thank you, and good morning. First, I will ask you about your plant in Saskatoon because I am from Saskatchewan. You talked about public-private investment. Can you tell me a little about what you are doing in Saskatoon that is new? Does that create more jobs? If so, what is the difference between the number of people you were employing before and the number of people you are employing today?

Mr. McAlpine: Thank you for the question. I cannot recall the exact job numbers, but, in Saskatoon, we have invested a great deal in capacity expansion, automation and modernization of the manufacturing of sausages, particularly, and other fresh prepared meat products. That has involved many millions of dollars in new capital and some new job creation. We are not talking about a huge amount because there is a lot of automation going into that to improve the scale and efficiency of the plant. That is the main thing. It now becomes the centre of excellence for those items for national distribution. We also have our new western distribution centre in Saskatoon, which employs several people managing the distribution of products across Western Canada.

At one point, as you might know, there was a discussion about the future of hog slaughter in Saskatchewan. We are part of that potential, but, in the end, as you know, we closed our former slaughter facilities. It is now just that value- adding business. We also have to say that, unfortunately, as part of this difficult rationalization, we just closed the bacon manufacturing facility in North Battleford, Saskatchewan. That production is now in Winnipeg as part, again, of a national centre of excellence for the manufacture of those products.

Senator Merchant: Thank you for those answers. That educates me a little bit. I live in Regina. You also mentioned our fight vis-à-vis the country of origin and that we won, but how has that helped us? I do not think the U.S. is abiding by the ruling, are they?

Mr. McAlpine: No. In fact, May 23 is the deadline by which they have to announce or impose this rule that they had drafted and on which they have consulted and received almost universal condemnation. May 23 is the key date after which, if they have not come into compliance, Mexico and Canada will have the opportunity to take it back to the WTO and initiate a process of retaliation, if that is the decision. We, of course, hope it does not have to come to that. However, at this point, what they have proposed is not satisfactory, particularly to the livestock producers of Canada, and the fight will continue.

Senator Merchant: May I ask a third question? You also spoke about trade and the trade deficit. Which markets are you concentrating on? I know that the U.S. has signed a new deal with Korea, for instance, and that is a market that we are usually after. How are we doing with our negotiations with them, for instance, and what other markets in Asia are you concentrating on where the Canadian government can help you?

Mr. McAlpine: As Maple Leaf, our biggest and most important export market is Japan. First, it is the United States in terms of volume, but, in terms of value and profitability, North America does very well selling pork to Japan. We play an important role in that.

The point about Korea is a serious problem. We are rapidly losing everything we have in Korea because, to your point, they concluded free trade agreements with the United States and with Europe. Those countries are now two levels of tariff reduction ahead of us, and we have drastically reduced our sales office in Korea. We are being completely eliminated from the market, and it is very unfortunate. It was a huge market. In fact, in total agri-food sales for Canada, it was close to $1 billion. The beef and pork side of that is in serious jeopardy. Unfortunately, I do not have a very positive signal that we are anywhere close to concluding an agreement with Korea, despite a renewed effort last year. That is a big concern. Otherwise, we are keen on the issues that are at play with potential free trade agreements with Japan and with the European Union. We are very involved in those discussions and the Trans-Pacific Partnership. These are all important agreements to the meat sector and to many other agri-food sectors in Canada.

Senator Buth: Thank you very much for being here today. I want to follow up on something that Senator Merchant talked about in terms of exports. We have heard from different witnesses that there are traceability requirements from different countries. I find it somewhat confusing because I think there is a perception that Japan requires full traceability and that other countries do not. Can you perhaps talk about some of the markets that you go into and what the requirements are for traceability?

Mr. McAlpine: Much of what we export in pork ends up in further processing for a final consumer product. That is true of what we ship to Japan. It is true of most of what we ship to the United States and, I think, even Mexico and other markets. In that sense, it is going into a system where they need absolute assurance of food safety and there needs to be lot-by-lot identification. Sometimes there would be testing of those lots at a border point or on arrival. Then it goes into a process product and from that point forward it is not our product, if you will. That is the issue.

However, on the export scene right now we are dealing with a very difficult issue of access to Russia. Russia has imposed very restrictive conditions to ensure there is no ractopamine, Paylean growth promotant used in the production of animals from which meat is derived for export to Russia. To put that requirement in place, they have clamped down and want strict control and evidence of traceability of ractopamine-free hogs into slaughter and that the slaughter plant is not handling any other hogs that may have been fed the growth promotant. That is an example where the traceability is critical to gaining access to the market. It is costly and disruptive. The segregation involved to do that is very difficult.

