Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 17 - Evidence - Meeting of May 17, 2012
OTTAWA, Thursday, May 17, 2012
The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to examine and report on research and innovation efforts in the agricultural sector (topic: bringing research to the table in the context of Canada's current agriculture and agri-food innovation system).
Senator Percy Mockler (Chair) in the chair.
The Chair: Honourable senators, thank you for being here this morning. I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry.
As the Chair of the Standing Senate Committee on Agriculture and Forestry, I would like to thank the witnesses for coming to our meeting this morning. I am Senator Percy Mockler from New Brunswick.
I would like to ask the senators to introduce themselves as well.
Senator Robichaud: Good morning, I am Senator Fernand Robichaud from Saint-Louis-de-Kent, New Brunswick.
Senator Buth: Joanne Buth from Manitoba.
Senator Eaton: I am Nicole Eaton from Ontario.
Senator Maltais: Good morning, I am Senator Ghislain Maltais, from Quebec.
Senator Rivard: Good morning, I am Senator Michel Rivard, from the Laurentides, in Quebec.
The Chair: Thank you, senators. Our committee continues its study on research and innovation efforts in Canada's agricultural sector. The topic of today's meeting is bringing research to the table in the context of Canada's current agriculture and agri-food innovation system.
Joining us today from the Conseil de la transformation alimentaire et des produits de la consommation, better known as CTAC, are Sylvie Cloutier, President and CEO, Carole Fortin, Vice President, Communications and Public Affairs, and Dimitri Fraeys, Vice President, Innovation and Member Relations, as well as Richard Cloutier, President and CEO, Centre québécois de valorisation des biotechnologies, and Jean-Pierre Lacombe, CEO, Groupe R&D.
I welcome you and thank you once again for joining us this morning. Ms. Cloutier will make the first presentation.
Sylvie Cloutier, President and CEO, Conseil de la transformation alimentaire et des produits de consummation: Good morning and thank you for welcoming us here today. I have to tell you that, although I am a member on the board of directors of Farm Credit Canada, the statements and comments that I will be making today are strictly related to the Conseil de la transformation agroalimentaire, the board that I am directing, not that of Farm Credit Canada.
CTAC is an alliance of Quebec's industry associations. We have over eight member associations that bring together 500 businesses. CTAC's current members, SMEs and large corporations, generate 80 per cent of the business volume of Quebec's food sector, or $15 billion from a total of $23 billion for all industry. Food processing is Canada's major manufacturing industry, representing 17 per cent of all manufacturing shipments and 2 per cent of the GDP. The processing sector is also Canada's largest employer with over 270,000 jobs.
The big challenges facing the processing sector include being officially recognized as a major contributor to the Canadian economy, having shelf access for food products from Quebec and Canada, gaining access to capital, promoting local products and innovation.
To stay competitive internationally, innovation and research and development will play a key role in the success of the largest food processors. CTAC would like to go over a few recommendations and solutions from the brief submitted to your committee.
They include: recognizing the importance of the food processing sector to the Canadian economy and investing in research and development and in innovation in proportion to the importance of the food industry to the Canadian economy; developing and implementing an innovation strategy for the food and beverage processing industry — businesses need a strategy to point them in the right direction; in terms of venture capital financing, we have to align the assistance by reviewing the performance criteria of shrinking funding — from 35 to 15 per cent, for example — by creating venture capital financing for agri-food processing SMEs and by developing specific programs to attract private investors to agri-food; reducing the Canada Revenue Agency's administrative requirements for obtaining tax credits in research and development in order to make them more accessible to food processing SMEs, and supporting product development; the innovation of manufacturing processes can make it possible to achieve a productivity level that ensures competitiveness at an international level; access to major funding for investment in cutting-edge equipment to improve manufacturing processes, to reduce production costs and to increase productivity so that we have a world class industry.
We feel that we have to stimulate and help businesses implement a culture of innovation in their organizations. Innovation is a process that can be learned through training both inside and outside the company. Canada has to train a sufficiently large skilled labour force in innovation to meet the needs of the food processing sector and to make its resources more readily available to SMEs.
Improving the effectiveness of research and development goes hand in hand with strengthening the relationships between stakeholders in the innovation chain through promotion and an even more effective technological transfer, as well as by creating value chains. Value chains are a source of innovation since they are based on the needs of consumers and they support innovation that will be validated by major sales.
Processing companies need a place for meetings and exchanges, a portal, technological and managerial incubators, test kitchens, a collaborative platform for the exchange of information, a research consortium, in a word, tools. Industry wants to get organized and to bring together researchers and industrialists into a highly competitive food processing research consortium. The CQVB and the CTAC have also presented a project to that end.
Canada has to create a lighter regulatory environment that protects consumers without delaying innovation or adding to the paperwork of companies. Regulations have to be relaxed, simplified and modernized in order to reflect the industry's current needs and to maintain Canada's competitive edge over imported products.
Thank you for listening. I will now yield the floor to Mr. Lacombe.
Jean-Pierre Lacombe, President, Groupe conseil R&D, Conseil de la transformation alimentaire et des produits de consommation: Good morning, my name is Jean-Pierre Lacombe and I am a dairy producer who continues to work the fourth-generation family farm. I am a co-founder of the Groupe R&D and a member of the board of Agropur, the largest Canadian dairy co-op.
In 2005, a group of innovators dedicated to the agricultural industry and to food processing responded to the call of our governments. Those repeated and urgent calls encouraged the people working in production and food processing to redouble their efforts to innovate, to become more competitive and to improve their productivity.
Groupe R&D is a non-profit organization that was founded in 2005. Its mission is to foster knowledge, international competitiveness and economic growth in the agri-food sector by promoting the use of tax credits and research and development grants as financial incentives to advance agricultural production and food processing in Canada.
The target clients of Groupe R&D are small and medium production and processing businesses, with average tax credits between $20,000 and $25,000. Those clients are usually ignored by specialized consultants and large accounting offices. Groupe R&D is involved in educating, in training and in helping those agricultural companies in their research and development efforts and in their goal to become more productive and competitive.
Since 2005, Groupe R&D has helped over 400 agricultural companies to claim more than $15 million in the form of tax credits. Those companies have become more productive, improving their performance, as well as developing and marketing new products. They have created new jobs and have generated wealth.
Between 2005 and 2010, Groupe R&D had a client file refusal rate varying between 2 to 4 per cent. The refusal rate is currently at 20 per cent. Groupe R&D and its clients have been experiencing a progressive and, in their view, unjustified tightening of the processing of files in the agriculture and agri-food sector by the Canada Revenue Agency analysts and managers.
Last fall, Groupe R&D submitted a brief about our observations and claims as to the increasingly limited access to SR&ED tax credits, allowed by the Canada Revenue Agency for its agricultural clients. We respectfully submit that brief to you today.
The Chair: Thank you very much. We are going to start our first round of questions with Senator Maltais.
Senator Maltais: Thank you very much, Mr. Chair. Quebec has a strong presence in the Canadian agri-food sector. You are affiliated with some independent government and university research groups. Are you affiliated to other Canadian universities?
