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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 35 - Evidence - Meeting of May 7, 2013


OTTAWA, Tuesday, May 7, 2013

The Standing Senate Committee on Agriculture and Forestry met this day, at 6:25 p.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: To the witnesses, I want to say thank you for accepting our invitation. We will introduce you shortly. We want to share with you that the Standing Senate Committee on Agriculture and Forestry was mandated by the Senate of Canada to examine research and development efforts in the context of developing new markets domestically and internationally, enhancing agricultural sustainability, improving food diversity and security, and talking to all stakeholders. We want to thank you for coming to our committee and sharing your views with us.

Before you do, I would like to ask each senator to introduce themselves. I will start. I am Percy Mockler, a senator from New Brunswick and chair of the Standing Senate Committee on Agriculture and Forestry.

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

Senator Callbeck: Catherine Callbeck Prince Edward Island.

Senator Plett: My name is Don Plett and I am from Manitoba.

Senator Buth: JoAnne Buth, from Manitoba.

Senator Enverga: Tobias Enverga, from Ontario.

Senator Duffy: Mike Duffy, from Prince Edward Island.

[Translation]

Senator Maltais: Senator Ghislain Maltais, from Quebec.

Senator Rivard: Senator Michel Rivard, from Quebec

[English]

The Chair: Honourable senators, today we are honoured to welcome, from Costco Canada, Janet Shanks, Vice President of Fresh Foods, and Stuart Shamis, Corporate Counsel. From the Retail Council of Canada, I believe we have had Mr. Wilkes here before, so welcome again David Wilkes, Senior Vice-President, Grocery Division.

With that, thank you for accepting our invitation and for sharing your vision with us.

I have been informed by the clerk that the first presenter will be Janet Shanks, Vice President of Fresh Foods, Costco Canada, to be followed by David Wilkes, Senior Vice-President, Grocery Division.

With that, Ms. Shanks, please proceed.

Janet Shanks, Vice President of Fresh Foods, Costco Canada: If I may, I defer to Mr. Shamis for a few opening remarks.

The Chair: Absolutely. Mr. Shamis, please.

Stuart Shamis, Corporate Counsel, Costco Canada: Thank you very much. We thought that we would just give you a bit of an overview of Costco in Canada and then, essentially, turn the floor over to you so that you can ask us your questions with regard to traceability.

Briefly, Costco started in Canada in 1985-86. Some of you in Eastern Canada will recognize the Price Club banner, which was in Ontario east. It was Costco from B.C. to Manitoba, for the most part. The companies merged in 1993 and have operated, through various names, as Costco since then.

We currently have 85 buildings in Canada, in all provinces except for P.E.I. My apologies, Senator Callbeck. The way our business works, we need a certain number of people to make a store — a warehouse, as we refer to them — successful. The population is varying, but it is larger than Prince Edward Island.

We have approximately 25,000 employees in Canada. Our head office is here in Ottawa, which we moved to in 2001. There are about 650 people in the Ottawa office. It is buying, operations, legal, tax, HR and all variety of business operations.

Our Canadian sales, in our fiscal year 2012, were approximately $15 billion. Costco is a membership-based organization, so you have to buy a membership to be able to shop at Costco. There are approximately 10 million Costco cards around the country, so almost one third of the Canadian population has a Costco card in their wallet.

If you have been to a Costco — and we do not assume that that is the case — you will note that our selection is broad in terms of our ability to cover a lot of products. We sell everything from jewelry to mayonnaise, but we only carry 3, 500 stock keeping units or SKUs, as they are referred to in the industry. The typical grocery store will carry something like 35,000 to 40,000. We have roughly one tenth of what you would ordinarily find in a grocery store. Department stores are even more, for example, because we do sell general merchandise as well.

People are shopping, on average, about once per week at Costco. The main reason for that is, to my colleague on the right, fresh foods. People come back because they provision for fresh foods roughly every week. That is basically Costco's story.

David Wilkes, Senior Vice-President, Grocery Division, Retail Council of Canada: Thank you, senator. My colleague, Karen Proud, is with me tonight. We were here approximately a year ago and shared some of our industry's experience and knowledge on local procurement and innovation within the industry. I am pleased to be back to continue the conversation.