Beyond meeting that kind of customer requirement, it is not generally the case that any other market would require that kind of traceability back to the farm on a meat product that is being exported.

Senator Buth: I understand ractopamine is approved in Canada and the U.S., accepted in other countries. What is the issue with Russia?

Mr. McAlpine: Unfortunately, Russia, China, the European Union have taken a stance that growth promotants, irrespective of the science — and in this case the science is well-established and the Codex is approved — that ractopamine is a safe drug, albeit used properly, where the withdrawal ensures there is no residue left in the animal. Of course, part of the issue is that in some of these countries, they struggle to manage their own veterinary drug systems and, in a way, I believe this is certainly true in China. If they open the door to imports of products using those drugs, they cannot deny their own industries the right. However, the fact is that in their environments it is very difficult for them to properly control the safe use of these drugs. It tends to result in an unscientific restriction on imports that is trade disruptive and in the case of the European Union it tends to be much more of a consumer reaction against any notion that hormones or growth promotants should be used in livestock production. That has been battled out in the WTO. This is another manifestation of that unscientific consumer reaction in the case of Europe.

Senator Buth: Which results in non-tariff trade barriers, which is what you are facing right now.

Mr. McAlpine: Exactly.

Senator Buth: Going back to your comments about public versus private research, where does that shift occur and how do you determine where that shift occurs from public to private research? I come from an industry that had quite a bit of public research put into it — the canola industry — and then as private industry stepped in, of course, it was prudent and responsible for the government to pull back in terms of public research because the private industry had really taken over.

Mr. McAlpine: It is an interesting question. I do not profess to be an expert on how that is optimally managed in different segments of agri-food. However, back to a comment I made in my opening remarks, the public upfront investment that occurs in basic research, for example the initial funding of the development of canola or any number of wheat varieties and so on, can achieve remarkable returns that then open the door to further private research and investment. In canola, that creates an enormous industry. However, it starts up front where someone, most often government, is prepared to take the cost and the risk of research in a field which at that point shows no real prospect of immediate commercial return.

I think it differs, though. To your point, I made the comment that it is not to say we should still necessarily be funding primary agricultural research at the same level in real terms as we did in the 1930s or 1940s. There is a whole different economic environment where biotech companies and food companies and commodity interests have the ability to deliver some of that research. However, I fear we have moved too far in that direction towards private. Remember, that also implies intellectual property rights that, as you develop new gene technologies, are now in the control of one private entity and the ability to use that as a foundation for further research and build off that to take discoveries to the next level is obviously inhibited by IPR licensing and so on.

Those are the questions. In the case of the livestock industry, if a lot of that primary research is not done in animal genetics by a public source, I worry it will not be done and we will not get the same kind of benefits we did with the development of animal breeds in Canada going back many generations.

Senator Buth: You made the comment that you have now formed an organization and you are taking a look at science clusters.

Mr. McAlpine: Right.

Senator Buth: As part of the food manufacturing industry, have you clearly articulated what you believe needs to be done in terms of public research?

Mr. McAlpine: Yes. The themes of that cluster, the basis with which we went out for a call for research proposals, are food safety. What we are saying is that there are fundamentally a number of non-competitive science and research issues that we ought to collectively invest in, and out of that may come proprietary interests of a given firm or business. However, at the front end many of these issues are shared and ought to be pursued from a non-competitive point of view. In that theme, that would include food safety, sustainability, enhancing value and quality of food products generally. Those are the kinds of themes we think would merit a lot more public investment in research.

The Chair: Before we move on to Senator Callbeck, Senator Plett, did you have a supplementary question?

Senator Plett: Yes. Further to Russia and the special conditions they want, are you building plants to accommodate that? You say you almost have to do that separately. Is that something Maple Leaf is doing?

Mr. McAlpine: We are not building new plants, but our plant in Lethbridge, Alberta, has an adequate source of Paylean-free hogs so that we can meet the Russian requirement. The challenge is our Brandon, Manitoba, plant, which is much larger and receives a much wider range of animals where setting that up is the problem. However, we are managing that right now and dealing with the decisions around what plants will be approved, what will not. It is back and forth right now, but at this point our Lethbridge plant is the plant we will use for Russia.

Senator Callbeck: Thank you, Mr. McAlpine, for being here this morning. It is beneficial for us to hear from a vice- president of a multinational corporation.

I want to ask you about an area that has not been brought up. You mentioned the ThinkFOOD! Centre in Mississauga, Ontario. What kinds of information are consumers looking for before they make that decision to purchase?