Do you share research being done in Vancouver, at Dalhousie, in Nova Scotia, or in Fredericton? Is there a meeting point between universities in terms of research on marketing new products?
Richard Cloutier, President and CEO, Centre québécois de valorisation des biotechnologies: Yes, but not enough. Some federal programs promote co-operation across Canada. Many are called, but few are chosen.
In terms of university research, we are a clearing house that operates in Quebec and abroad. We promote co- operation to facilitate the commercialization of technologies, but all those people need funding to do their research and to move forward faster, and the clients are not able to get all the funding they need. So Canada is often left behind because of that.
Senator Maltais: Because of the funding?
Mr. Cloutier: Yes.
Senator Maltais: It is quite remarkable how Agropur has become the leader in Quebec. Do you deal with the research centre in Saint-Hyacinthe and Quebec City for new products?
Some senators went to see some research centres in Quebec and they saw that a lot of the research was being done on dairy products. Are you included in the projects received by those research centres?
Mr. Lacombe: Agropur created its own research centre in 2009.
Senator Maltais: Where is it?
Mr. Lacombe: In Saint-Hubert, right near highway 30. It was about a $20 million investment or so. Agropur used to work with the research centre in Saint-Hyacinthe, but now that their business is at almost $4 billion, Agropur has its own research centre that was created in 2010.
Senator Robichaud: I will try to be as quick as Senator Maltais. Ms. Cloutier, in your presentation, I think you said that there was a significant decline in the funding earmarked for research in your sector. Is that correct?
Ms. Cloutier: Yes. Over the past few years, there has also been a significant decrease in the funding allocated to research centres that used to work with our sector. The mandates of federal research centres have changed over the past few years, which means that we no longer have as many projects and products as we used to have with them in the past.
Senator Robichaud: You also recommend that we allocate the funding according to the percentage of business activity, correct?
Ms. Cloutier: We are the largest manufacturing sector in Canada, and in terms of GDP, we are second in Quebec. We recommend that the government invest at least 2 per cent of all the funding earmarked for innovation and research.
Senator Robichaud: What is the total right now?
Ms. Cloutier: I do not know what the total amount is.
Mr. Cloutier: I have some figures from a recent report, with studies from 2002 to 2009. Research and development accounts for only $457 million of the $6.3 billion invested by the federal and provincial governments in the agri-food sector. Compared to the pharmaceutical and aerospace sectors, that is a very small percentage for research and development.
Senator Robichaud: Are there any reasons for this gradual decline? Have you put in less effort than in past years? Have you submitted fewer projects?
Ms. Cloutier: If I may, this is a problem everywhere in Canada, both nation-wide and in the provinces. The food processing sector is the largest manufacturing sector and is not recognized as being a major sector in the Canadian economy.
Everyone talks about aeronautics, but one of the biggest problems that the food industry has right now is not being recognized as a major sector in the Canadian economy. In Quebec, we are the largest manufacturing employer. You can ask anyone on the street and nobody knows that we have the largest food sector.
Our sector is taken for granted. Over time, it has obviously lost ground to other sectors that are more glamorous. Yet if we do not work on agri-food innovation, we lose our shelf space. The competition is very fierce. Imported processed products are coming in from all over the world. And here in Canada, we have to compete with those products. So we must invest heavily in research and development and new product development.
Dimitri Fraeys, Vice President, Innovation and Member Relations, Conseil de la transformation alimentaire et des produits de consommation: Someone mentioned an important aspect. The fact that businesses have less access to tax credits means that they have less funding available. Tax credits are a preferred source for SMEs to access grants and funding for their R&D.
By increasing the administrative burden and reducing access to tax credits for SMEs, access to R&D funding is automatically reduced.
Mr. Cloutier: I looked at some research agencies, including the Natural Sciences and Engineering Research Council of Canada, AAFC, and NSERC. When we talk about the major groups, we mean natural resources, environmental science and technology, information technology and manufacturing.
The food sector does not exist. I looked into this a little further. I wondered whether there were any Canadian agri- food chairs. In my brief research over the past few days, I have not found any. Of course, the food industry does not invent airplanes or new drugs. It works with what they call "incremental innovation'' as opposed to radical innovation. And that is why, as Ms. Cloutier said, it is taken for granted.
Senator Robichaud: I have a final question about what Ms. Cloutier said. Are you losing ground vis-à-vis imported products?
Ms. Cloutier: Yes. We have a table in our brief that I could send to you. Over the past few years, the imported products that have gone up significantly are processed products, which means that, over time, we are losing ground in terms of processed products. The import of inputs has been stable but the import of processed products has been increasing significantly.
Senator Eaton: To follow up on my colleagues' questions, do the imported products against which you compete have to go through the same regulations as you once they enter Canada?
Ms. Cloutier: Technically, yes. But, as you probably know, Canadian border posts do not have the same resources as the United States to check all products that come through. Products often end up on the shelves before we realize there is a problem with it.
Senator Eaton: Part of our mandate is to study access to new markets. What are your challenges with non-tariff barrier regions?
If we manage to negotiate agreements with the European Union, Japan, Korea, China, are you going to have difficulties with non-tariff barriers in those countries for Canadian products?
Ms. Cloutier: It depends on the type of product. In Canada, for example, we are major hog producers. So if we had an opportunity to export pork without significant tariff barriers to countries such as Korea, it would probably be an advantage for us. In other cases, it would be a disadvantage. There are all sorts of reasons. In Canada, we have to factor in the climate, and the cost of labour, which means that the cost of products is still not competitive with countries like China, for example.
Senator Eaton: Do you see free movement, even between the provinces? I cannot get Quebec cheeses. My brother brings them to me. Very often in Ontario we cannot get cheeses from Quebec or New Brunswick. Are provincial barriers a challenge?
Ms. Cloutier: An agreement was negotiated between Quebec and Ontario, which should resolve some issues. But we feel that, in Canada, we should be able to trade between provinces, especially when it comes to niche products.
Mr. Fraeys: If I may, there should be an interprovincial trade agreement. However, in very specific cases such as milk, there are significant differences between provinces, which means that there may be difficulties in everything to do with fluid milk. In terms of processed milk, like cheese or any dairy products, there is free movement between provinces because Quebec is a big producer. But when it comes to fluid milk, there are in fact barriers that prevent the free movement of products.
Senator Eaton: And wine? Is wine a concern for you? I think Quebec produces wine now.
Ms. Cloutier: Yes, Quebec has more than 60 artisan wine producers, and at the moment, you can find Ontario wines on our shelves in Quebec, but you cannot find Quebec wine on the shelves in Ontario.
Senator Eaton: Not yet.
Senator Mahovlich: I have a supplementary on cheese.
The Chair: Would you please ask now?
Senator Mahovlich: I have been getting Oka cheese for years in Ontario. You can get Quebec cheese, and Oka has been around for a long time. Their presentation is good, too. I spot it right away in the stores.
The Chair: Do you have any comments, Ms. Cloutier?
Ms. Cloutier: Some cheeses are sold on a larger scale but small artisan cheeses are really quite rare outside the province of Quebec.
