canada's meat packing industry

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CANADA'S MEAT PACKING INDUSTRY

H.K. Leckie

It is r a t h e r timely t h a t t he Socie ty decided t o devote t h i s y e a r ' s workshop, which I be l i eve i s the 15th. t o a wide- ranging discussion of our beef indus t ry . I t is also very ap- p ropr i a t e t h a t t h i s seminar takes place he re i n Southern Alberta which has i n recent years become t h e ep icen t r e of t he Canadian beef indus t ry -- and a l s o country f ami l i a r t o t h a t pioneer beef packer, Pa t r i ck Burns. It i s f a i r l y obvious t h a t the beef indus t ry has demmstrated r e l a t i v e l y favourable growth and progress over the l a s t two decades, and i s not p re sen t ly faced with any r e a l l y c r i t i c a l marketing problems such a s now confront the P r a i r i e wheat producer. V i r tua l ly a l l our beef output has been r ead i ly moving in to domestic consumption a t p r i ces com- paring favourably with any o ther market i n the world. Never- t he l e s s l i k e any o ther en te rp r i se , the beef indus t ry cannot a f ford undue complacency because of pas t success, bu t most look t o the fu ture and t r y t o a n t i c i p a t e and m e e t i t s challenges.

I be l ieve I a m one of t he r e l a t i v e l y few of those attend- ing t h i s workshop, who took p a r t i n the s t i l l memorable C.A.E.S. f i r s t workshop a t Guelph i n 1956. One of t he immediately apparent d i f f e rences between the t w J i s the much broader representa t ion of d i s c i p l i n e s and i n t e r e s t s a t t h i s p a r t i c u l a r one. I presume the sub jec t being discussed is q u i t e a f ac to r i n t h i s , b u t I hope it is not the only one. One thing t h a t has become increas ingly c l e a r is t h a t problems i n the a g r i c u l t u r a l and food indus t ry a r e b e s t tackled by an i n t e r d i s c i p l i n a r y team approach. Few problems of any complexity a r e amenable t o the min i s t r a t ions of any one science.

I be l i eve i n genera l a g r i c u l t u r a l economists during the p a s t 30 or 40 years have made cons iderable progress i n learn ing t o g r a p p l e i n a p r a c t i c a l way with some of t he problems of the a g r i c u l t u r a l and food industry, p a r t i c u l a r l y perhaps i n such f i e l d s as marketing, business management and genera l policy. Ar t i c l e s i n the Canadian and American p ro fes s iona l journa ls bear t h i s ou t . B u t unfortunately the c u r r e n t l i t e r a t u r e a l so provides some evidence t o support those who w u l d claim t h a t some a g r i c u l t u r a l economists a r e t o o imprac t ica l and theore- t i c a l . Cer ta in ones place g r e a t s t o r e i n h ighly-s ty l ized and complex mathematical models. Others l ean toward communicating an an e s o t e r i c jargon which is incomprehensible t o most ord inary mortals. Another connnon c r i t i c i s m i s t h a t some ec-onomists a r e much more adept a t r a i s i n g questions than

H.K. LECKIE i s General Manager, Meat Packers Council of Canada. Is l i ng ton , Ontario.

proposing p r a c t i c a l s o l u t i o n s , and i n t h e o r i z i n g about com- p e t i t i v e conduct than sugges t ing how more e f f e c t i v e l y compet- i t i v e condi t ions can be achieved i n t h e modepeconomic c o n t e x t . I f t h e w e l l known 1961 Report of t h e R e s t r i c t i v e Trade P r a c t i c e s Commission (meat packing) h a s served no o t h e r purpose, it h a s been t o s t i m u l a t e endless theses on t h e a b e r r a t i o n s of t h e meat i n d u s t r y .

I b e l i e v e t h e r e are undoubtedly a number of economic prob- l e m s i n t h e meat packing i n d u s t r y on which o b j e c t i v e i n v e s t - i g a t i o n and research from o u t s i d e t h e i n d u s t r y i t s e l f coul? be h e l p f u l , j u s t as t h e r e a r e r e s e a r c h a r e a s i n p h y s i c a l s c i e n c e f i e l d s such a s micro-biology, meat chemis t ry , e tc . i n which c o l l e g e s and r e s e a r c h s t a t i o n s are showing i n c r e a s i n g i n t e r e s t .

I have t h e impression t h a t economists from time t o time f e e l t h a t a g r i b u s i n e s s f i rms are less than f u l l y co-opera t ive i n r e s e a r c h p r o j e c t s which t h e y ( t h e economists) propose. Having had t h e oppor tuni ty t o see both s i d e s of the c o i n , I t h i n k t o some e x t e n t I can a p p r e c i a t e t h e p o i n t of view of bo th t h e academic economist and t h e i n d u s t r y execut ive .

I r e c a l l no t ing a remark i n D r . G.R. W i n t e r ' s s t u d y of Conduct i n Canadian Food Market ing1 t o the e f f e c t t h a t "bus iness execut ives a r e g e n e r a l l y s e c r e t i v e i n t h e extreme r e s p e c t i n g t h e i r a c t i o n s . . . i t i s d i f f i c u l t f o r a c a s u a l r e s e a r c h e r t o a s c e r t a i n the n a t u r e o f t h e i r d e c i s i o n proces- ses".