Mr. McAlpine: I will refer to a note. We actually look at this in terms of six major trends that we build our product development around. The first is demographics because there is a whole shift in the ethnic and age profile of our population, which is profoundly changing the market for food. Health and nutrition, absolutely, is all over the store and a key driver. Convenience just grows. This year is the year of snacking. The amount of product innovation and consumer demand for healthier snacks, because people seem to be snacking more and eating main meals less, is a major trend. You cannot get away from taste and indulgence. While our culture wants to be healthy, we also like to spoil ourselves, and that is a market to which you must pay attention.

On value, as a result of the recession, we have the value packs and price points that will attract the lower-income shopper. We have many more store brands and bulk store sales of value-packed product, which is key.

The final point is sustainability and how it is portrayed in packaging, and even origin to some extent. There is a certain shopper who looks for that kind of thing.

Those are the six big buckets of reality. The challenge is how to reconcile them. We have some products that target one of those trends and others that target others. Again, it is everything from very healthy to not so healthy, but it is about choice, and we believe we do not want to dictate choice. We want to give consumers those opportunities, so the product developers work on the product formulations, the marketing strategies and the packaging that will address all of those issues.

Senator Callbeck: There is so much information out there today. To what extent does a consumer pay attention to information on the Internet, Twitter, Facebook or what have you?

Mr. McAlpine: Digital marketing has become quite important. We are engaged in that. For example, Dempster's and Schneiders have websites, Facebook pages and social media that put out promotions and so on. Many consumers are engaging. They may not have time to read that label in detail when they are buying a product, but when they bring it home they may go online to get more information.

We will probably soon be able to scan a QSR code on a label to get more information on the product. That electronic exchange with the consumer is very powerful. I am not sure that it is yet more powerful than television or print advertising, but it is pretty significant.

Senator Callbeck: What means does the centre use to learn what really affects consumers? I am sure you have focus groups.

Mr. McAlpine: Yes.

Senator Callbeck: What other means do you use?

Mr. McAlpine: This facility has test kitchens, sensory labs and a home kitchen where you can observe, from behind a one-way mirror, how people work with foods, how they open packages and things like that. It is a combination of all of those things. We conduct taste panels with both average consumers and professional tasters before the final launch of a product to make sure that it will work. All of those strategies go into it. There is a lot of data analysis of consumer trends and you respond to that to try to innovate something that appears to be in line with what consumers want.

To some extent it is hit and miss. I would like to think that we are better than most, but the number of product launches that fail in the food industry is very high, because it is not a science.

Senator Callbeck: You mentioned shopping for low-cost protein. We have heard witnesses who said that price is the bottom line. In your estimation, to what percentage of Canadians would that apply?

Mr. McAlpine: The trends around discount retail are interesting. In Ontario, the discount retail channel, that is, Price Chopper, No Frills and such stores, have been steadily growing for several years. At the same time, we have seen new Whole Foods stores with much higher-end retailing. Both are going on. Of course we want more traceability and more quality control, but a major segment of the population is struggling to feed a family, and protein is a centre-of- plate cost that people have to manage. We are aware of that. We produce some very high-end and expensive products, such as ready-to-cook roasts, but we have a lot of value meats that will respond to that need. I do not want to misquote figures, but it is a significant trend.

Senator Callbeck: How many people work in this centre in Mississauga?

Mr. McAlpine: There are about 60 people including product developers, nutritionists, dietitians and microbiologists. We have an executive chef. Much of it is culinary strategy, working with retailer, consumer and food service groups. For example, we supply products to various food service chains, so we will work with them to develop a new menu idea for Boston Pizza or Tim Hortons. We develop the whole concept and then work through not only what the product is but how it can be efficiently and economically prepared in their kitchen, making it a win-win business opportunity. That is what we do.

[Translation]

Senator Rivard: Thank you for being here. You answered a number of questions during your presentation, but I would like to focus on a specific issue. At the end of your presentation, you said that a product — for instance, American fruit imported to Canada — has to be labeled ``product of the United States.'' Can American producers be both exporters and importers? Let us take the example of fruit from Central America, in which case countries like Panama, Columbia, Nicaragua, Costa Rica or even Guyana would be exporting products to the United States. If those products were in turn forwarded to us, would traceability labels such as ``grown in Nicaragua'', ``imported by the U.S.'' and finally ``exported to Canada'' be mandatory? Is that kind of traceability possible?

Mr. McAlpine: I do not know much about the procedures that apply to fruits and vegetables.