Senator Mahovlich: There is more that we do not see.
Mr. Cloutier: We have more than 300 cheeses that have been produced in Quebec. It is good you can see Oka, but you missed a lot of others.
Senator Mahovlich: I guess I have. I did not realize there were that many.
Senator Eaton: Oka is not made by the monks any longer.
Senator Mahovlich: No, but it is made in Quebec.
Senator Merchant: Is there not something about cheese, though? Some of them are pasteurized and some are non- pasteurized. There are certain cheeses we cannot get outside of Quebec. Is that part of the problem of why we cannot get the cheese?
Mr. Fraeys: The problem with non-pasteurized raw milk is that there might be circular barriers since it is a safety issue. It is important to know that there is a temperature difference in cheeses made from heated milk, which may cause some safety problems. As a result, the commercialization is done within a certain radius of the factory to ensure that consumers get a safe and high-quality product.
Senator Merchant: My question was about innovation. Do you cooperate internationally? In what countries do you have such agreements?
Ms. Cloutier: Yes, we do.
We have a number of international partnerships. Of course, it is fairly easy to co-operate with the United States in this sector. There are many exchanges with France, the European Union. We are trying to establish some major partnerships with the European Union in the agri-food sector. With the European Union being a group of countries, it is not easy because, when you come from Canada, you do not have direct access to the European Union. We have to try to form a partnership with a country that will lead us to the European Union funding.
I do a lot of international trade in India, Israel, and China. We have to think about development in the long term. We have to understand that the Canadian brand is quite renowned, and people want to form international partnerships with Canada, but we have to put a lot of effort into it.
Senator Merchant: When you cooperate internationally — if you have innovation — who benefits financially from that? Do you have certain agreements? How do you share in the financial aspect?
Mr. Cloutier: The relations we have with other countries are that you have the IP, intellectual property, and you share it. You have your background, the other side has their background, and what they share together can be negotiated. You can have the rights for your country, I will have the rights for my country, and we split the rest of the world. That is something that is not usually a big problem with because innovation could generate new IP, and that is very important. That is something that you get in assets with an IP.
That is why the relationship we have with young people abroad in terms of innovation is very easy. We keep the partnerships we have with those countries and negotiate for the rest of the world.
Senator Merchant: Are you delving into the Asiatic markets? Are you interested in working with the countries that have large populations and therefore technology? They are very technologically advantaged as well.
Mr. Cloutier: One thing we have to keep in mind is that innovation is both ways. Yes, we are working with Asian markets, mainly in Japan, because they have a lot of innovation. What is interesting is that we can present innovation from Canada and we can bring Canada some innovation that has been developed in Japan.
You are the king where your innovation can reach the market as soon as possible. Some products that we develop here, and some companies, are looking directly to Japan or Asian markets to be able to sometimes first put their products in the other market and then the market in Canada. Why? The regulations in Canada take so long that, if you need to have some return on investment on your innovation, you will want to start abroad rather than in Canada.
Senator Rivard: In your recommendations, you talk about the administrative requirements of the Canada Revenue Agency for obtaining tax credits. As we recall, Quebec is one of the few provinces that collects its own taxes. When there is a tax credit program, does it automatically apply to both levels or is there a tax credit program that applies only to the federal level or only to the provincial level?
Mr. Lacombe: Right now, the tax credit program applies to both levels.
Senator Rivard: Is it automatic?
Mr. Lacombe: Yes, federal and provincial.
Senator Rivard: When you talk about reducing the administrative requirements, without going into detail, could you give us a simple example of something that you think is cumbersome, unnecessary paperwork or a waste of time? Do you have a couple of examples?
Mr. Lacombe: In research and development, we often have to make a distinction between two things: scientific research and experimental development. In agriculture and agri-food, our businesses focus a lot on experimental development. Earlier we were talking about the dairy sector. In the past, research centres started off with a whole molecule, which was milk, and they separated it into three different components: fat, protein and lactose. Following that, the industry has created a whole range of products. As you saw just now, we have over 400 varieties of cheese in Quebec. That becomes experimental development.
When we submit R&D projects that focus on experimental development, at some point, they are very demanding in terms of the documentation, and the documentation for scientific research is different from that for experimental development. Experimental development is done in the company, and it is often a process of trial and error. Products are discovered through trial and error, and the reason for ending up with a final product is that the product has evolved to reach that point. All the related documentation that we have to submit to the CRA is very complicated to write. In some cases, we lose track of it.
Senator Rivard: Have you made representations to the CRA to ask them to change their requirements?
Mr. Lacombe: Yes, we are currently in meetings with the people from the CRA.
Senator Rivard: We know that Canada might sign a free trade agreement with the European Union. Do you think that supply management could be called into question again and, if so, what could the impact on your industry be?
Mr. Lacombe: As a dairy farmer, I am probably biased on this issue. I believe in supply management. I think that our dairy company is doing well right now. We have four employees on the farm. I still believe today that this is the best system, especially for products that are highly perishable. If you think about it, it is a huge challenge to get milk in consumers' refrigerators within 48 hours of leaving the cow; it is a race against time. In the dairy sector, you go on volume markets.
Why have we developed a wide range of products in Canada? It is because the system allows the processor to work with fresh products. With tomorrow's open market, when you have a surplus of raw material, what will the processors do? They will make powder.
So it is a system that does the job. It is a system that governments have never had to subsidize. Look at the hog crisis in Quebec right now. It is bad. Many hog farms in Quebec are going bankrupt. Governments in the past, with farm income stabilizations, have injected a lot of money. The beauty of supply management is that they are financially independent systems.
I, for one, think it would be harmful to change the way supply management works in Canada. In Quebec, the dairy and poultry sectors are two sectors that are currently doing very well and that are financially independent. That is important.
Senator Rivard: Thank you.
Senator Mercer: Thank you for being here. I was reviewing your discussion paper on the CRA's tax credit programs in the agri-food sector. I found it interesting that the problems you outlined in the paper are similar to problems that other sectors have had with the CRA. They did not just invent for your sector.
Have you attempted to sit down with CRA and work out a structure? The trouble with CRA is that they are professionals — they are there to do their job — but they are not experts in all the industries they regulate, so they do not understand what happens on a farm or when you are doing agricultural research.
Have you talked to them about perhaps establishing a joint working group of CRA officials, the agricultural industry, and people like the Groupe R&D to make the system work better for everyone so that as you are applying for the tax credit, you are not trying to fit a square peg into a round hole; everyone understands what is required? They then, on the other side, understand why you may not be able to supply certain information because of the way research and innovation happens in the agricultural industry.
Mr. Lacombe: You make a very good point. The example I often use is that I am a dairy farmer, I can manage a dairy farm, but I am not a hog producer. I would have a great deal of difficulty in managing a hog farm. I think this is a major problem for the CRA, and I understand those people. You know, when an officer looks at a file on aeronautics and the next file on their desk is that of a dairy farmer who came up with an innovation in feeding his herd of dairy cows, it must not be easy to manage. We have raised those points. I have always said that we are becoming more and more specialized in our activities, and, in the future, we will have to have market experts.