Personal ly I do not t h i n k a " c a s u a l r e s e a r c h e r " o r anyone else should b e very g r e a t l y s u r p r i s e d t o f i n d t h a t t h e average businessman, i n c l u d i n g a m a t packer , is a b i t r e l u c - t a n t t o d ivulge s t r a i g h t o f f a l l k i n d s of c o n f i d e n t i a l i n - formation. There must be a t l eas t minimum p a i n s taken t o e s t a b l i s h a l e v e l of conf idence , t o e x p l a i n t h e o b j e c t i v e s , and p a r t i c u l a r l y t o c r e a t e a c t i v e i n t e r e s t i n the p r o j e c t t h e r e s e a r c h e r h a s dreamed up.

I t i s r a t h e r r a r e l y , i n my e x p e r i e n c e , t h a t t h e economist f i r s t t i res t o l e a r n what problems i n d u s t r y people themselves might f e e l a r e important , b e f o r e d e s i g n i n g h i s p r o j e c t . O u t o f t h e b l u e t h e company e x e c u t i v e ( p o s s i b l y n o t even the most a p p r o p r i a t e one a t t h a t ) r e c e i v e s a l e t te r o r a v i s i t f r a n someone who f o r a l l h e knows may be b i a s e d , h o s t i l e , incom- p e t e n t o r some v a r i e t y of s o c i a l a c t i v i s t o r e x t r e m i s t .

There a r e q u i t e a number of a s p e c t s o f t h e l i v e s t o c k and meat i n d u s t r y concerning which a g r i c u l t u r a l economists might develop u s e f u l p r o j e c t s , b u t i f c o n f i d e n t i a l d a t a is r e q u i r e d ,

G.R . Winter , Conduct i n Canadian Food Marketinq, A g r i c u l t u r a l Economics Research Counci l of Canada, J u l y 1967.

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I would recommend c a r e f u l thought as t o the c o r r e c t appr0ach.l After a l l , t he re i s a r i g h t of privacy which m u s t be respected.

B u t with t h i s i n i t i a l d ig re s s ion , I m u s t now proceed with the subjec t which was assigned, namely "Canada's Meat Packing Indilstry". I n the o r i g i n a l wording of t he top ic I was given, the words "meat trade" were used ins tead of "meat packing industry". While I d id not reques t the a l t e r a t i o n , I was glad of it, fo r I regard "meat t rade" a r a t h e r archaic and not-too- e x p l i c i t term.

Actually when you g e t dawn t o i t , "meat packing" i s a l s o a b i t a rcha ic . I t is a term derived from the o r i g i n a l p rac t i ce of s a l t i n g s e a t i n b a r r e l s t o preserve it. This i s brought out i n the French equivalent of "Packer" which is "sa la i son" o r " s a l t e r " .

I n accepted common usage, the meat packing indus t ry includes qu i t e a wide range of various types of firms who perform various functions i n connection with meat animals and meat, between the t i m e animals a r e sen t t o market by the producer, and when the f resh o r processed products a r e ready t o be consumed. Also, while not properly a p a r t of t he meat packing indus t ry , there a re a number of important a n c i l l a r y se rv ices which a r e e s s e n t i a l fo r its functioning such as t r anspor t a t ion and communication, suppl ie rs of various processing and packaging ma te r i a l s , e t c .

My chief concern i n t r y i n g t o decide how t o present t h i s top ic , framed i n such an open-end way, was how t o choose those aspects of the meat indus t ry which might be of some i n t e r e s t and a l s o re levant t o some ex ten t t o a d i scuss ion of cu r ren t beef prablems. Any thorough d iscuss ion of the Canadian meat packing indus t ry would obviously f i l l a good-sized volume, so I can a t b e s t only t r y t o p re sen t a few h igh l igh t s of tk s t a t e of the indus t ry and some of i t s t r ends , poblems and fu tu re challenges.

In the d i r ec t ions I received from the Workshop Committee, there was a suggestion t h a t I might th ink i n terms of an economic appra isa l of t he meat packing indus t ry . For various reasons I decided it would be inappropr ia te fo r m e t o attempt t o do this, considering my r a t h e r c l o s e a s soc ia t ion wi th the indus t ry fo r t he pas t 20 years . I n t h i s period I have been cons tan t ly learn ing new f a c e t s of t h e complex and f a sc ina t ing "packing" business and I can t r u l y say t h a t the more I l ea rn about i t , the more convinced I am t h a t it is w e l l se rv ing both l ives tock producers and meat consumers. I have c o n s i s t e n t l y found the business e t h i c s i n the indus t ry h igh , and while meat packers t r y t o make a p r o f i t i f they can, they have a c lose

2 In t e re s t ing ly , as t h i s paper was being prepared, w e were

informed of two ambitious p ro jec t s by economists i n two Agri- c u l t u r a l Economics co l lege departments. I n both cases , advice and r eac t ion was being sought, before proceeding.

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a p p r e c i a t i o n of the f a c t t h a t l i v e s t o c k producers m u s t a l s o r e c e i v e a s a t i s f a c t o r y p r i c e f o r t h e i r p roducts .

O r i q i n , S i z e and Economic Importance of t h e packinq I n d u s t r y

Time c e r t a i n l y does n o t permi t m e t o dwel l on t h e h i s - t o r i c a l development o f t h e Canadian meat packing i n d u s t r y , a l though it is a r a t h e r f a s c i n a t i n g s t o r y . I f any of you have not seen t h e h i s t o r i c a l d o c u m e n t a d publ i shed i n connec t ion w i t h our C o u n c i l ' s semi-centennial t h i s y e a r , w e would be p leased t o provide you w i t h a copy on r e q u e s t .