[English]

I am quite sure that for the import into Canada you could not misrepresent the actual origin of an unprocessed food. If a melon from Nicaragua was coming into the United States for redistribution, which I am sure does occur, the requirement would still be absolutely that its identity as a product of Nicaragua be maintained. Again, our business is not involved in that.

[Translation]

I gave the example of fruits and vegetables, but what if we were talking about meat products? I understand that South American countries are not major meat producers. But if that were the case and those products were imported through the United States, would there be a way to know that the product came from an animal raised in Nicaragua, and then went through the U.S. to reach Canada? Does such an obligation exist?

Mr. McAlpine: According to customs rules, that has to do with processing. In principle, we are normally talking about processing that accounts for 50 per cent of the total. If imported meat is processed in the United States and the value added is over 50 per cent, the meat becomes a U.S. product.

As for food safety, American processors must carry out sufficient controls to ensure the safety of the meat they import. It is then up to the Canada Food Inspection Agency to assess that American exporter based on its controls, including ingredient control. The matter of origin with regards to customs is related to processing.

The mandatory country-of-origin labelling is a problem in the United States because they are refusing to accept the principle of determining a product's origin. That rule goes against this principle.

Senator Rivard: We hope to be able to sign a free trade agreement with the European community before the 2014 European elections. We know that the negotiations are moving forward, but we do not know what the agreement entails. We will find that out when everyone else does — when Canada says yes to the European community.

We know that the European Union has 27 member countries, with Croatia slated to join in August. The situation is different in rich countries. If we make a list, we see that the per capita income is a fraction of what we make. We could be talking about Romania, Croatia, Latvia or Lithuania.

Should we worry about the fact that those agricultural products will have a label that says ``produced by the European Community''? For instance, we probably will not be able to see whether the product was grown in Lithuania or Croatia. Do you see that as a dangerous situation, or are you confident that the European community will impose criteria similar to ours to ensure traceability and safety?

Mr. McAlpine: That is a good question. It is true that the quality of controls, infrastructure and expertise varies greatly in the area of animal health and food safety across the European Union. But for the most part, we are talking about a group of developed countries, with consistent controls, laws and guidelines across the board. There is a common inspection service, and standards established in Brussels apply virtually across the European Union.

The task is not an easy one, but I am confident that the agreements will ensure sufficient controls. Either way, the Canada Food Inspection Agency will still have an obligation — or opportunity — to inspect operations in all countries that export to Canada. The same goes for the other countries we import meat from.

The biggest problem for us stems from tariff barriers, and health and phytosanitary regulations, which create technical obstacles in terms of our access to the European market. We are more worried about those issues than about the safety of imported European products.

[English]

Senator Black: I found your comments absolutely fascinating. This presentation this morning has been very interesting. I am a guest at the committee this morning. I just found the learning very important.

I have a question arising from your comment on the nexus among innovation, competitiveness and productivity. You had some pretty strong comments around the current state of affairs as you viewed them. From your company's point of view, if that circumstance were to continue as you have described it, what is the consequence for your company?

Mr. McAlpine: It is a profound consequence. It is the consequence I suppose I spoke of when I said that 50 or 54 food plants in Ontario have gone in the last six years. That is the consequence, because what we are seeing is the conditions of production and cost in Canada relative to the United States in a par dollar environment, if we are not absolutely on par. The reality is that it is more economical to produce south of the border and access what is fundamentally a pretty small market from much larger, more competitive plants south of the border. That is the issue. For us, in our world, in the segments we operate in — and I am not saying this is universal for the food industry — it is about scale, because as much as people might believe Maple Leaf is a big company, we are something like only the sixth or seventh largest pork processor in North America. There are five or six North American pork companies that are bigger than we are, and every one of them has a scale, double-shifted, state-of-the-art plant that can add a little production at the end of a shift and serve the whole Canadian market in a given product. That is the commercial reality.

We have avoided that reality for a number of years because of the dollar. We bought assets, we expanded, but we ended up with a very fragmented, sub-scale, inefficient plant network. We are spending the $760 million to fix all of that. We are doing it on this side of the border, but a large number of food manufacturers are not doing it on this side of the border. That is the concern. The concern is not only for the jobs and the manufacturing; it is about the farming. All of the inputs that go into that come from farms.

We can continue to ship. We can ship live hogs south. We can ship live cattle. We can ship our grain, but we would have thought for a country as advanced, developed and wealthy as Canada is in these resource inputs, if we cannot figure this out on this side of the border, we will pay a big price in economic development, in my view, in every province.

Senator Buth: What is the obligation of the government in that? Every industry faces competition in a global marketplace. When you look at the manufacturing sector, say, in clothes, et cetera, what do you believe the obligation of the government is in terms of ensuring that manufacturing stays in Canada?