Take banks, for example. Banks that operate in the agricultural sector hire agronomists as account managers, not financiers. Why? Because agronomists are sort of familiar with the agricultural sector and they are able to meet clients' needs. Subsequently, the bank meets clients' financial needs in-house. That would be a great step forward; we have already pointed those things out and we are aware of them. I personally think that it must be very difficult for a multi-market officer, as they say, to make sense of the files they are reviewing in aeronautics, transport, and agriculture; I feel it is sort of a loophole in the system.
Senator Mercer: Having worked in another sector that the CRA heavily regulates, I know that when they put their mind to it, it works extremely well. I worked in the charitable sector for most of my career. A number of years ago we were having similar problems to you: Everyone was having difficulty understanding why the other side wanted certain information or why certain information could not be provided.
We sat down and started talking to each other. They found out that some information they were requesting was extremely difficult to produce and other information being produced was of no use to CRA. Therefore, they got together and now have an ongoing working group that reviews things on a technical basis.
It seems to me we have to figure out a way to help all different sectors. We are talking about your sector now, but there are probably a few dozen others who are having similar difficulties.
There is hope.
Mr. Cloutier: That is a very good question. I am pretty sure that the people working at CRA are very good people and knowledgeable. However, the point is that the word "innovation'' is the key thing we have to look at. If you are in the aerospace sector and you get this green plane, people will say, "Wow, that is an innovation.'' However, when you are in the agri-food sector and you want to make a gluten-free product, is it an innovation? What is the technological risk of the innovation?
My colleague here has some definitions of the word "innovation.'' It could be some production thing related to productivity. It could be related to the product or to the process. Everything in the chain could be innovation.
When you get the definition at CRA — you need risk, you need this level — it is tough. In the agri-food sector, usually what we see is that for the development that the company will do, they will say no, that is not innovation because of the OECD definition. Usually that is the one they take, which is mainly a problem.
Senator Mercer: Innovation in aerospace is easy to define — see and measure. Innovation in agriculture is tougher to define, maybe impossible to see. I am with you.
Senator Buth: Thank you for being here today.
To start, can you give me more details on who some of your members are and what kind of brands you produce? Not being in Quebec, I would like to learn more.
Ms. Cloutier: For example, Agropur is a member — they have Natrel and Oka cheese. Saputo is a member. We also have Canada Bread. In Quebec it is called Multi-Marques. We have Lassonde, with Oasis juice. We have Bonduelle, the largest producer of frozen vegetables.
We also have smaller companies. It could be Margarine Thibault. We have Brome Lake Ducks, wineries, apple cider. We have wine, foie gras, Périgord and Aux Champs d'Élisée; they are all members in our organization
We group eight small associations. One is a bakery and one processes general food products. We have ducks, bottled water, wine, cider and maple products. Citadelle is the largest producer of maple syrup.
Senator Buth: You have talked about some of the barriers and some of the issues with tax credits et cetera. Can you tell me what your recommendation would be to the Government of Canada in terms of the top three things that you would like for your industry?
Mr. Fraeys: The first item we would like to have has to do with reducing the administrative burden, cutting the red tape. We have to make work easier for SMEs, either through tax credits or through creating opportunities for them to bring new products on the market. That is crucial. The other item at the R&D level has to do with training the workforce. This is a topic that has not yet been addressed, but if Canada wants to continue to be a world leader, skilled and trained workers in innovation is the key to staying in the G8. We must continue to be flexible in order to stay ahead on a global scale. Our workforce will help us keep this competitive edge.
The third item is the sharing of resources, which we presented earlier. It includes all the tools that allow various players to come together around one table. We talked about research consortia. We also need to have an information sharing platform. We need to have tools to be able to answer questions within 48 hours, which we currently do not have. We must speed up communications between inventors and users.
Senator Buth: What would the government's role be in that last example you used?
Ms. Cloutier: We must relax regulations to allow for more direct exchanges and to have as few barriers as possible.
Mr. Cloutier: We also need funding specifically for the agri-food sector. Right now, the funding is for innovation in general, but the agri-food sector is not included in the definitions that make it possible to have access to the available funding. We must therefore understand how unique the agri-food sector is in terms of having access to those federal and provincial funds.
There are many beef or hog producer groups in Canada, but not in processing. That is a major aspect and I have noticed it around the world. Take Israel, for example. It is a small country in terms of innovation production, but people come together. In Canada, we have a vast country, but we are not getting together. If we want to show our Canadian innovative assets abroad, we must come together, and food processing needs that support.
Under those broad guidelines, we talked about the Natural Sciences and Engineering Research Council of Canada and Agriculture and Agri-Food Canada, which invest large amounts of money in food processing to get a better mix in Canada in order to have an impact globally.
The Canada label is the one people are looking at.
One of our recommendations is also to work with the federal government and the provinces to develop an innovation strategy for food processing.
Senator Mahovlich: You have some very large companies in Quebec, for example, Pepsi and Danone. These companies make a huge profit. Would they also need help or assistance in R & D — companies that make large profits — or do they have a section of their company that does research all the time?
Mr. Cloutier: Those companies invest in their research and development. They invest a lot in research. Danone is a huge company, but what these companies are looking at is the research done at the university level. They are scouting everywhere to find new ingredients or products that they could bring in their own product. It is not that Danone will finance every university across Canada. Those universities — and we can talk about Guelph, Laval in Quebec, or UBC in British Columbia — are looking for financing or funding in the agri-food sector to be able to bring something to the table.
Danone will be looked at, but you need a pipeline of innovation at the bottom of the university level or at the college level. In Quebec we have a different type of research, applied like Mr. Lacombe said, and more scientific, like the university research that is done. You need those pipelines for the big Danone to take a look at and bring this, because you get the amount of money invested in the research but you do not forget the amount of money needed for the commercialization of those products at your grocery store.
There is a need to invest a huge amount of money on the commercialization side.
Senator Maltais: In terms of food safety research and innovation, is Canada a safe country for consumers who get their food products at the local grocery store?
Ms. Cloutier: It is recognized around the world. Canada is among the safest countries in the world. In terms of food safety, both federal and provincial standards are very high. Consumer confidence and consumer health and safety are food processors' biggest concerns.
Senator Maltais: When someone compares us to Cuba in terms of food safety, do you think that it is out of line, or is it anywhere close to reality? I have been to Cuba, but I will keep my comments to myself. In my opinion, some people would do well to visit Canadian producers and processors. Saying things like that destroys the reputation of the Canada you have all helped to build. As I see it, it is just not acceptable to compare Canada with a developing country. I do not know who he thinks he is, but I do not accept it at all.
We have visited a lot of food research centres and the people working there; it all seems far superior to what I have seen elsewhere. It confirms my impression that the Canadian consumer can rest assured when he reaches for a product on a grocery store shelf.
Senator Robichaud: Senator Maltais, do we know who made that statement?
Senator Maltais: Yes. It was Olivier De Schutter, a UN representative in Canada, who stated that two million Canadians eat poorly and that Canada is worse than Cuba in that regard.