It is s i g n i f i c a n t t o n o t e t h a t pork packing developed cons iderably ahead of l a r g e s c a l e beef s l a u g h t e r i n g . Pork packers such as W i l l i a m Davies i n Toronto w e r e deve loping by t h e mid-1850's. b e f o r e Confederat ion, w h i l e t h e f i r s t s i z e - a b l e beef packing p l a n t , t h e Harris A b a t t o i r Co. d i d n o t come i n t o be ing u n t i l a f t e r t h e t u r n of t h e c e n t u r y i n 1901. I ts o r i g i n a l purpose, t o e n t e r the overseas b e e f t r a d e , d i d n o t work o u t as expected, b u t it w a s t h e fore-runner o f c e n t r a l i z e d com- m e r c i a l beef o p e r a t i o n s , as t h e former overseas t r a d e i n l i v e c a t t l e came t o an end.

I n the l i g h t of t h e concern c u r r e n t l y expressed regard- i n g t h e i m p l i c a t i o n s o f dominat ion of Canadian i n d u s t r y by l a r g e m u l t i - n a t i o n a l c o r p o r a t i o n s , it is s i g n i f i c a n t t o n o t e t h e r e seems no l i k e l y p r o s p e c t of t h i s o c c u r r i n g i n t h e meat packing indus t ry . P r i m a r i l y t h e Canadian meat i n d u s t r y r e p r e s e n t s n a t i v e e n t e r p r i s e , developed and opera ted by Canad- i a n s . While t h e S w i f t Canadian Co., which h a s opera ted i n Canada f o r over h a l f a c e n t u r y , i s one e x c e p t i o n , it f u n c t i o n s as a good corpora te c i t i z e n and i s predominant ly s t a f f e d by Canadians. Some y e a r s ago Wilson and Armour had l i m i t e d opera t ions i n Canada, b u t f i n a l l y s o l d t h e s e o u t t o Canadian i n t e r e s t s . A t p r e s e n t Uni lever h a s m a j o r i t y c o n t r o l o f a Mont- r e a l p rocess ing p l a n t and K r a f t w i t h i n t h e l a s t two years purchased a Vancouver sausage o p e r a t i o n . Home1 8, Co., the l a r g e midwest U.S. packer , a l s o r e c e n t l y concluded a working agreement with J . M . Schneider Limited i n Ki tchener , f o r t h e mutual exchange of ce r t a in process ing and d i s t r i b u t i o n r i g h t s -

Predominantly, however, our packing i n d u s t r y i s d i s t i n c - t i v e l y Canadian and i n s t a n d a r d s and p r o g r e s s i v e n e s s does n o t need t o take a back s e a t t o any count ry . The o n - t h e - r a i l (Can-Pac) d r e s s i n g technique f o r beef which i s now widely used i n a number of c o u n t r i e s , was a Canadian development. A more recent innovat ion is an ingenious pork l o i n p u l l e r , a l s o deve l - oped by a major Canadian packer .

3

s p e c i a l r e p r i n t from September, 1969 i s s u e of Food I n Canada, a v a i l a b l e from Meat Packers Counci l .

The Growth and Development of Canada 's Meat Packing I n d u s t r y -

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In s i z e , ( tonnage o r d o l l a r sales) t h e m e a t i n d u s t r y is impressive. Although i n d i v i d u a l meat packing f i rms and p l a n t s vary widely i n s c a l e , t h e i n d u s t r y a s a whole ranks h i g h i n output va lue among l e a d i n g manufactur ing i n d u s t r i e s and i s e a s i l y t h e l a r g e s t food i n d u s t r y . A s shown i n Table 3 i n t h e appendix, s l a u g h t e r i n g and meat packing ranked t h i r d i n volume o f s a l e s i n 1967, among 40 l e a d i n g manufactur ing groups , b e i n g o n l y exceeded by t h e motor v e h i c l e and pulp and paper i n d u s t r i e s . Only t h e motor v e h i c l e manufac turers s p e n t more f o r m a t e r i a l s and s u p p l i e s than d i d meat packers . I n the p a s t 10 y e a r s t h e meat i n d u s t r y has c o n s i s t e n t l y ranked w i t h i n t h e f i r s t h a l f dozen i n d u s t r i e s i n s a l e s volume, b u t l a t t e r l y h a s improved i ts p o s i t i o n from f i f t h o r s i x t h t o t h i r d . During World War 11, i t a c t u a l l y was No. 1 f o r a y e a r o r two, when bacon e x p o r t s w e r e a t t h e i r peak.

I n i t s p r o f i t a b i l i t y r e c o r d , u n f o r t u n a t e l y , t h e meat packing i n d u s t r y s t a c k s up much lower t h a n it would l i k e among o t h e r lead ing i n d u s t r i e s . While there may have been a time when t h e indm t r y c i t e d i t s r e l a t i v e l y low e a r n i n g s a s evidence of i ts low c o s t s e r v i c e t o producers and consumers, meat packers a r e no longer p a r t i c u l a r l y proud of demonstra- t i n g they can s u r v i v e on such narrow margins . Firms i n t h e i n d u s t r y a r e c o n s t a n t l y t r y i n g t o improve their e a r n i n g s t o t h e l e v e l needed t o provide funds f o r improving and expanding f a c i l i t i e s , f o r more adequate r e s e a r c h and development programs, e tc . Despi te t h e i r e f f o r t s , p r o f i t s have t o b e w e l l earned i n t h i s aggress ive i n d u s t r y .