As referenced, the Retail Council of Canada represents grocery retailers and general merchants. Costco is one of our fine members. We have approximately 45,000 storefronts within our membership across the country. We have responsibility in six main areas as they relate to government relations, including things such as food safety, sustainability, and health and wellness. I would be pleased to discuss those and other items during tonight's session.

The Chair: Ms. Shanks, do you want to add anything?

Ms. Shanks: I have nothing to add, but I would be happy to answer your questions.

Senator Mercer: Thank you all for being here. I apologize for being a bit tardy because of the goings-on in the chamber.

Over the years, most retailers unfortunately suffer the process of having to do recalls. I know it has happened to Costco, and it has happened to other retailers. I do not want to single you out, but you are here.

From the point of view of a couple of things that we are talking about, traceability being one, what happens when you have an incident in one of your stores or in a number of your stores where the alarm bells go off on a product? Can you walk us through that?

Ms. Shanks: I can walk you through that. If it is a single-store incident, we are notified in Ottawa and the warehouses have recall procedures in place wherein we automatically pull the product. We conduct a quick investigation and, if we find it is something we need to contact our members about, we immediately pull a call list and call all members to advise them of the situation and to return the item to Costco for a refund or replacement.

Mr. Wilkes: Can I add to that? Similarly across the country, I would suggest that within notification of a recall, much like Ms. Shanks has indicated, an email or other communication will go out to all affected stores. The first responsibility will be to get the product off the shelf within a matter of hours, I would suggest. The product is taken off the shelves, kept in the back room and then notification is provided through media, as opposed to the membership basis at Costco, and having to bring the product back.

It is a responsibility the industry takes very seriously, and it is one that we are proud of the execution we can provide and the rapid response that we are structured to take.

Ms. Shanks: We have the ability to stop sale on our registers immediately. As soon as we have a recall notice, even in advance of the CFIA in most cases, we put a block on the registers so no product can go out for sale in case we may have missed pulling it somewhere.

Senator Mercer: Because you are membership-based, if I go to one of your outlets and I buy Product X and the next day it becomes subject to a recall, do you contact me directly?

Ms. Shanks: Yes.

Senator Mercer: By phone or email?

Ms. Shanks: Usually by automated phone calls at this point. When we have a complete list of email addresses, that would be an ideal way to do it, but we are still obtaining email addresses. We are much more efficient with phone calls.

Senator Mercer: The incident happens, and you will see the report in the store itself or perhaps from the CFIA?

Ms. Shanks: Yes. We are usually notified by our vendors in advance of the CFIA notifying us. In that case, we pull the product and we conduct an investigation. Usually by that point, the CFIA and Costco are talking.

Senator Mercer: You have identified a product and you have done a recall. Now you need to know where it came from. If you have determined through your own investigation that the contamination or whatever it might be did not happen in the store, what kind of information do you then give back to the CFIA? In many cases, these are meat products or fresh vegetable products, particularly processed meats or meats that are hard to trace. What kind of information do you give back to them?

Ms. Shanks: We can provide detailed information on fresh meat. We are on the GS1-128 bar code system on beef, so all beef arriving into our distribution centres is scanned. We know the production date and the lot numbers. We know what lot numbers and production dates went to which ones of our locations. It is then scanned into the location and, when we actually put it into production, it is scanned into production.

We can identify the exact time that particular lot code and production date goes into our counters for sale. We can also identify which members purchased the product and at what time each day so that we can actually — I would say within about six hours — pull a complete list of everyone that purchased the affected product and make the phone calls. We have called as many as one million people within four hours.

Senator Mercer: Wow. Mr. Wilkes, do you have anything to add?

Mr. Wilkes: The GS1-128 standard is one that is across industry. The process that Ms. Shanks has described would be one employed across retail. Where Costco will be different is the membership base and the ability to reach out, as they have described.

Senator Mercer: You can identify when the product came into Costco and when it may have been distributed within a store or stores. Have you been able to identify where it was before it arrived in the possession of Costco?