Senator Robichaud: He was referring to certain communities. We should not generalize. It does not apply to the food industry.
Senator Maltais: Senator Robichaud, you have not read the article. He says that two million Canadians eat very poorly, but there are only 200,000 Aboriginals in Canada. We can do without his comments. Read the paper!
Senator Robichaud: Go and visit some food banks, Senator Maltais, and you will see.
The Chair: Senator Maltais, Senator Robichaud, if you want to discuss this between yourselves afterwards, you can do so. But we would like to continue asking our witnesses questions.
Senator Maltais: I will answer Senator Robichaud with a comment that is germane to the topic. Let me continue.
A lot of people have come to tell us that it is difficult to get approval from Agriculture and Agri-Food Canada or Health Canada for labelling. Is that a problem for researchers?
Ms. Cloutier: When you say labelling do you mean health claims?
Senator Maltais: Yes, exactly.
Ms. Cloutier: It can take two years, certainly.
Mr. Cloutier: Let me give you an example of a company that has received awards from CTAC and CQVB. The company is called Lallemand. It developed a new yeast that produces vitamin D and sells it to other companies that use it in their products.
It took two and a half years for the company to be able to advertise the vitamin D content in their product. This is not a new medication. This is just a product containing vitamin D that is good for Canadians' health.
The first comment from the businesses that we support as they innovate and develop new products is about the speed of approval for products to be used in food.
Senator Maltais: Speeding up the process could be one of your recommendations.
Ms. Cloutier: Yes, we actually have made the recommendation to Agriculture and Agri-Food Canada's round tables.
Senator Maltais: Is the food that large stores donate to food banks safe for Canadians?
Ms. Cloutier: Most definitely. Anything else would be unacceptable.
Senator Robichaud: Ms. Cloutier, you mentioned an innovation strategy in order to bring the various players to a common understanding. But is that not a chicken or egg situation?
Do we know where to start? A lot of people are under the impression that innovation in your area is not very likely, while in other sectors like aeronautics, every discovery makes headlines. Where are innovations in agri-food made? Does it happen everywhere along the line?
Ms. Cloutier: Very briefly, when you are working on developing a new product, there is an impact everywhere along the line, from production to the finished product. Innovation at any given point implies innovation in procedures, technologies and the commercialization of the product. So, yes, innovation happens everywhere along the line.
To go back to your introduction, yes, food processors have some work to do for our sector to be in first place in Canada. We recognize that there is work to do in promoting our sector's innovations. I can also tell you that innovation is happening throughout the industry. There are a lot of projects being done by a lot of people.
I am going to tell you about Quebec, but I know that it is happening all across Canada. The problem is that, when you knock on financiers' doors with specific projects, there is no money to move them forward. So there are a number of projects on the table and people are working in isolation. We are trying to get ourselves organized and to establish a structure, but we also need support, be it moral or financial, from governments and other institutions.
Mr. Cloutier: The Centre québécois de valorisation des biotechnologies has been in existence in Quebec for 27 years. When talking about strategies, we wonder what we should be concentrating on.
I point to the position taken in a report by the Canadian Agri-Food Policy Institute. Among other topics, it deals with risk management. We could also focus on food traceability or health food.
In Canada, $10 billion are spent on chronic diseases like diabetes and obesity that are directly related to nutrition. We could focus our strategy on the development of new products or on managing some ingredients, such as lower levels of salt and fat. In my opinion, those are major areas that the industry could focus on. Other areas are more directly related to the businesses themselves. Those are technologies and product development.
In terms of technologies, business asks a lot of us in productivity and in new equipment allowing us to work towards those new products. We are studying one project that involves a new piece of equipment to make potatoes that look like French fries. But they are not fried and so are not covered in fat. There are new pieces of cooking equipment that will lead to the development of health-oriented products.
Another matter that companies mention all the time and that has an effect on the environment is packaging. Food processors want new, innovative packaging options that will have a positive effect on the environment.
There are four or five targets in a strategy that we could say Canadians are aiming at. And they are things for which we could make a good case to the federal government for funding to support those targets in order for Canada to make its mark internationally.
Senator Robichaud: At the moment, I do not seem to be grasping how what you are telling us falls under the heading of innovation.
Mr. Cloutier: No, you are right. Take some really basic elements. People tell us: I am going to cut down the amount of salt in my soup stock. From the standpoint of ARC, I am afraid, cutting down the salt is not very exciting.
Senator Robichaud: It does not taste as good!
Mr. Cloutier: Cutting down the amount of salt in a soup can be completely different from cutting down the salt in cheese. In cheese, not just the taste will be changed, but the texture and the preservative quality. Some may not see that as innovation. But if you reduce the salt or the trans fat in your product, it has a positive impact on health. Probiotics are added to your yogurt. Ten years ago, how many people would have thought there would be probiotics in yogurt? Not many. Now it is an added ingredient that is really good for you. That is innovation. Sometimes, innovation is not adding a product; it may be taking some away in order to get a health benefit. But it is still innovation.
Mr. Lacombe: One point that my colleagues mentioned is that the entire chain is affected. Agricultural production has come a long way in 10 years. In the branch of agriculture in which I am involved, we have reduced the amount of pesticides we use by 50 per cent in 10 years. It is important for you to understand that today, in 2012, a lot of herbicides are still approved for use in the United States, but no longer in Canada.
People often forget that, in our world of agriculture and agri-food, we are working with living things. Soils are living things. We want to be efficient and to provide people with food that is safe. My grandfather used to say that the rotation they used to do back in the day was maize, then corn. You went past fields and the crops were always the same. Things have evolved today. Rotations are important. The priority for agriculture is often not financial; it is the safety of the food.
We are talking a lot about the dairy sector this morning. In the United States, they use a growth hormone called somatropin that makes a dairy cow increase its production by at least 50 per cent. Canadian dairy producers have decided not to use it. It is important for people to be aware of that.
Senator Robichaud: If that substance is permitted in the United States, is it in all the milk that comes from the United States?
Mr. Lacombe: There is nothing to say that it is not.
Senator Robichaud: I was on the agriculture committee a few years ago and, with the help of some scientists, we studied the effects of that substance, how it could be transmitted and to what extent the human digestive system could absorb it or not. The public reaction was really very strong. We were not to go in that direction at all. But when we are talking about products coming from outside that contain other products, we are not highlighting the quality of Canadian products vis-à-vis imported ones. What is the situation with chicken, I wonder?
Ms. Cloutier: That is the argument we most hear about imported products. We have very high standards in Canada for ingredients as well as for what we put on our fields. They may be prohibited here, but we know they are used in imported products. There are two sets of standards for Canadian products and for imported ones; not all of them, but a lot.
Senator Robichaud: And that puts you at a disadvantage.
Ms. Cloutier: Yes, it does.
Mr. Lacombe: Perhaps I should add the worrisome fact that it is not possible to detect growth hormones like somatropin in milk. If I bring you a glass of milk from a cow that has been injected with somatropin and a glass from another one, there is no way to detect it.