Wpes of Operat ion i n t h e Canadian Meat I n d u s t r y

What is t h e typical m e a t packing f i r m l i k e ? This i s n o t a s imple q u e s t i o n t o answer because t h e meat i n d u s t r y today inc ludes many d i v e r s e types of o p e r a t i o n . I n its o r i g i n a l connota t ion t h e term "meat packer" g e n e r a l l y r e f e r r e d t o a f i rm which s l a u g h t e r e d any o r a l l s p e c i e s of l i v e s t o c k as t h e y were a v a i l a b l e , s o l d f r e s h meat , cured and smoked v a r i o u s products and d id o*r types of p r o c e s s i n g , and processed a t l e a s t p a r t of the by-products.

This type of f u l l - l i n e , i n t e g r a t e d , s l a u g h t e r i n g and process ing packer s t i l l comprises a k e y segment o f t h e i n d u s t r y . However, t h e fo l lowing i n d i c a t e s the v a r i a t i o n i n the type of opera t ion now found i n t h e "meat packinq" i n d u s t r y :

1. B y type of i n s p e c t i o n

( a ) F e d e r a l (b) P r o v i n c i a l (c) Other, i f any

2 . B y number of s p e c i e s s l a u g h t e r e d

( a ) All s p e c i e s

2 5

( b ) Spec ia l ized (one s p e c i e s - e .g . c a t t l e ) ( c ) Custom opera t ion (may inc lude l o c k e r p l a n t s , e tc . )

3 . Type of bus iness o r g a n i z a t i o n

( a ) H o r i z o n t a l l y - i n t e g r a t e d ( m u l t i p l e p l a n t ) packer ( b ) Independent l o c a l packer (c ) Co-operative (farmer-owned) packer

4. By degree of process ing o p e r a t i o n s

( a ) F u l l l i n e ( a l l s p e c i e s - may i n c l u d e any o r a l l types

(b) Spec ia l ized (e.g. - c a t t l e , hogs) of process ing o f m e a t and by-products)

5. By type of process ing o p e r a t i o n s (non-s laughter ing)

( a ) Wholesaler (wholesa le cut-up o r breaking) ( b ) General o r s p e c i a l i z e d process ing (wide v a r i e t y ) (c ) S p e c i a l t y processor ( sausage , meat p i e s , p i z z a s ,

( d ) Purveyor ( p o r t i o n - c o n t r o l meats , e tc .) (e ) Meat canning ( s p e c i a l i z e d )

etc.)

6. P o u l t r y o p e r a t i o n s 4

( a ) S laughter ( b ) S laughter and e v i s c e r a t e (c ) Process ing (canning, e tc . )

7 . Sundry - s l a u g h t e r s and p r o c e s s e s h o r s e s , b u f f a l o , r a b b i t s , e tc .

Federa l ly inspec ted packers comprise the b a s i c c o r e of Canada 's meat i n d u s t r y . F e d e r a l meat i n s p e c t i o n , e s t a b l i s h e d i n 1907, is mandatory f o r a l l p l a n t s s h i p p i n g a c r o s s provin- c i a l boundaries and engaging i n f o r e i g n t r a d e . However, due t o t h e i n c r e a s i n g demand on a l l s i d e s f o r consumer assurance of food.wholesomeness, t h e number of p l a n t s apply ing and q u a l i f y - ing f o r f e d e r a l i n s p e c t i o n h a s been s t e a d i l y i n c r e a s i n g . This f a c t , coupled wi th a l a r g e r domest ic o u t p u t of meat, and a l s o a s u b s t a n t i a l import movement of m a t . h a s g r e a t l y increased the c o s t s of meat i n s p e c t i o n , and a l s o taxed t h e c a p a c i t y t o pro- c u r e and t r a i n v e t e r i n a r y and l a y i n s p e c t o r s .

41t is a moot p o i n t whether p o u l t r y p r o c e s s i n g o p e r a t i o n s should be considered as p a r t of t h e meat packing i n d u s t r y , b u t they have been included above, because t h e y , l i k e a l l the above types of o p e r a t i o n , i f f e d e r a l l y - i n s p e c t e d , are superv ised by the Meat Inspec t ion Div is ion of t h e Canada Department of Agri- c l t u r e .

mately $13 m i l l i o n , wi th a t o t a l of 1,125 employees, i n c l u d i n g 310 v e t e r i n a r i a n s and 795 t e c h n i c a l personnel .

The annual f e d e r a l budget f o r meat i n s p e c t i o n i s now approxi - r

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The following t ab le shows the progressive growth i n fed- e r a l l y inspected p l an t s and ve te r ina ry inspec tors :

Year

1907 1912 1917 '1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1969

Number of Establishments

27 56 42 50 57 66 82 93 108 123 161 237 336 380

N u m b e r of Veter inar ians

39 77 113 136 140 142 149 205 157 177 205 2 34 291 300

Orig ina l ly a key p r i o r i t y i n the in t roduct ion of f e d e r a l meat inspection was the safeguarding of Canada's export meat t rade . While t h i s is s t i l l of key importance, the f i r s t concern in meat inspection i s t h e s a f e t y of t he meat supply ava i l - able t o Canadian consumers, whether from domestic o r fore ign sources.