Mr. McAlpine: First and foremost, I would say it is not a government issue. It is about businesses that are prepared to take the risks, align their shareholder support, generate the capital and have the wherewithal to take the risk to make these difficult choices.

At the same time, we live in a business environment that is very much affected by policy, tax, regulation and interprovincial fragmentation of requirements in the marketplace. From that point of view, there are a number of things. We have a very positive tax environment. That is not really an issue, but I mention the issue of supporting research and development. That is something that only government fundamentally can do at that primary research level. Again, there have been some good things. There has been more money I think going into university research, but somehow agri-food has fallen off the priority list. Things like that put us at risk if we do not continue to invest.

Again, I mention fragmentation. Your committee has helped sponsor the Safe Food for Canadians Act. We have a new, strong, I think very good national food safety law. It does not apply to the provinces. It does not apply to intra- provincial trade. How do you build, in a small fragmented population base, a viable domestic market when you have that kind of fragmentation?

The final point I will make is, when it comes to business support, whether it is subsidy programs, be they federal and provincial, we fundamentally have a bias against scale. Obviously, we understand the political motivation to want to provide a little here, a little there, and absolutely support small business because they are a very important part of the economy. However, it almost feels like we treat it as a win-lose proposition, that we cannot have strong national-scale plants and facilities that have global mandates and are proudly serving markets around the world coexisting with smaller operations, that somehow that is a win-lose situation. I fundamentally cannot see why it is win-lose. That is not the case in the auto sector. We have strong, powerful auto companies that nurture an entire network of auto parts suppliers. That is true in many areas. It is a global market, so it is not win-lose, but government policy tends to set it up as win-lose and bias support and favour to small and local. Sometimes that actually is detrimental to the interests of more efficient and large, and those that are prepared to spend large capital to get further ahead.

[Translation]

Senator Maltais: Mr. McAlpine, allow me to begin by congratulating you on your French. You are among those rare Canadians who can speak both official languages. That is very much to your credit.

I am happy to learn that you are working in the fast food industry with companies like Tim Hortons. That is an excellent idea. I see on your website that you process fish — more specifically tilapia. Are you supplied by Ontario producers, or do you import that fish?

Mr. McAlpine: Our Laval, Quebec, plant produces ready-to-eat fish. I think we import frozen fish for processing and packaging. I am honestly not quite sure what the sales figures are.

Senator Maltais: Tilapia, which is farmed in Ontario, is a very high-quality type of fish. It is sold at competitive prices compared with the tilapia from Atlantic fisheries. However, if you ever end up importing it from Thailand, you will have to come back to see us. You should look into that. We are sure of the quality of the fish farmed in Canada, but when you know how the fish farmed abroad is fed, you cannot assign it the nutritional qualities listed on your website.

At the beginning of your brief, you say that traceability is expensive. We are now in 2013. Do you think most Canadians are more likely to buy food of whose origin, quality and safety they are sure, even if it costs a bit more?

Mr. McAlpine: That is not entirely clear. As I said earlier, some consumers are certainly willing to pay for that kind of traceability. Quality assurance is definitely very important to consumers. However, in most cases, we are talking about a combination of factors, such as quality assurance, brand name, available information, advertisement and a trust relationship they may have with a particular brand. A product that is not only produced by a brand they trust, but is also traceable and comes with in-depth information on its origin clearly carries an incentive, and companies can charge more for it.

In other circumstances, the brand is very important to meat consumers. I think Canadian origin is important when it comes to meat. It means the meat comes from a processor subject to federal inspections. That is important in the case of inspection marking. Beyond that, we are not seeing a high demand for traceability.

Senator Maltais: I do not know whether you read the newspapers this morning. In Quebec, some meat was just seized that had apparently been contaminated by antibiotics that were not necessarily intended for those animals. The drugs may have been administered by mistake. The origin has not yet been revealed, but the meat comes from Canada. Is that something that can happen often, or is this an exceptional case?

Mr. McAlpine: It is exceptional and it happens from time to time. Generally, veterinary drug control is well- established in Canada. In those circumstances, the important question to ask is whether the product had made its way to the retail market or the problem had been caught beforehand through testing. Normally, we hope that any problems are uncovered through testing such as ingredient quality control. It is fairly rare for the contamination to be found once the product is already in consumers' homes.

Senator Maltais: So this is an exceptional situation?

Mr. McAlpine: Yes.

Senator Maltais: Thank you.

[English]

The Chair: In reference to the tilapia product, it is probably linked to the fact — and I just want to say this for clarity — that you had mentioned, in your opening comments, that it was important to be mindful of foods that are imported versus foods that are produced from Canada.