Ms. Shanks: All the information on the GS1-128 bar code indicates that. Our suppliers are able — we have run tests on this several times — to actually trace it back to the farm where the product was produced.

Mr. Wilkes: To use the phraseology, there is a one-up and one-down system in place — understanding where you bought it from and where it was sold — so that, throughout the supply chain, it provides the integrity that you have been asking about, senator, wherein you can trace it back and understand the root cause.

Senator Mercer: I was not questioning the integrity; I was just trying to get it explained to us. I am not worried about the integrity.

Mr. Wilkes: "Integrity" may have been too strong of a word. Trying to understand the system that is in place.

Senator Mercer: Thank you.

Senator Plett: Thank you. I think one of the main questions I was going to ask you just answered at the very end, but I want to go further on it.

I am one of the many people that carry a Costco card, and I love shopping there. Now that my wife and I are by ourselves, however, many of the products that Costco sells are in bulk, which makes it more difficult.

However, I like buying your whole rib eye. I love steak and I love cutting them up for barbecue season. If I have a problem with that product, you can trace it back all the way to the farm. Is that what you said?

Ms. Shanks: Absolutely.

Senator Plett: Can you walk me through that?

Ms. Shanks: We would rely on our suppliers. We run random tests with our suppliers to trace back a product to the farm, and they are able to do that. It is a bit more time-consuming than us being able to trace it back to the consumer, but it is possible to do.

Senator Plett: In answer to Senator Mercer's question, you talked about whether it is a single-store incident. When there is a bad piece of meat out there somewhere, how do you determine that it would only be a single-store incident? I am sure many Costco stores are using the same supplier.

Ms. Shanks: On meat, it would never be a single-store incident. That would be the case of a foreign object or something of that nature.

Senator Plett: If it was a health thing with a meat product, it would —

Ms. Shanks: It would go either regionally or nationally, depending on the supplier involved in the recall.

Senator Plett: Thank you.

Senator Callbeck: Thank you all for being here this evening. Ms. Shanks, I think you have a terrific system. It is unbelievable.

When you say you call your members, are all members of Costco called or just the ones that purchase?

Ms. Shanks: We call only the ones who purchased the product affected.

Senator Callbeck: Do you keep track of what customers purchase?

Ms. Shanks: Yes.

Senator Callbeck: How far back do you go? How long do you keep these records?

Ms. Shanks: I have never looked to see how far back they go, but probably as far back as you want to go.

Mr. Shamis: It is a function of what is available on the computer systems and what we have to recall from tapes. I believe it probably goes back about six to eight years.

Ms. Shanks: I would think so.

Mr. Shamis: From a recall perspective with respect to fresh products, for example, the records are there because it does not take that long to figure it out, usually.

Ms. Shanks: The CFIA uses us as a resource of information because we have such quick access to what was sold.

Senator Callbeck: You talked about fresh product. Ms. Shanks, you are Vice President of Fresh Foods for Costco. Do you make a concerted effort to have a lot of local produce?

Ms. Shanks: It is very difficult for us because of the large volume that we sell, and most local suppliers are quite small. However, we try to use local suppliers. In Quebec, there are produce suppliers that we use. All things being equal, we will buy Canadian, for sure. All of our beef comes from Canada, unless it is in the summertime when we run out of supply in Canada and we have to go south. During this last recall, we had to buy U.S. product. We try to buy locally where possible, but it is limited.

Senator Callbeck: Do you find that customers are prepared to pay for local even if it is a bit more?

Ms. Shanks: We find they will pay for organic if it is a bit more, so I would assume they would for local if we had it available, yes.

Mr. Wilkes: May I provide some industry perspective on that? To give a range within the industry when we ask our members, about 31 per cent of the fresh products that they sell in the stores will be sourced locally or Canadian. It will go up during the growing season — 40 per cent would be an average number. There is a determination to support the locally grown products, and customers look for them and will support them. However, there are restrictions on getting that number to 100 per cent with the Canadian climate.

I believe we referred to some programs the last time we appeared before the committee. Support from the retail community has given particular processors a chance to augment their businesses and allow them to grow from serving the local market area to growing regionally and nationally.