Today, a s never before , t he re i s t h e c l o s e s t i n t e r n a t i o n a l a t t en t ion t o meat inspec t ion standards. The United S t a t e s , f o r example, now has a law requi r ing c l o s e su rve i l l ance by U.S. meat inspection o f f i c i a l s of a l l fore ign p l an t s shipping meat i n t o the United S ta t e s . Already under this program a l a rge number of p l an t s i n various coun t r i e s have been suspended from shipping t o the U.S.A. u n t i l shortcomings have been cor rec ted . No Canadian p l an t s have been c u t o f f .

Canada has been included i n this U.S. fore ign inspec t ion program and t h e i r o f f i c e r s a r e now cons tan t ly v i s i t i n g Canadian plants,accompanied by our own Meat Inspec t ion Division o f f i c i a l s While genera l ly our high inspec t ion standards equal or exceed the American, this e x t r a checking imposes e x t r a demands on both Canadian packers and our meat inspec tors . I t is f requent ly found necessary t o examine carcasses with s t rong l i g h t s and v i r t u a l l y wi th a magnifying g l a s s i n case of h a i r s o r small specks of foreign matter. Of the commercial s laughter which is no t f ede ra l ly inspected, a s u b s t a n t i a l p ropor t ion is now covered by provinc ia l meat inspec t ion systems. The provinces of Ontario, Quebec and B r i t i s h Columbia opera te t h e i r own systems independently. Others, such a s Manitoba and Saskat- chewan, con t r ac t with the Federal Government t o have the Canada Department of Agriculture Meat Inspection Division provide the service. In this case a "Domestic" inspec t ion legend is used, r ead i ly d is t inguishable from the Federal "Canada" o r "Canada Approved" marking.

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I t cannot y e t be sa id t h a t i n every p a r t of Canada meat consumers have the assurance t h a t a l l meat ava i l ab le f o r consumption comes from l ives tock which has been slaughtered under federa l o r provinc ia l inspec t ion . There is s t i l l l e s s assurance in the case of processed meats. For example, i n Ontario. only loca l s l augh te re r s , b u t not s m a l l processors, a r e as y e t covered by provinc ia l inspection.

The trend is, however, c l e a r l y toward a un ive r sa l , adequately high standard of meat inspection. In the United S t a t e s , under the Wholesome Meat A c t of 1967, standards of a l l s t a t e inspection systems a re required t o be brought up t o the f ede ra l standard within the near f u t u r e , otherwise Washington w i l l s t e p i n and take over t he service.

One f i n a l po in t i n connection with meat inspec t ion . There now seems t o be general agreement t h a t i t is v i t a l s e rv i ce f o r the pro tec t ion of the consuming publ ic , a s w e l l a s being essen- t i a l for i n t e rna t iona l trade. There a re thus s t rong arguments t h a t inspection serv ices a re a leg i t imate charge on the pub l i c t reasury . However, i t should not be overlooked t h a t the t o t a l cos t s of inspection a re by no means a l l borne by the Government. Inspected establishments incur s u b s t a n t i a l e x t r a cos t s i n comp- ly ing with the inspection a c t and regula t ions , and l i ves tock producers, e i t h e r d i r e c t l y o r i n d i r e c t l y , a l s o share i n loss incidence from condemned carcasses and portions.

In addi t ion t o the key d i f f e r e n t i a t i o n of meat packers according t o inspection s tandards , t he re is q u i t e a v a r i a t i o n i n functions which may be performed. This ranges a l l t h e way from an a b a t t o i r which mainly only s laughters one o r more spe- c i e s of l ives tock t o various types of non-slaughtering proces- s o r s who buy carcass meat o r cu t s and whose a c t i v i t i e s may range from simply "breaking" o r wholesale cut-up, t o very sophis t ica ted processing and the prepara t ion of de l i ca t e s sen products.

In recent years t he re has been a d i sce rn ib l e t rend toward more spec ia l i za t ion in the meat indus t ry , although perhaps this has been somewhat l e s s pronounced i n Canada than i n the U.S .A . , due t o our ove ra l l smaller s ca l e . However, examples of newer spec ia l ized beef s laughter ing p l an t s a r e no t hard t o f i n d , t he re being c lose t o 20 of them, mainly i n Alberta and Ontario.

In Ontario and Quebec, p a r t i c u l a r l y , t he re a r e l a r g e numbers of meat processing operations of various kinds producing a wide range of prepared meats, sausage products, e t c . One p a r t i c u l a r l y expanding type of operation is the purveyor t r a d e , spec ia l i z ing i n portion-controlled meat i t e m s fo r the H . R . I . t r ade , including s t eaks , chops, p a t t i e s , e t c .

All t h i s la rge complex of a wide-ranging v a r i e t y of m e a t indus t ry operations i s s t i l l loosely known a s "meat packing". B u t the c e n t r a l cornerstone is the r e a l "meat packer" o r

2 8

inspected f u l l - l i n e slaughtering-processor, who is the source o f most of t he raw mater ia l f o r t he more spec ia l ized secondary operations. Most of the p r inc ipa l firms of this type belong t o the Meat Packers Council, although membership of the l a t t e r a l s o includes some major non-slaughtering processors.

Census of the Meat packinq Indus t rv

Strange a s it may seem. an up-to-date, s t r i c t l y accura te and complete tabula t ion of a l l s laughter ing and meat processing p l an t s i n Canada is not regular ly ava i l ab le . However, by put- t i n g toge ther the information on federally-inspected p l an t s (which is accurate and cu r ren t ) and secur ing d a t a regarding provinc ia l ly inspected o r l icensed p l a n t s and any o ther known types of operation, i t i s poss ib le t o a r r i v e a t a census of p l an t s accounting f o r a high proportion of connnercial s laughter meat prepara t ion and processing.