Mr. McAlpine: Right.

The Chair: That links very well to that question, and, if you could follow up on the question vis-à-vis your plant in Laval, we would appreciate it.

Mr. McAlpine: Sure, I can do that.

The Chair: On that particular product.

Mr. McAlpine: Yes.

Senator Mercer: I thought that Senator Maltais would zero in on the fact that you do some business with Tim Hortons, which is his favourite retail outlet, but he decided to talk about fish instead.

I want to go back to your comment, in your presentation, about your bakeries in the U.K. being zero waste. I would love to know more about the technology, but I do not think we have time for that here.

Is the technology importable? Of the $750 million that you are spending over the next number of years on food safety, would any of that be spent in your bakeries to try to bring them to the level of zero waste that you have in your U.K. operation?

Mr. McAlpine: Yes, we are working on that. I cannot give you a lot of detail, but, for any of the organic waste or waste products, there is value in that kind of organic waste. In fact, an important part of the Maple Leaf business, it was mentioned, is rendering. We gather, not just from our own facilities but also from a wide number of food plants and livestock operations, byproducts of organic origin, animal origin for the most part. That then gets rendered. In fact, that becomes an input to biodiesel production at our plant in Montreal.

That is real sustainability, taking true waste and turning it into energy. That is the kind of opportunity.

As for the bakeries, I know that, for example, the new bakery we built in Hamilton is, again, totally state of the art and has really brought product control and waste management to a new level. Energy efficiency as well because food manufacturing is an energy-intensive activity, and so anything you can do to save on energy is really important. That is a big part of it. Water is the other one.

[Translation]

Senator Rivard: If I have understood your earlier statements, regarding Maple Leaf pork, you handle the slaughtering and processing. But do you also raise hogs?

Mr. McAlpine: We handle all three steps. We have a hog farm in Manitoba. We recently bought a bankrupt business. We have expanded the production and now meet about 30 per cent of our needs using the animals from our Manitoba farms. The remainder comes from purchases through contracts with independent producers.

Senator Rivard: Have you read any of the articles published in La Presse? Over the last three Saturdays, two whole pages were used to praise Danish pork produced at a lower cost — without subsidy — and raised without antibiotics or growth hormones. Canada is a producer and an exporter, and we are complaining that we do not have enough markets. Last year, we imported $12 million worth of pork from Denmark. Could you comment on that? There are things we do not know. One of the factors covered in the article was the quality of farming. The hogs have more space.

Mr. McAlpine: Yes.

Senator Maltais: That has apparently contributed to Denmark's success. However, to my great surprise, Denmark is so much smaller than Canada, yet they can afford to export and do it at a lower cost. I am astounded by that. I want answers.

Mr. McAlpine: That is a reflection of the market. Denmark exports frozen pork ribs to Canada. That is a common order in Canadian restaurants. I cannot explain how the hogs are raised in that context, but some Canadian restaurants may prefer a certain price because it is low. In addition, a product's quality or origin may affect their preference.

Senator Maltais: But how come we are now constantly a major pork exporter, while exports have been increasing over the past few years?

At the beginning of this year, the amount of pork Canada imported from the U.S. was equal to our exports. That is incredible. We are an exporting country, with an advantage in terms of huge costs, and we have grown over the past few years. Yet we are now importing from the U.S. as much as we are exporting to that country. That is indicative of a decrease in Canadian production, and we are talking about huge production costs and losses suffered by producers over these last few years. That is very worrisome.

Senator Rivard: We saw that the Americans did some dumping before the free trade agreement. Could Denmark be exporting the $12 million worth of pork because they have a surplus, and instead of losing their pork, they are selling it below production cost? I assume that, if this was the case, it would be practical in terms of the free trade agreement.

Mr. McAlpine: I cannot make any specific accusations, but it should be said that food production in Europe is well- subsidized and highly protected. Their system promotes the production of many products, especially meat. They also subsidize exporting to certain markets. Currently, according to what I understand, there are no export subsidies for meat products sold to Canada, but they do have a general production subsidy system that usually gives them an advantage. We have to contend with that competition on Asian markets, for instance. A worldwide agreement is needed to decrease subsidies and harmonize subsidy levels, as certain market players, such as the United States and Europe, have a system that gives them an advantage and puts us at greater risk.

Senator Rivard: Thank you.

[English]

Senator Buth: I want to go back to your comment about the challenges facing the industry, especially in production, and I am assuming you were referring to the high feed costs; is that correct?