Ms. Shanks: We use Canadian hothouse sources almost entirely for tomatoes, peppers and cucumbers, et cetera. Hothouse in Canada is very important to us.

Senator Buth: I have one brief question for Costco on corporate buying versus personal buying. Some of your members are small businesses. Given some of the things I see going out when I am at Costco, it must be either a really large family or someone supplying a small restaurant, et cetera. What would be the split?

Ms. Shanks: That varies by category. In fresh foods, we have wholesale sales, but probably not to the degree of copy paper or those kinds of categories. We supply restaurants and caterers with fresh product. Percentage-wise, I would say it is roughly 15 per cent to 20 per cent in fresh product, but it could be greater than that in the overall warehouse.

Mr. Shamis: The problem is that people will show up with a business card or a gold star card. Even though they show up with a business card, it does not necessarily mean they are buying for resale or consumption within the business. It might be personal; and a lot of that goes on too. Unless we ask people, it is next to impossible for us to know what they are buying for. Obviously, there are special cases of people whom we know are buying for resale.

Senator Buth: Traceability is not a guarantee of food safety or animal health; but clearly it is important when there is a food-borne illness or when there is an animal health issue.

We have heard from several witnesses who indicated that they do not believe that we need to trace from farm to fork, but we need to trace from farm to processing and processing to fork. You do not really need to go back to an individual farm. Can you both comment on that?

Ms. Shanks: We rely on safe food being delivered to our distribution centres, so we hold our suppliers accountable for that. As far as tracing produce back to the farm, sometimes we do that when we have an issue. Many of our suppliers, let us say on our salad mix, may be getting that mix from several different farms. If we run across an issue like a foreign object, we want it traced back to the farm where that happened so they can correct the situation.

Mr. Wilkes: You would agree the system the senator described is really the expectation that the retail community has. We expect safe food from the processor, and their responsibility is as you articulated it.

Ms. Shanks: To the fork is also difficult for the retailer. We can guarantee it through our cash registers, but how the customer handles it after that becomes an education process on our part: how to properly handle the product.

Mr. Wilkes: You raised the point that traceability is not a guarantee of food safety. After a customer purchases a steak or whatever from Costco or another retailer, leaving it in the trunk for two hours is probably not going to be the right thing to do from a safety perspective. There are proper washing and handling techniques, and so on. Many components go into food safety that traceability does not touch.

Senator Buth: I have heard statistics but I cannot bring them back to memory right now. The greatest cause of food- borne illness is preparation in the home. Would you agree that is the case?

Ms. Shanks: I concur.

Mr. Wilkes: We are involved in a number of programs to provide proper education to consumers, particularly around the barbecue season, such as how to properly store, handle and cook those products. We view that as a responsibility of the industry to our consumers to ensure that, as they prepare and serve the products they buy, they do so in a safe way. We support a number of areas like that.

[Translation]

Senator Maltais: I am also a member of Costco. It used to be known as Price Club, and there was a time when you only accepted public servants or politicians, but that was quite some years ago. It is good to see that you are also associated with American Express.

I would like to commend you for the quality of your products and the cleanliness in your food aisles. Other grocery stores would do well to go and visit your locations and to see how clean they are, whether the bakery or the butcher's section. I would like to congratulate you for buying many cheeses from Quebec, unlike other stores that boast about buying Quebec products, but when you shop there, you do not find anything from Quebec. You do not advertise that, and yet we can find Quebec products in your store. If you are looking for a specific kind of cheese, you just have to go to Costco and you will find it.

Those were my words of congratulations, now I have a criticism. There is something about your store that exasperates me. I have already fought against a large chain and they did away with this practice. I do not know if you are the ones I should be talking to about this. If not, you can pass on the message. Once we have shown our card and paid at the cash register, we take our box of goods and we are checked over at the door as if we were suspects. For goodness' sake, buy a machine to detect those who have not paid and let those who have paid go through without searching their box. That is my request, in all kindness. Thank you.

Mr. Shamis: We can talk about it afterwards.