There are a t o t a l of 286 f ede ra l ly inspected p l an t s s laughter ing l ivestock and/or preparing o r processing meat, plus an add i t iona l 66 reg is te red t enan t s opera t ing out of inspected establishments and i n many cases having l ives tock slaughtered by the hos t firm. The number of f e d e r a l l y inspected poul t ry p l an t s i s 97, some of which s l augh te r and some only process.

P lan ts operating under p rov inc ia l inspec t ion systems involving post-mortem inspection ( B r i t i s h Columbia, Saskatche- wan, Manitoba. Ontario and Quebec) t o t a l 332. Some of these p l an t s do processing (e.g. 41 i n Quebec b u t fewer i n o the r provinces). Ontario has not y e t begun t o r equ i r e p rov inc ia l inspection f o r l o c a l processors, of whom t h e r e are presumably a considerable number, even though many may only be a small sausage operation.

I n ade i t i on t o provincially-inspected p l a n t s , t he re are approximately 304 loca l p l a n t s , mainly s l augh te re r s , opera t ing i n various provinces under varying degrees of overs ight , bu t not having r e s iden t inspection se rv ices .

This tabula t ion is the c l o s e s t c u r r e n t approximation which it seems poss ib le t o a r r i v e a t respec t ing t o t o t a l number of meat and poul t ry p l an t s i n Canada. The grand t o t a l of 1,092, as previously noted, omits a considerable number of smaller l oca l processors i n Ontario and does no t include locker p l an t s and the l i ke . On the o ther hand, a s u b s t a n t i a l number of the 1,092 a r e r a t h e r small t o be c l a s s i f i e d a s "meat packers", b u t they nevertheless a r e a part o f the indus t ry .

I t may be noted t h a t the D.B.S. Annual Report of t he Slaughtering and Meat: Packing Indus t ry (1967) included 442 establishments, who completed the voluntary s t a t i s t i c a l r e - t u rns . The corporation t axa t ion s t a t i s t i c s fo r 1967 indica ted t h a t only 341 businesses f i l e d t ax r e tu rns as meat firms. The

29

above i s f u r t h e r evidence t h a t once you go beyond 300 o r 400 p l a n t s , the s i z e of opera t ion becomes p r e t t y s m a l l .

S i z e and Type of Firms

Somewhat l i k e t h e farming i n d u s t r y , meat packing i n z l u d e s a g r e a t d i v e r s i t y of types of o p e r a t i o n , w i t h a wide v a r i a t i o n i n s c a l e between t h e l a r g e s t and s m a l l e s t . A l s o l i k e a g r i c u l - t u r e . a r e l a t i v e l y l a r g e p r o p o r t i o n of the t o t a l m e a t ou tput is accounted f o r by a r e l a t i v e l y s m a l l percentage o f t h e t o t a l f i rms and p l a n t s i n t h e i n d u s t r y , a l though i n major market c e n t r e s such a s Toronto and Montreal t h e r e a re l a r g e numbers of f i rms i n some a s p e c t of t h e meat b u s i n e s s . Only 1 2 p l a n t s have over 500 employees.

T r a d i t i o n a l l y t h e r e have been t h r e e " n a t i o n a l " packing f i rms i n Canada, wi th m u l t i p l e p l a n t s i n v a r i o u s l o c a t i o n s a c r o s s t h e country. However, a n o t h e r Western Canada f i r m now has p l a n t s i n t h r e e provinces , and a few o t h e r f e d e r a l l y - i n s a e c t e d f i rms have p l a n t s i n two provinces . Some f i r m s , i n a d d i t i o n t o n a t i o n a l packers , have more t h a n one p l a n t w i t h i n a province , and q u i t e a number o f t h e l a r g e r , s i n g l e - u n i t federa l ly- inspec ted es tabl ishrnents d i s t r i b u t e t h e i r p roducts i n more t h a n one province.

Meat packers r e p r e s e n t a l l types o f b u s i n e s s o r g a n i z a t i o n - p u b l i c and p r i v a t e c o r p o r a t i o n s , p a r t n e r s h i p s , s i n g l e pro- p r i e t o r s h i p s and co-operat ives . Many r e p r e s e n t fami ly b u s i n e s s e s i n the second o r t h i r d g e n e r a t i o n s t a g e . A t the p r e s e n t time o n l y three co-operat ive f i rms - two i n Quebec and one i n Nova S c o t i a - a r e i n opera t ion .

The trend i n t h e i n d u s t r y i s c l e a r l y toward e f f i c i e n t , s t r a t e g i c a l l y - l o c a t e d u n i t s of moderate s i z e r a t h e r than l a r g e r c e n t r a l i z e d opera t ions r e q u i r i n g long h a u l s of l i v e s t o c k . Most newer p l a n t s a r e of s i n g l e s t o r y c o n s t r u c t i o n , rather t h a n t h e o l d e r m u l t i - s t o r y type.

Ent ry i n t o some type of meat o p e r a t i o n on a modest s c a l e is r e l a t i v e l y easy , and many new f i r m s have begun b u s i n e s s i n r e c e n t y e a r s . Experience has shown t h a t e f f i c i e n t , medium- s i z e d p l a n t s which are wel l - loca ted and managed can compete q u i t e e f f e c t i v e l y w i t h l a r g e r p a c k e r s .