Senator Robichaud: On the same question, we noticed that the hooves of those animals grew faster than the hooves of animals that did not get it.
Mr. Lacombe: Not just the hooves.
Senator Eaton: Canadian dairy people have decided not to put this growth hormone in milk. Is that what makes American milk cheaper, because cows produce more?
Mr. Lacombe: It influences the costs of production directly for sure. For example, if you have a dairy herd producing an average of 10,000 kilos and another herd using growth hormone that gets the production up to 15,000 or 16,000 kilos, your costs of production are directly affected.
Senator Eaton: Do you advertise that? I have never noticed that on a milk carton. Do you say, "We do not employ any growth hormones''? Would that not be a good selling point for most people? Most people would not know that. Some people who cross the border to buy cheaper American milk might presume.
Therefore, would it not be good for the Canadian consumer to know that Canadian milk has no growth hormones in it?
Mr. Lacombe: I think that the associations that represent us talk about it, but it is certainly not talked about enough.
Senator Eaton: I am thinking at the grocery store level.
The Chair: Do you have any other comments on this?
Senator Rivard: I would like to get your opinion on the American demand for country of origin labelling on livestock that began a few years ago. We know that this discriminatory initiative did not have the desired effect. For Canadians, it is discriminatory. It has prevented us from exporting at the same levels as previously. The problem was raised at the WTO at the request of Canada and Mexico and the matter was heard in Geneva in May. We should get the WTO's final response in 2012. Do you agree that the bill on country of origin labelling — actually it has become legislation now — is useless and costly?
Mr. Cloutier: That is an excellent question. I will give a politically correct answer. We have to recognize that, in food processing, being from Canada is a bonus. I work internationally a lot. Canada's brand means quality. I do not claim to be an expert in defining livestock. There would have to be an impact on the entire chain, on what the effect of having a label could be.
In food processing circles, when we go to China or India and people see that we have a Canadian innovation, the "Canada'' label means a great deal of added value. So, in terms of your question on the origin of livestock, I think that, in general, there is something to it. But if it is at the WTO, they surely have experts, very good ones, who can answer that question.
Senator Rivard: As you know, the Senate recently passed a motion about the labelling of maple syrup so that the quality is clearly shown. Do you agree with that approach?
Ms. Cloutier: Our maple syrup expert is right here. I will let her step in for a moment.
Carole Fortin, Vice President, Communications and Public Affairs, Conseil de la transformation alimentaire et des produits de consummation: Good morning. I am the secretary of the Conseil de l'industrie de l'érable. We certainly support this recommendation to make changes at the marketing level. But there will be no change in classification. So we are talking more about the marketing of maple syrup.
Senator Rivard: Are you satisfied with it in general?
Ms. Fortin: We will only be able to evaluate the process over time. But it is a good initiative in that there is Canadian maple syrup and American maple syrup. You have to be able to compare apples with apples. It becomes confusing for the consumer to know that the syrup is grade AA. It is similar to wine when they talk about a fruity taste, for example. So it may be more important for the consumer on that level, but it changes nothing in the actual classification, when the buyers purchase it from the producers.
I would like to add something about Canadian products in light of the earlier discussion. As was mentioned, Canadian products are well-regarded. And because they are well-regarded, it is important for us to be able to say so and to make the comparison with imported products. If we are comparing Chinese products with Canadian ones, it is important for the Canadian consumer to be able to recognize our own. At the moment, we can only put "product of Canada'' if 98 per cent of the product is made in Canada. So the moment you add sugar, you are no longer meeting that standard. So you are seeing fewer and fewer products labelled "product of Canada'' on the shelves, but that is not because they are not produced here. There are some restrictions that we do not have here in Quebec. With Aliments du Québec, we need 85 per cent of the products to be produced in Quebec. It has to be possible for us to promote products from Canada and from Quebec.
Senator Maltais: It is like the problem we have with peas.
Ms. Fortin: Exactly. The moment you add sugar, you cannot say "product of Canada'' here in Canada.
Senator Robichaud: Ms. Fortin, you say 85 per cent must be produced. . .
Ms. Fortin: For Aliments du Québec, you can use the "aliment du Québec'' label if 85 per cent of the ingredients come from Quebec, compared to 98 per cent in Canada. When you ask consumers whether they want Canadian products, they are not going to realize that sugar does not come from Canada. We have no sugar cane in Canada, of course, so it is difficult for us to meet the 98 per cent requirement that will allow us to use the "product of Canada'' label on our products.
Senator Mahovlich: Do we sweeten other products with our maple syrup so we can have a "Made in Canada'' or "Made in Quebec'' label on it?
Ms. Fortin: Maple syrup is part of a marketing agreement and there are different possibilities. But it is a question of cost. At the moment, the cost of maple syrup is very high compared to the cost of sugar. From the outset, we have told you the products from Quebec and Canada must be competitive. Clearly, they must be competitive first and foremost. Yes, companies want to use maple syrup, but, in order to be more competitive, they have to make choices.
Do not forget that, at the moment, you are seeing more and more imported products in Canada. There is a major increase. And we here in Canada have to compete with those products. We are talking about labelling, about innovation and about access to shelf space. We have obstacles and our objective is innovation, both in processes and the recipes. We have to be able to sell our products in Canada as much as elsewhere. We have to be productive, we have to be competitive, we have to be able to promote our products. As was mentioned earlier, we have to reach the consumer, because the consumer is affected by promotion. We need money. Money, remember, is an economical lever in food processing also. We are asking for money so that we can continue contributing to Canada's economy.
Senator Mahovlich: Are we the largest supplier of maple syrup to the world?
Ms. Fortin: Yes, exactly.
The Chair: Let me add that New Brunswick is a producer too, if I may. We had a debate in Washington, D.C., just this week over who is the world's second-largest producer of maple syrup, Vermont or New Brunswick. I said that it depended on the time of year.
Ms. Fortin: To answer your question about Canada, we have Quebec, we have New Brunswick and we also have Ontario. We are seeing more and more maple syrup made in Vermont. I can tell you that we in Quebec do indeed have a marketing agreement regulating both buying and selling. But more and more people are getting into maple syrup production.
The Chair: If I may interject, in terms of the number of taps, the single largest producer of maple syrup in the world is located near Saint Quentin, New Brunswick. But, of course, the largest production of maple products in the world is certainly Quebec.
Ms. Fortin: Once again, the important thing is food processing. For us, processing involves buyers as well as producers. In terms of processing, it is important for us to work together. Because you are right, our maple syrup production is a major one at world level and the producers and processors in Canada have the opportunity to work together to meet people's needs.
The Chair: Well said. That will be noted in our report.
Senator Robichaud: Ms. Fortin, processors also depend on producers for the quality of the product that arrives at their door, right?
Ms. Fortin: In Quebec, around 67 per cent of agricultural products are sold to processors. Processors buy 67 per cent of agricultural products. Clearly when we talk about the value chain, that is a critical factor, it is the way we work. We have to get to the shelves; we have to get to the consumers.
So it is important to work together when we consider research and development, when we consider innovations. That dialogue is really important because we are competing globally. We want to have Canadian products on our shelves here, but we also want them on shelves around the world.