Senator Maltais: For those who do not pay, I do not know how they get away with it at your store, but install a little machine to detect them. And for those of us who have paid, let us go through. It is a nuisance and it is colonialist, honestly.

[English]

The Chair: Do you have any comments?

Ms. Shanks: I could briefly comment, saying that part of the reason is to catch our own errors. If there is a mistake at the cash register or something like that, we are going to catch it and, perhaps, save you some money by doing that. We do it for multiple reasons, but it does improve our accuracy. On our low margins, we need to make sure that we are ringing it through the till at the right price.

[Translation]

Senator Maltais: Nonetheless, with the system you have at the cash registers, I do not think that a lot of errors occur. Besides, it is up to the client to verify the receipt. Once I have paid for my things, I do not want anyone to come rummaging through them. For years, I fought with a large chain and I caused them a lot of headaches. In the end, they decided to get rid of this practice. And I am warning you, I will do the same for Costco if you do not abandon this practice. Once I have paid, the items are mine, not yours. Do you understand? Is that clear?

[English]

The Chair: So, we will take that under advisement. Thank you.

[Translation]

Senator Tardif: Please forgive me for being late and therefore not being able to hear your presentation. My apologies if you have already answered the question that I am going to ask you.

Judging by the comments I have heard, you seem to have an excellent tracing system. To what extent is a technological platform necessary to guarantee successful traceability of your products?

[English]

Ms. Shanks: As I said, right now, our system covers beef only. As we revamp our information systems, traceability will become part of that revamp, which will be taking place over the next few years. Produce will be the next big one that goes onto that system. As we know, that is an area where there are more food-borne illnesses, at this point, than anywhere else, so that would be our next priority. It does take a total revamp of information systems in order to do this, so it is quite expensive and time-consuming.

Mr. Wilkes: I think Ms. Shanks indicated this earlier. Part of the foundation for the traceability system is standards. Costco uses, as other members do, GS1-128. That is the terminology within produce. As Ms. Shanks indicated, we are also working with the national standards-based organization to introduce a scannable code as well, so it will enhance the ability to track the product.

Senator Tardif: Are you trying to harmonize with different countries to get the standards?

Ms. Shanks: Absolutely. Produce especially comes in from all over the world, so we have to have a harmonized standard, just as we want a harmonized standard in Canada. It would help.

Mr. Wilkes: The organization I referred to is a global organization. It is called GS1, and there are country organizations throughout the world. I think they have 128 various country organizations. It is a not-for-profit group that is supported by industry, the grocery industry in particular, and its mandate is to have one machine-readable standard that ensures accuracy, consistency, efficiency and the ability to identify the product.

Senator Tardif: One of the experts who came before the committee to speak about traceability indicated that establishing a traceability system requires a lot of collaboration between the different sectors and the different stakeholders. Are you finding that you are getting a lot of collaboration in that respect?

Ms. Shanks: When we unilaterally put beef into this system, we were obviously working with our suppliers to get the barcodes with all of the right data input on them. Both industry and Costco cooperated 100 per cent. We are finding that in produce now as well. I think there is a great deal of cooperation.

Mr. Wilkes: I think the short answer to your question is yes, because it is in everyone's best interest. From a supplier perspective, they do not want various retailers having different standards or ways of identifying produce, because they would have to invest in 10, 15 or 20 different systems. From a retailer perspective, you do not want that confusion of trying to understand when suppliers are using different ways to do it. GS1 is mandated to work collaboratively with industry, suppliers and retailers to develop both the GS1-128 and the data barcode for produce.

Senator Duffy: Picking up where Senator Tardif left off, the pork people, who have been here from both western and eastern parts of Canada, and others have said, "We really are reluctant to expand too far because producers are finding it expensive."

Have you had resistance from your suppliers, and what is the industry view on the cost of this? Of course, people were saying, "It is so expensive that we will need the government to pay for it."

Ms. Shanks: Of course.