Locat ion Fac tors i n t h e Meat I n d u s t r y

As time has gone on and t h e geographic s e p a r a t i o n between c h i e f areas of l i v e s t o c k product ion and major cen t r e s of consumption has become more pronounced, t h e r e h a s been some s h i f t away from t h e o r i g i n a l meat packing i n d u s t r y c o n c e n t r a t i o n around c e n t r a l p u b l i c s t o c k y a r d s . T h i s d e c e n t r a l i z a t i o n t r e n d has perhaps been l e s s marked i n Canada t h a n i n t h e U.S.A., due t o t h e somewhat d i f f e r e n t geography of t h e two c o u n t r i e s . I n t h e United S t a t e s major packing p l a n t s have a lmost e n t i r e l y moved o u t of Chicago t o l o c a t i o n s f a r t h e r w e s t , c l o s e r t o a r e a s

30

of major hog and c a t t l e feeding. The new p lan t s cons t ruc ted i n Alberta i n r ecen t years a re a r e f l e c t i o n of the same type of trend t o loca t e c l o s e r t o raw mater ia l suppl ies .

Among the f a c t o r s which e n t e r i n t o new packing p l a n t loca t ion a r e a v a i l a b i l i t y of adequate supp l i e s of l ives tock within easy hauling range, access t o t r anspor t a t ion f a c i l i t i e s and r e l a t i v e c o s t s t o s h i p product t o markets, a v a i l a b i l i t y of a good water supply, a convenient labour supply and f a c i l i t i e s f o r waste d i sposa l . A major U.S packer follows a "Proximity Pr inc ip le" i n loca t ion which s t a t e s "br ing the p l an t s t o where the supply i s , process where the people a re" .

There a re obvious economies i n s laughter ing l ives tock re- l a t i v e l y c lose t o the poin t of production and shipping the reduced weight of dressed o r processed meat t o d i s t a n t markets, vis-a-vis moving t h e l ives tock over the same rou te t o s l a u g k e r . Meat, of course, r equ i r e s r e f r ige ra t ed t r anspor t b u t a s aga ins t t h i s l i v e animals may s u f f e r damage o r loss i n - t r a n s i t , a s -111 as being sub jec t t o considerable shr ink . These f a c t o r s he lp t o account fo r t he f a c t t h a t over r ecen t years the proportion of the f ede ra l ly inspected c a t t l e s laughter tak ing p lace i n Alberta has increased s i g n i f i c a n t l y . A number of new p lan t s have been b u i l t he re , as more c a t t l e have been fed c lose t o the main range a reas .

The l a r g e s t s laughter ing cen t r e s i n order of importance a re Toronto. Edmonton and Winnipeg with Calgary and Kitchener competing f o r four th . Kitchener s laughters more hogs but Calgary leads i n c a t t l e . Montreal i s a major beef wholesaling and meat processing cen t r e , although no t ranking q u i t e so high as it once d i d i n s l augh te r volume. I t i s , however, N o . 1 i n vea l ca lves and a considerable volume of hogs i s handled the re a l so .

Transportation is obviously a major c o s t f a c t o r i n the meat indus t ry , e spec ia l ly i n a country wi th the geographic f ac to r s , g rea t d i s t ances , and population d i s t r i b u t i o n Canada has. The indus t ry spends l a rge sums t o move meat t o market over the r e l a t i v e l y long hauls requi red . Unfortunately it is d i f f i c u l t t o achieve s i g n i f i c a n t e f f i c i ency increases i n t r ans - po r t a t ion , shor t of dramatic innovations such as methods of moving new c l a s ses of commodities by p ipe l ine . Improved highways, l a rge r e f r ige ra t ed t rucks and improved railway equipment a l l have helped t o move l a r g e volumes of meat speedi ly and as economically as poss ib le .

Functions t h e Indus t ry Performs

To be economically use fu l a s food, meat animals obviously mus t be slaughtered and the r e s u l t i n g product turned i n t o read- i l y marketable forms. The average consumer does not th ink i n terms of buying a steer o r a p ig , although some with home f reezers now from time t o t i m e buy carcasses .

The b a s i c f u n c t i o n of the meat packing i n d u s t r y - and an e s s e n t i a l one w i t h both t e c h n i c a l and economic a s p e c t s - i s t h e t r a n s f o r n a t i o n o f meat an imals (a raw m a t e r i a l ) i n t o consumer products (meat ) . Associated w i t h this i s r e c o v e r i n g economic va lue from by-products such a s h i d e s , bones, f a t s , e d i b l e o f f a l and o t h e r s l a u g h t e r p r o d u c t s , etc.

B u t t h e t ransformat ion and d i s t r i b u t i o n process involves a major problem of l o g i s t i c s . Meat animals have t o be assembled f o r s l a u g h t e r i n a s economic volume as p o s s i b l e , then huge tonnages of product have t o be moved t o f i n a l markets , mos t ly u n d e r c o n s t a n t r e f r i g e r a t i o n . With an average of around 1 0 m i l l i o n pounds of m e a t r e q u i r e d d a i l y t o s e r v i c e t h e Canadian market , t h e meat i n d u s t r y performs q u i t e a complex r o l e i n s e e i n g t o it t h a t t h e f l u c t u a t i n g supply of var ious k i n d s and q u a l i t i e s of l i v e s t o c k i s matched up w i t h t h e more c o n s t a n t demand f o r meat a l l a c r o s s t h e count ry , n e c e s s i t a t i n g keeping a huge p i p e l i n e w e l l s tocked . T r a n s p o r t a t i o n and s t o r a g e services a r e e s s e n t i a l a n c i l l a r i e s t o g e t t i n g t h i s j o b done.