Mr. McAlpine: Yes.

Senator Buth: The U.S. is facing the same thing in terms of high feed costs, so I am curious about the competition with the U.S. We are importing product from the U.S. It goes back to why are they more competitive than us.

Mr. McAlpine: There are various factors, you are right. You have to understand hog pricing is North American and set by supply-demand conditions in the United States, and feed pricing and most feed grains similarly, because it is a free trade environment. However, the hog production industry in Canada has gone through some very bad times. Fundamentally, I would start with the currency as a key impact in elevating costs and putting us in that vulnerable situation overall. Second, mandatory country of origin labelling has profoundly shut down markets for many of the weanlings and the feeder animals that would have been shipped into the United States, and that was an important part of the business model for many hog producers. On the feed situation, you are right. We are paying, but we are paying more depending on where those feed grains are consumed. There is a combination of things.

It is true. Right now hog producers and even integrated efficient producers like Smithfield, which owns a lot of their own operations, is losing money on the hog production side. In Canada, we have an advantage in biology. We tend to produce a better yield, more litters, more piglets per litter, but we have higher fixed costs, higher barn and operating costs, than do typical large U.S. hog producers. Depending on location in the prairies, we face higher feed costs. Hopefully that will begin to change if we get a better crop in North America this year for corn and other feed grains.

It is a combination of these things, but fundamentally we have certainly lost the advantage of currency. We are very much exposed and because most of our operations are smaller and less well-capitalized, face some higher operating costs and they are losing their ability to compete and grow profitably. In turn, that is reducing hog supply for our business and many other processors that do not have quite the scale and efficiency that we have been able to achieve and are less competitive at that point.

Senator Plett: Further to your feed costs, how much of a problem is it that corn is being used to create fuel rather than feeding it to the animals? Is that driving up your feed costs quite a bit?

Mr. McAlpine: Well, again, I think the economists are debating that and have for some time. I believe there is absolutely a factor there among many, but there is a reality that increased use of feed grains or corn into ethanol has squeezed the supply, which has in effect magnified what occurred. The primary driver of higher feed grain costs in these last 12 months was the drought of 2012 in the Midwest United States. However, I read that a number of analysts would say that the diversion of the cushion, if you will, that may have existed in the past into ethanol production has magnified the price response. Yes, that is a real issue. We are in support of sustainability and, as I said, we have a biodiesel business. We benefit from mandate and support for biodiesel production, but there is a reality that we need to understand when it comes to how those policies can have an impact on costs of production in animal livestock particularly.

Senator Merchant: Thanks very much. You mentioned something about salt reduction in your presentation. I do not know why you would use it, whether you were responding to a trend or whether you have scientific evidence that salt reduction is helpful to the health of the people, but when you make a decision to do something like that, is that a costly transition to make?

When we reduce the sugar in products, we had to supplement because people have a taste that they prefer, so when you reduce salt you have to do something else to food so that it is tasty. With sugar, for instance, we have seen the different kinds of no calorie sugars that people put in there. When you make the transition to salt, I do not think the government has mandated that yet, have they?

Mr. McAlpine: No.

Senator Merchant: You have done it in advance. What do you do when you make a decision to follow a trend or change something like this?

Mr. McAlpine: Sodium reduction is a big challenge from a number of perspectives. The issue of doing it in a way that will maintain a consumer loyalty is obviously very important. You cannot radically alter the attributes, the taste profile without risking loss of your consumer. However, there are also practical realities in terms of what substitutes might be available and what you do to compensate. I think a number of food manufacturers are looking at new combinations of spices and other things that will change the flavour but make it interesting to the consumer.

The cost issues are material because the truth is that salt is a very low cost ingredient. There are various salt substitutes. In fact, more and more research is going into that. However, all of them tend to involve a lot more cost.

There is also the time frame involved because there is actually quite a long time frame before a new product is launched. Even once it is launched, everything that goes into developing the packaging and the labelling is all set in place, and you build up an inventory of those inputs. You have got a whole cycle before you would be in a position not only to trigger reformulation but also then to bring in the packaging and the labelling and everything that goes with it.