Mr. Wilkes: Senator Duffy, if you are referring to the standards, which are the backbone of any system to identify and trace products, really there has not been very much resistance because of the efficiencies that it creates, as I was describing earlier. I am proud to say that Canada really is a world leader in industry collaboration, not only in identifying industry standards but also in implementing them in a way that makes sense for both the supplier and the retailer. We will develop voluntary protocols, which will provide timelines and implementation plans, over a period of years or months, depending on what the right framework is, to allow people to transition to use what is basically a common language.

Although you will always get those who resist, we believe the business case, the facts, these important standards and the collaborative approach that really has become part of the Canadian business culture are things that have proven to be successful and, quite honestly, things that other markets around the world look at to see how we are making such progress.

Senator Duffy: As you say, the times are changing and change is always difficult.

I have one other question. Some time ago, the Canadian lamb industry came. We asked, "Are you selling to Costco?" They said, "No, because we cannot guarantee 25,000 carcasses in Toronto every week."

How has the invention of the big box store and these volume operations, as you have, changed the food production industry in Canada? Do you see people setting up operations specifically to feed into your system?

Ms. Shanks: We do have an example of one pork supplier now, Quality Meat Packers, out of Toronto, that has produced hogs to our specification and is now supplying all of our warehouses out of our Brampton distribution centre. That is one example of where they have worked with us to build a product to our specifications here in Canada.

Senator Duffy: Can I ask you one quick supplementary? Pork to your specifications is like a car with fins on it. How does that work?

Ms. Shanks: Every product that we sell fresh has specifications and, in the case of pork, we have a larger hog specification with a closer trim and various other items. Yes, every product has a specification and is checked when it arrives at our distribution centres to ensure that it meets that spec.

Mr. Wilkes: Senator Duffy, that would not be unique. Costco's expectations would be unique to the customers they are serving, but I know you would find similar guidelines, if you will, or buying practices among the retailers to ensure that the ultimate goal is to deliver a consistent product to the customers who are walking in the front door of the store.

Senator Duffy: I think a lot of people do not think about that. Thank you. You seem very confident in the safety of our system, and thank you for doing your part to continue that for Canadians.

[Translation]

Senator Rivard: My question is about food safety. We know that now, everyone who buys ground beef, or ground meat in general, cooks it much longer than they did before because of this issue of food safety.

Aside from meat, Health Canada informed us in March that they had done some lettuce sampling. Apparently, it was written on the container that it had been washed three times.

Out of 544 samples, 10 per cent still carried genes that could cause intestinal problems.

Just as we recommend that people cook their meat well, could we not indicate on the salad packaging that it needs to be rewashed? It was Health Canada that brought this lettuce problem to our attention. This problem must exist everywhere. Whether it was produced in Canada, the United States or Mexico, there were 10 per cent of heads of lettuce that were dirty and therefore dangerous for consumption.

[English]

Ms. Shanks: Speaking from Costco, we encourage everyone to wash their product even if it says "prewashed," although I must admit at this point that the suppliers do not label that on the package.

Mr. Wilkes: As I referred to earlier, among the food safety messages that we support as an industry through a food safety partnership, that is, a not-for-profit group, one thing they will do is encourage people to wash fresh products, whatever that might be, because there are two risks. There is the one that you describe, but there is also the transportation and the handling of it and ensuring that, before putting it on your family's plate, you take that personal responsibility to ensure that it is cleaned and prepared in the fashion as indicated with ground beef, for example, and other fresh products. We do support messaging like that.

To take a step back, you can never invest too much in food safety. It is the number one responsibility of any of the senior executives across the membership to ensure that they are doing the right things to inform our consumers in the way that the stores and the warehouses are managed, the refrigeration systems within them, and the relationships with the suppliers. The outcome is that Canada does have one of the safest food safety systems in the world.

When there are challenges, the recall systems are built to be managed as effectively and efficiently as possible. Even in some of the high profile cases that we have seen recently, the illnesses are rare and limited. I think that speaks to the efficacy of the system from start to finish. It is something that we take very seriously as an industry.

Senator Enverga: Thank you for your presentation. Many of my questions have been answered.

We go to Costco, and we end up buying a full load in the cart. I do not know why.

Ms. Shanks: Thank you.

