Processors see more opportunity than negatives in CETA deal

Glacier FarmMedia Special Report: Ice wine, pet foods and jam makers are analyzing what potential the European market 
offers their businesses to grow

Our March 31, 2016 issue marks the third and final instalment in a series of Special Reports prepared by Glacier FarmMedia reporters on how the Comprehensive Trade and Economic Agreement (CETA) between Canada and Europe will affect Canadian food producers and processors.

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Charles Crawford, founder and president, Domaine Pinnacle
Producers of spirits and cider based in Frelighsburg, Que.

Q What is the import/export situation between Canada and Europe for wine and spirits right now?

A There’s not a lot of wine going from Canada to Europe, but there’s a lot of wine exported from Europe to Canada. That’s one of the huge areas of trade imbalance, for sure.

Q Do you export to Europe right now?

A We do. We export several of our products: we’ve been exporting our Domaine Pinnacle Ice Cider line for over 10 years; and we have a line of maple liqueurs called Coureurs des Bois, a maple whisky and a maple cream liqueur that we export to Europe. Then we have our Ungava premium dry gin. So there are three brands that we’re exporting now to Europe on a regular basis. And we’re in different countries in the EU. It all depends on the brand, but we’re in France because one of our main partners is a French company; we’re in the U.K., we’re in Germany, Spain, Italy, and we even do (some business) in Eastern Europe.

Q Do you expect new markets to open up once CETA comes in?

A Potentially there could be new markets that open. I don’t know how it’s going to affect all the taxes and tariffs, but it might make us more competitive. One of the things we’ve seen is pricing becomes an issue in some of these markets. Our ice cider is competing against dessert wines, and by the time it gets over there to Europe, it becomes fairly costly versus what is produced locally.

Q If you do increase exports, would you make any changes to your operations?

A It could open up some opportunities, which could eventually mean more production, depending on how much (opens up) and how fast. It’s one of these things that sounds good in principal, but I really don’t know when this will all take effect and what the actual impact will be in our industry.

Q Do you think this is a good deal for Canadian food and beverage processors?

A I can’t speak for all the markets, but if it can provide more competitive access, I can’t see why it would be a negative. Obviously there are certain sectors where they’re concerned about lower-priced products coming in – and I know Quebec cheese was one that they’re trying to exclude in some of these things. But overall – and again, I don’t know what all the tariffs and taxes will be – but I’m personally in favour of more open borders when you have an export-focused business.

Q Are you worried about increased competition from European goods in Canada?

A No, not really. Right now we’re already being dominated by a lot of European products. In wine and spirits, there are products coming in (to Canada) from everywhere – products from Europe, products from Australia, South America… it’s a global business. I don’t know that CETA would make much of a difference in this respect.

Q What percentage of your sales currently are exports?

A It depends on the brand, but in general it’s about 25 per cent of sales.

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Gerhard Latka, president, Crofters Food Ltd.
Producers of organic fruit spreads based in Parry Sound, Ont.

Q Do you currently export to the EU?

A Actually, we don’t. We did a little bit of playing around there in the past, but I’ll tell you why we can’t. There are two things: a 25 per cent duty on jam items, and on top of that a 10 per cent sugar levy. It’s kind of absurd.

Q Will CETA change this?

A If the tariffs go way down and… if it’s similar to NAFTA, I’m going to attack Europe in a hurry! I’m pretty sure we could sell Canadian blueberry jam very competitively. We could probably do it today, it’s just that we would be in a high-priced, smaller-volume market; whereas if it would be free trade, we would be competitive.

Q How much of your current sales are exports?

A About 70 per cent of our sales are exports. The U.S. is really our big market.

Q Would being able to more easily export to Europe change your business?

A It would be an opportunity, definitely. You never know how it’s going to go, but I’m pretty sure that a Canadian flag on the label, selling wild blueberry jam – it’ll work.

Q Would you be worried about the flip side: increased competition from European products in Canada?

A No, because they already have it so much easier than us. The EU has a high level of protectionism in agricultural products.

