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.
The Chair: Honourable senators, there is one thing before we move on
to our witness this morning, Mr. McAlpine from Maple Leaf Foods.
I would like to bring the following fact to your attention.
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.
I want to thank him for his special interest in agriculture and forestry.
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.
This morning, we are welcoming Rory McAlpine.
He is the vice-president of government and industry relations. Before I
introduce Mr. McAlpine officially, I want to thank him for accepting our
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.
Senator Tardif: Good morning. I am Claudette Tardif from Alberta.
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.
Senator Maltais: Ghislain Maltais.
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.
Go ahead, sir.
Rory McAlpine, Vice-President, Government and Industry Relations, Maple
Leaf Foods: Thank you for giving us this opportunity to contribute to your
I would also like to thank you for your work on Bill S-11.
That is the Safe Food for Canadians Act.
That was the topic discussed during my last visit.
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Senator Callbeck: Thank you, Mr. McAlpine, for being here this
morning. It is beneficial for us to hear from a vice- president of a
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
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
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.
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
Mr. McAlpine: I do not know much about the procedures that apply to
fruits and vegetables.
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.
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
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
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
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.
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
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
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
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
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.
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
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
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
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
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
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.
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
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
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
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
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.
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
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.
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
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?
Mr. McAlpine: I just want to thank you for this opportunity.
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
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.