Senator Enverga: During our trips there, sometimes we see people returning goods; they are rarely produce. What do you do with those kinds of things, flexibility-wise?

Ms. Shanks: Anything that is returned fresh is destroyed, and I am speaking for the fresh products in my group.

Senator Enverga: Everything is destroyed?

Ms. Shanks: Yes.

Senator Enverga: I know that you have a great system at Costco, but how would you compare it to other grocery stores?

Mr. Wilkes: Do you mean from the return perspective or overall?

Senator Enverga: Overall.

Mr. Wilkes: We mentioned the protocols in place from an industry perspective. When a recall is identified, it is a matter of one or two hours at the most when a product is off the shelf. From the traceability perspective, the standards that Ms. Shanks has referred to are the ones that are employed across the country. There is an expectation from all retailers that their suppliers provide safe product.

From a return perspective, once again, if it is fresh it would be destroyed. In a recall situation, the product will be held for further instruction either from that vendor or the CFIA.

Where Costco Canada is unique is in the membership base of their business model, which is different than other retailers, and that would be the point of difference that would make Costco different from the other members of the Retail Council of Canada.

Senator Enverga: Would you suggest that we make it mandatory?

Mr. Wilkes: No. There are a couple of reasons. One, as Mr. Shamis indicated at the beginning of his remarks, Costco has a different business model. It is a narrow SKU base. It is both public and private. There may be some privacy issues that we would have to think through if you were doing it from a non-membership-based retailer. Each retailer has a way to go to market that makes sense for its customers. The membership base is the way that Costco goes to market; others go to market in a different way. I cannot see a world where it would be mandatory.

Senator Mercer: I want to return to something that Senator Enverga raised. While we know Costco is membership- based, and many of us around here have Costco cards in our wallets, most other big chains such as Sobeys, Loblaws and Safeway — I live in the East, so I do not see a Safeway store — have some type of rewards program, so they all have some information on me. If I go into Sobeys in Ontario, I have a Sobeys reward card; if I go into a Sobeys in Atlantic Canada, I have an Air Miles reward card. If I go into Loblaws, I am asked if I am a member of the President's Choice.

Can those programs, at some time in the future, be adapted to match the ability that Costco has to contact their customers in the case of a serious recall?

Mr. Wilkes: I cannot comment on the specifics of the individual programs that you have identified.

One of the challenges that I see is that they are voluntary in nature, whereas to shop at Costco, you must be a member. When I shop at any one of those retailers that you mentioned, I could choose to use one of their loyalty programs or a different one or not use any program whatsoever. It is a way to build loyalty within that store, as opposed to becoming a partner in the store as you are with a member.

Senator Mercer: Thank you.

Senator Callbeck: The questions on traceability have been answered, but having grown up in the retail business and being involved myself through the years, I am amazed that you are able to have one tenth of what the other grocery stores have in terms of items. I think you said roughly 3,500. Are all your stores about the same size?

Ms. Shanks: Yes.

Senator Callbeck: You can do it with one tenth. That must be quite a challenge to determine what those 3,500 items will be.

Ms. Shanks: Well, our buyers are experts at that, so really, it is not. We obviously look at consumer demand based on sales. When you look at a category, 20 per cent of the items do 80 per cent of the business; that is the rule in retail no matter where you go. It is quite simple.

Senator Callbeck: It does not sound that way to me, but anyway, it is great that it is.

The Chair: To Costco Canada, thank you very much for appearing here. Thank you for your cooperation. There is no doubt that what you have shared with us was very informative, helpful and enlightening.

Before we close, senators, and with the indulgence of the senators, Costco, since you are here, and Mr. Wilkes, we will invite you, because it is a product of Canada, the best country in the world for maple syrup. The maple syrup producers of Canada — Nova Scotia, New Brunswick, Ontario and Quebec — are at the Sheraton Hotel and they will be demonstrating their best products in the world. You are welcome to come.

Ms. Shanks: May I say that Canadian maple syrup is sold throughout Costco worldwide, so, yes, you are absolutely right.

The Chair: With that, honourable senators, I declare the meeting adjourned.

(The committee adjourned.)