Senator Robichaud: It has been mentioned on several occasions that the number of imported products that you have to compete against is increasing and that those products are perhaps more attractive to the consumer in terms of price. Does the difference lie in the price of labour in the countries of origin?
Ms. Fortin: The cost of labour is a factor in competitive pricing.
Some countries provide huge tax incentives for people to develop innovations and access products. Then there are regulatory requirements to comply with. In Quebec, product labels must be bilingual. You can label the product in French, but, the moment you get to Canada, labelling must be bilingual. There is a cost to all that.
In unilingual stores, the product is already on the shelves, so the language does not matter. There are also the costs associated with the nutritional value of a product. In Canada, we have to meet criteria for the values listed in the nutrition facts table. There are costs associated with developing the nutrition facts table because you have to analyze the product and check it. So your costs begin to add up.
First and foremost, you are dealing with food processing and I am here to tell you that it is probably more expensive. Hence the need to innovate, to find ways to add value.
Senator Robichaud: Are imported products subject to the same regulations in terms of their nutritional value?
Ms. Fortin: You only know that a product has arrived in Canada when it gets onto shelves. It is up to the consumer to judge if such and such a product has the same nutritional value or not. Let me ask you. Do you study the label on each product you buy? Do you look to see if it is made in Canada? Is that the major factor for you? I hope it is.
We do it, we are aware and, above all, we expect Canadians to recognize and buy Canadian and Quebec products as a priority. That is important for us. And, as we have said, we have excellent innovative products in terms of food safety. We have to establish our position.
Mr. Lacombe: To expand on the matter of costs, let me give you another example. For several years, we have not used animal meal to feed dairy herds, though it is cheaper than vegetable meal. Today, all our products are made using vegetable meal as the basis. A tonne of soya meal is clearly more expensive than a tonne of animal meal. It all influences the chain and leads to uncompromising food safety.
Mr. Cloutier: Senator Robichaud opened the door for us on the matter of costs and that brings me to the subject of the profit margins in food processing. They have a direct and major effect on innovation. We work with SMEs and help them to develop a culture of innovation. People often say to us: "every dollar I invest in research and development is a dollar I have to take from my production''.
Producers are trying to cut everywhere they can in supply chain costs. But the consumer wants quality at a low price. So the market we are in is very difficult. And that is the point at which innovation is set aside because people have to watch their costs. People come to see us and we fund their projects. They ask us if they can get grants before they go to the bank for financing. They do not want to go to the bank right away because they say that bankers do not understand innovation and will require a higher rate of interest.
In calculating the cost of a product, businesses must consider the cost of innovation if they want a high-end, cutting- edge product at a reasonable cost to the consumer.
Mr. Fraeys: I would like to give you some examples of imported products that do not always comply with Canadian regulations. You can see bottles of water in Polish only and juice in Arabic only in all kinds of grocery stores. More and more products are arriving in Canada with absolutely no attempt to meet our basic rules such as labelling in French and English.
If you go a little deeper into the analysis in terms of what the product contains, you realize that some levels are significantly higher than Canadian recommendations or requirements such as the preservatives in products like muffins and other bakery items. Those are other examples of imported products that do not meet Canadian regulations.
Senator Robichaud: What do we have to do to stop that sort of thing? Do we report the violations to the responsible authorities? I check where a product comes from occasionally. Sometimes my wife checks the nutritional value because our daughter is a dietician, so we have a reason to do it. I think that we have to report the details to the people in charge of enforcing the regulations.
Ms. Fortin: We do that. We support the Canadian Food Inspection Agency, which really needs more inspectors to do the checking. At the moment, we are waiting to find out what the effects of the latest budget will be on the Canadian Food Inspection Agency and Agriculture and Agri-Food Canada. Clearly, they are trying. Everyone says that, but we do understand that it all comes down to money.
Mr. Fraeys: Do we have to wait until the product is on the shelves to report it, or is it better to stop it at the border? I think that the best step of all would be to stop a product at the border so that it does not get into the Canadian distribution system.
Senator Maltais: Mr. Lacombe, I was able to visit dairy farms in Ontario and the Maritimes. What struck me the most was the care you take of the animals. They are treated very well. What really surprised me in terms of animal health and cleanliness is that you have to put on coats, boots and masks before going into your dairy barn.
Your production is built on food safety. The milk from the cow is transported in containers that are amazingly clean. Does that help to increase production?
Mr. Lacombe: That is a good question. As I said earlier, I am a fourth-generation dairy farmer. These days, it is critical for each animal to have a comfortable environment. Let me give you an example. At our farm, each cow has her own mattress. Twenty years ago, who would have said that cows would be sleeping on mattresses? My grandfather would have been horrified.
These days, we have ventilation and fogging systems. In the summer, when it is really hot, we lower the inside temperature to 10 degrees Celsius below the outside temperature. In Quebec and in Canada, producers are really concerned about the well-being of their animals.
Consider the genetic evolution of dairy herds in Quebec and Canada. Take for example the Centre d'insémination artificielle du Québec — Quebec's artificial insemination centre — which has helped us advance significantly. Today, more than just dairy production is taken into consideration when it comes to animal compliance. Few people know that, when a bull is being selected for a cow, about 50 selection criteria are analyzed. Comfort is very important and accounts for 50 per cent of the production.
Senator Maltais: Thank you. Mr. Cloutier, there has been little mention of tariff barriers between provinces. Some improvement has been noted when it comes to Ontario, and that will probably resolve the grape issue Senator Mahovlich mentioned, but I am still not quite satisfied. We know that this comes under provincial jurisdiction.
I have a suggestion for you. The provinces meet at the Council of the Federation a few times per year. In Nova Scotia, they produce an apple wine — not a cider, but a real apple wine. If Quebecers want to buy a bottle of that wine, they have to go through Boston. It is complicated because we are not allowed to buy it. We have the same problem with British Columbian wines and other western Canadian products because of those small tariff barriers.
Could you come to an agreement with the Government of Quebec, at the next Council of the Federation, to ask all of the provinces to remove those barriers? I assume that there should be some constraints, but I think that, today, those barriers should be eliminated.
For instance, I know that Senator Eaton loves her Quebec cheeses. I think that we are living in the era of globalization, and we should be more open. Some excellent products come from other provinces; we also have excellent products in Quebec to share with other provinces. I personally prefer Niagara grapes to California grapes. I know that Niagara grapes are well taken care of and well-grown, but we do not know whether California grapes contain pesticides. They may tell us that their grapes are pesticide-free, but I have visited Californian fields —
Senator Eaton: It is like American milk.
Senator Maltais: Could Canada become self-sufficient by removing those tariff barriers?
Mr. Cloutier: Your suggestion is very interesting. Some efforts are currently being made in that area. For instance, there are some agreements for the Quebec-Ontario corridor. We must continue to support that project. We will keep your suggestion in mind so that we can bring it up at the Council of the Federation.
Senator Maltais: Thank you. Your testimony has been very useful.