Q So would you consider Canadian jam producers to be on the “winning” side of CETA?

A I’m sure every product is different, but for jam, we’d be on the winning side, there’s no doubt about it.

Q If you did increase exports, would you expand operations?

A It’s sort of already done. We just went through 2.5 years of madness. We’ve invested over $12 million in Parry Sound into a new plant.

Q Did you have CETA in mind when you embarked on this?

A You know, it was one of those situations where you look at all the factors. We were already growing to capacity here. But what (CETA) did for us is it made me realize that we had to go really fast. The original plan was sort of more spread out.

Q Do you think CETA is a good deal for Canada’s food processors overall?

A I’m not 100 per cent sure. I just think people should think back to before NAFTA came in and everyone said it would be a catastrophe. I know for a fact that there are many Canadian food manufacturers that export to the U.S. right now. I know that from just the retailers that we’re dealing with, that there are a good bunch of Canadian companies that are on a good list of preferred suppliers for these people… I think where it gets a little dicey is with dairy, and where they want to protect agriculture. Agricultural protectionism may be where it gets tricky. But for us, I can only see rosy.

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Frank Burdzy, president and CEO, Champion Petfoods
Pet food manufacturer based in Edmonton, Alta.

Q Are you currently finding success with exports to the EU?

A At Champion Petfoods, our mission is clear and strong — we make Biologically Appropriate dog and cat foods from Fresh Regional Ingredients Never Outsourced (BAFRINO). We make our authentic and real pet food exclusively in our world-class, award-winning kitchens, for pet lovers worldwide. Our company’s European success is due in no small part to the image of Canada. There are lots of pet food manufacturers in Europe. But we aren’t selling a commodity; we’re building authentic brands that are trusted by pet lovers worldwide. Canada is regarded as clean, pure, modern and regulated, with the capability to produce high-quality food that is safe and trusted. Understanding the customer base is also critical. We aren’t in the business of making commodity foods… we’re in the business of building trust with pet lovers worldwide.

Q Are you aware of CETA?

A Yes – Champion had the privilege to be invited and to participate in two CETA roundtables. Reducing trade barriers and shaping international trade is always positive policy. We believe that the CETA is a comprehensive agreement that aligns tariffs, product standards, investment, and professional certifications.

Q Do you expect new markets to open for you once CETA is in effect?

A The EU is the world’s largest integrated economy. Gaining preferential access to this rewarding market secures a key competitive edge for Canadian pet food makers. Champion brands are found in over 75 countries including all EU member states.

Q Do you expect production to increase due to increased exports?

A Pet lovers are found all over the world. Globally there is a strong desire for trusted and authentic foods and ingredients. People are concerned about the health and well-being of their beloved dog and cat. We expect our production to continue to grow due to increased exports.

Q Is there anything you will need to do in order to capitalize on these increased market opportunities?

A At Champion, our international success is built on strong relationships focusing on trust, teamwork, loyalty and dedication. Here are a few things that we will continue to do to expand internationally:

  1. Have a compelling product or service and an authentic, powerful story.
  2. Do not overcomplicate. Keep it simple and real. Build strong relationships and stay personally involved – don’t outsource your growth.
  3. Have true passion and belief. This will cultivate strong customer engagement, which is a key driver in international expansion.

Q Is CETA a good deal for the food-processing industry in Canada overall?

A Improving the sustainability of the Canadian economy is important for the Canadian food-processing industry. Having a framework to facilitate co-operation and lower trade barriers is always welcomed by the majority of Canadians.

Q Are you worried about increased competition from EU goods?

A We believe that when you focus on the competition, you might miss something important. That’s why we focus on creating innovative and unique BAFRINO foods to create a joyful experience that reflects our passion worldwide.

Q What percentage of your sales is currently in exports?

A Our growth portfolio is balanced – 80 per cent of our total sales are attributed to our export business: 40 per cent overseas, 40 per cent in the U.S., and the remaining 20 per cent in Canada.

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