The one thing I will mention is regulatory because, again, government has said, ``We want sodium reduction.'' As I have said, we are working towards those Health Canada guidelines, but there are still regulatory impediments to doing that. Right now, there are several meat products that specify a minimum standard level of sodium. That is related to food safety, although it tends to be a higher margin of food safety than is necessary or to not reflect that there are new food safety interventions that can be used in place of salt. There are actual standards of identity, in the meat inspection regulations, that specify salt thresholds. This has been in play for two years, and the government still has not even tabled amendments that would fix that. As for labelling, under Health Canada guidelines, if you want to put out a sodium-reduced product, you have to reduce the sodium by at least 25 per cent compared to the existing product before you can call it sodium reduced. Twenty-five per cent is a big jump, and we would like the ability to promote a sodium-reduced product that might be 5 or 10 per cent, and then, incrementally, wean the consumer onto a different product that would be more healthful. Right now, again, we would suggest that the labelling rules are too restrictive. Those are things governments can do to help and have not yet done. A lot of economics, science and consumer response has to be factored in. Agriculture Canada has recently produced a report that outlines, based on interviews with the industry, what those kinds of challenges are. It is an interesting document to read.

Senator Merchant: Thank you very much. It is interesting to understand what goes on.

[Translation]

Senator Maltais: Mr. McAlpine, you explained the regulations for salt reduction in food. Canada has very strict regulations in that area. We had some witnesses here, and I am thinking of the pea producers who want to add a bit of salt to their packages and are subject to the same regulations as you. In other words, Health Canada is refusing to allow them to add salt, and I am unsure why. There are regulations for reducing salt and another set of regulations that prohibits increasing the sodium content. Is that right?

Mr. McAlpine: There are no regulations that obligate us to reduce the salt content in our products. There is a voluntary guide with targeted levels to be reached by 2016. However, standards are set for certain products in terms of ingredients — minimum quantities of certain ingredients in processed products. That is the case for some of the products on the market. I do not know of any standards for peas. It is hard to imagine any regulations limiting the amount of salt.

Senator Maltais: That is what they told us. They were very worried. Thank you. It is important to know that the level can be reduced, and that regulations are in place for increasing that level.

Mr. McAlpine: Yes.

[English]

The Chair: Before we conclude, honourable senators, there are three items I would like to bring to the attention of Mr. McAlpine.

Mr. McAlpine, please give our best regards and thanks to the Maple Leaf group, especially Mr. Michael McCain, for his outstanding leadership. It has to be recognized, with fairness, that the McCain people have always been community-minded entrepreneurs, with a social conscience. That said, I would like to bring to your attention three matters that we would like to have information on. You may choose not to answer. You may choose to provide a written answer. We would appreciate that.

First, yesterday, I participated in a committee on intellectual property, IP, and the challenges, especially in agriculture. Do you have comments on that to recommend to the committee the next step? On Growing Forward 2, what would be, from the industry point of view, things to do and not to do?

Second, Maple Leaf is seeking certification under the Global Food Safety Initiative. Despite the national traceability systems in place, why do you feel the need to meet international traceability standards?

Third, I have experienced this in the last few weeks. I will repeat myself about the McCain family when you look at community-minded entrepreneurs with their growers and/or producers. My question is the following: I have experienced this in U.S. markets, being from a border town, next to the state of Maine, in New Brunswick. You go to Walmart or even Costco or Sam's, on either side of the border, and when you go to their grocery sections you see more and more locally grown products. Does that have an impact? We have, here at the committee, had comments made by certain witnesses that locally grown was not always at the forefront or was not always present in many stores, without pointing fingers at any of those major grocers. Do you have any comments on how to better highlight locally grown products in food chains across Canada?

That said, if you have a few closing comments and if we can receive, through the clerk your comments, on the three last questions from the chair, we would appreciate that.

If you have comments, I will have you conclude, and then we will move, honourable senators, to adjourn the meeting. Do you have any comments?

[Translation]

Mr. McAlpine: I just want to thank you for this opportunity.

[English]

I will be happy to answer your questions. I do have copies with me of our new community outreach report. We have gathered, in a report, all of the stories of our involvement in community groups, charitable groups and things like that across the country. I have a few copies.

I mentioned sustainability. As I say, we are about to come out with our first-ever sustainability report. In the spirit of sustainability, it will be electronic only, on our website within a few days. That is available to the committee.

The Chair: Thank you. When we talk about IP, I would like you to also consider the fact that one of the biggest challenges we have for IP and leasing and whatnot that was brought to our attention yesterday is the fact that browsing through the Internet can be easily captured and brought to other places in the world. That also has an impact on IP in Canada.

That said, thank you very much. We will take up your offer to visit ThinkFOOD! in Mississauga.

Mr. McAlpine: I did forget. I definitely want to make sure that you appreciate that invitation to the innovation centre if you are travelling. We would love to bring you there, so you can have a hands-on and visual understanding of how we work on these issues. We will provide you with some food samples and make it quite interesting.

The Chair: Mr. McAlpine, thank you very much.

(The committee adjourned.)