The Chair: Before we adjourn, I would like to add that Ms. Cloutier gave an interview about some of the CTAC's accomplishments, such as the website launch and new services for members. Following that interview, I have often been asked whether you had any comments regarding social media that are currently influencing the way people eat.
Ms. Cloutier: The role social media play in everyday life is growing in importance. It is clear that, in terms of marketing and commercialization, major food processors or food processors in general are much more focused on social media, be it Facebook, Twitter or something similar.
I can also tell you that there was recently an example in Quebec of a company — which I will not name — that was caught trying to defend itself through social media. We realized that things are moving so quickly that we have so much left to learn when it comes to social media. That may both work against us and for us. That assessment goes not only for food processing, but also for products in general. However, that is now part of our reality.
The Chair: Mr. Cloutier, do you have anything to add?
Mr. Cloutier: We have talked about how fast information needs to be provided. When it comes to the CQVB, there is a strategic intelligence aspect involved, and all the new concepts, such as social media and blogs, are used to quickly update local companies on what is being done elsewhere. Since we work with international colleagues, we would very much like to share with them what is being done here. To do that, we use social media.
The Chair: For your information, we will hear testimony from representatives of major superstores, such as Costco, Walmart, Loblaws, Zellers, Canadian Tire, Atlantic Superstore and Sobeys. You mentioned access to shelves for Canadian products. Do you have any comments or recommendations for us, so that we can bring to the attention of those major chains the importance of Canadian products and labelling?
Ms. Cloutier: In Quebec, a label has been developed called Aliments du Québec, which you have perhaps heard of. That label belongs to all partners from the agri-food system — from production all the way to distribution.
As you know, we have three major chains in Quebec — Metro, Sobeys and Loblaws-Provigo — and we now have Walmart, which has an increasing number of agri-food superstores. We have worked with them to develop a sale and identification strategy for Quebec products on the shelves. I must admit that, without those superstores, we would not have the visibility we have today with Aliments du Québec. So everyone has come on board, from production all the way to distribution. That model should definitely be followed across Canada. Accessing shelves in Canada is becoming increasingly difficult, and as we said earlier, there is a growing number of imported products, so consumers and retailers have many more options. Shelves are not getting any longer. So if new products are introduced, choices need to be made. Depending on everyone's marketing strategy, choices vary greatly. However, I can say that, in Quebec, the Aliments du Québec model, with the major chains, should be applied nationally.
The Chair: I have one last question. The fact that foreign investors are buying arable land and putting it to other use is something of a concern for us. What do you think about that?
Ms. Cloutier: When it comes to the land, I have nothing to add. However, when it comes to Canadian companies being bought, I think it is in our interest to retain Canadian ownership of food processing companies. It is important to retain Canadian ownership of those companies.
So having foreign investors is one thing, but in terms of our companies being bought, that may be a strategy we should look into in the long term.
The Chair: And what about the disappearance of arable land?
Mr. Lacombe: Your question is a very good one. That is a big concern. Over the past few months, Canadian banks have been showing investors that, in the last 20 years, the best investments have been land purchases. However, land must not become a speculation tool. Farm land remains a part of our heritage.
I am a fourth-generation dairy farmer, and I often say that my grandfather and my father could have speculated on the farm's value. They made a choice based on certain values and principles.
It is true that what is happening is very worrisome. Like us, you have seen that Lac Saint-Jean land has been bought through funds over the past few months. Producers need to be given tools, so things like that will not happen. I live in Montérégie, and land is often traded among producers, as we have established a social pact because the situation may become very worrisome. Speculators that purchase land often rent it to producers in the meantime, but their goal is not agricultural production; it is anything but agricultural production.
Senator Mercer: Do we have any evidence that land speculation in regard to farmland is increasing in Quebec, and is it coming from a specific area? Are people coming from other parts of the world to buy up the land?
Mr. Lacombe: Yes, I think there is more and more speculation. As I said earlier, today, in Montérégie, for instance, there are pieces of land that sell at up to $10,000 per acre.
Five years ago, that same land was being sold at $5,000 per acre. So business people are very quick to do the math. What is special about agricultural land is that nothing is lost and nothing is gained. There is one example that is often provided. We call it the farmer's fever. The neighbouring land may go up for sale — something the farmer has been waiting for for 40 years — but the morning it goes on sale, there are many people interested in it. That is what makes our situation unique.
In today's real estate, people make buildings when they arrive in a city, in a region. But agricultural land is a lot more particular. We know that the global population is growing, but farm land is not. Yes, there has been more speculation over the past five years, and it has not gone unnoticed.
Senator Robichaud: I just have a quick comment. Back home, in Saint-Louis, a former farmer refused to sell his land. People pointed out to him that he was not using the land, but he said that those who would buy it would not use it either. That is where the conversation would end.
The Chair: Is it currently more difficult for SMEs than for large companies to innovate and market their innovations?
Ms. Cloutier: Yes. As Richard said earlier, investments come first and foremost from entrepreneurs, and profit margins are so small, or increasingly small. We are talking about a 6 per cent average in Quebec, compared with 10 per cent for Ontario and 8 per cent across Canada. Every dollar counts, so it is more difficult for a small company than a large company to invest in innovation.
Mr. Cloutier: As a further bit of information, I explained earlier the notion of the dollar that is divided. Mr. Lacombe also mentioned that the average tax credit project is worth about $20,000 or $25,000. So in order to get that $20,000 or $25,000, or to obtain that $25,000 in tax credit, companies need to have projects worth about $75,000 or $100,000. For a number of small SMEs — our client base — that is very difficult to do. We also work with them as much on loan arrangements as on finding innovation at universities because we have access to a number of universities in Quebec, Canada and around the world. So we can find innovation, but it is extremely difficult to finance that with the entrepreneur.
Mr. Lacombe: To take things one step further, the Groupe R&D managed to recover $15 million in tax credit because it had a unique formula that carried zero risk for the client. The Groupe R&D is an NPO supported by partners — including the Coopérative fédérée, the mouvement Desjardins, the MAPAQ, the CPAQ and the Financière agricole du Québec. When we meet with clients, those partners pay us if they obtain results. So we have six companies, and we have developed the whole project literature, but ultimately, if the CRA rejects the request, there is no cost to the client. That is the approach we decided on because those companies are growing, and their major challenge is often liquidity.
Mr. Fraeys: To continue in the same vein, I think that SMEs need stimulation and help in implementing an innovation culture. One of our recommendations is to have groups that would provide those companies with guidance in their innovation process because money is one thing, but those small companies must also acquire the expertise the whole innovation process requires. So they must have guidance and assistance, and they need stimulation to become more and more innovative.
The Chair: When it comes to that, we will probably discuss workforce training — you referred to it and provided a recommendation. I also invite you to continue following the debate and the presentations made in the committee. Should you have any recommendations or opinions to share with us, you can send them through our clerk. On that note, thank you for your presentations, Ms. Cloutier, Ms. Fortin, Mr. Lacombe, Mr. Cloutier and Mr. Fraeys. We also want to point out that you are important players and stakeholders in Quebec and Canada.
(The committee adjourned.)