Sometimes overlooked is t h e impor tan t f a c t t h a t se t t le - ment f o r l i v e s t o c k i s b a s i c a l l y made promptly on a c a s h b a s i s , u n l i k e some o t h e r commodities where t h e producer must w a i t sometime f o r s e t t l e m e n t . The packer , w h i l e paying cash f o r l i v e s t o c k , may have h i s money t i e d up i n t h e product f o r a cons iderable t ime, meanwhile b e a r i n g t h e r i s k of market f l u c t u a t i o n s .

I n 1969 t h e es t imated v a l u e of commercial market ings o f c a t t l e , c a l v e s , hogs, sheep and lambs marketed i n Canada reached $1,422 m i l l i o n . I t i s a p p a r e n t t h a t t h e t o t a l c a s h flow gen- e r a t e d by t h e s a l e o f l i v e s t o c k , t h e sale o f meat a t wholesa le and r e t a i l , p l u s payments f o r a l l a n c i l l i a r y services and product ion and market ing m a t e r i a l s , is v e r y l a r g e indeed. D r . Gordon MacEachern h a s s t a t e d t h e t o t a l red meat o p e r a t i o n accounts f o r about 14% of Canada 's t o t a l economic a c t i v i t y , f u r t h e r no t ing t h a t f o r each $1 of meat packer s a l e s , $ 3 o f t i e - i n a c t i v i t i e s a r e involved.

Both changing technology and changes i n market demand have a l t e r e d what goes on w i t h i n t h e w a l l s of v a r i o u s k i n d s o f packing p l a n t s , i n c l u d i n g how much v a l u e t h e processor adds t o t h e raw m a t e r i a l h e s t a r t s w i t h . The pr imary producer , s imi- l a r l y involved w i t h r a p i d l y changing technology and t h e i n c r e a - s i n g c a p i t a l requirements of l a r g e s c a l e , s p e c i a l i z e d produc- t i o n , depends on t h e packer t o t a k e over once hogs o r c a t t l e a r e s e n t t o market , and t o assume r e s p o n s i b i l i t y f o r s e l l i n g t h e products and by-products t o b e s t advantage. I n o t h e r words t h e producer-packer f u n c t i o n s a r e complementary, fo l lowing each o t h e r i n c l o s e sequence.

6

Packers Counci l , February, 1970. G.A. MacEachern, Address t o 50th Annual Meeting o f Meat

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J u s t a s the packer depends on the producer as h i s source of raw mater ia l t o process, so t he r e t a i l e r , wholesaler, i n s t i t u t i o n a l buyer and spec ia l ized processor depend on s laught - e r ing packers fo r t h e i r suppl ies .

It might be noted t h a t f o r the most p a r t packers perform the wholesaling function f o r meat, a s we l l a s the s laughter ing , processing and r e l a t ed a c t i v i t i e s . There a r e some exceptions t o t h i s , notably the extensive Montreal wholesale beef t r ade , bu t the major p a r t of the meat supply i s sold d i r e c t l y by packers t o r e t a i l e r s , the i n s t i t u t i o n a l t r a d e , o r (genera l ly through agents) i n foreign markets.

In many respec ts it is remarkable how smoothly the whole vas t l ives tock and meat marketing process works without any cen t r a l d i r ec t ion o r co-ordination. Meat packers, forming as they do the major connecting l i n k between producer and consumer, a c t as equal izers and programmers.

Economic Charac te r i s t ics of the Industry

As we have noted, the meat indus t ry comprises many firms which vary g r e a t l y i n s c a l e and type of operation. I t is, therefore , d i f f i c u l t t o genera l ize on various c h a r a c t e r i s t i c s of the industry unless one takes ' t he typ ica l "meat packer" as a f u l l - l i n e s laughterer who c a r r i e s through t o most types of processing operations -

On t h i s assumption, the following genera l c h a r a c t e r i s t i c s of the industrymay be noted:

1. Rela t ive ly la rge volume, rapid turnover and a narrow p r o f i t margin per d o l l a r of s a l e s and pe r pound of product.

2 . Raw mater ia l c o s t s comprise a h igh percentage of the s a l e s d o l l a r (7040%) with cash se t t lement f o r l ives tock the predominant p rac t i ce . Value added during manufacture i s considerably lower than i n i n d u s t r i e s which convert a r e l a t i v e l y low value raw h a t e r i a l i n t o a f in i shed product which commands a good p r i ce .

3. NO con t ro l over raw ma te r i a l supp l i e s and raw ma te r i a l comes i n a u n i t package o r combination dea l , requi r ing disassembly. Even i f the packer i s temporarily s h o r t of one o r two c u t s , he must buy the whole animal (unless he can buy cu t s from another packer).

4 . Rela t ive ly high r a t i o of expenses t o p r o f i t , p lac ing pre- m i u m on management e f f i c i ency and c o s t con t ro l .

5 . Capi t a l - moderate i n f ixed c a p i t a l requirements bu t sub- s t a n t i a l working c a p i t a l i s required.

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6 .

7.

8.

9.

10.

11.

Only moderately adaptab le t o automation. Most of i t s products a r e n o t adaptab le t o f u l l "push but ton" o p e r a t i o n , and s u b s t a n t i a l hand labour i s r e q u i r e d . Some o p e r a t i o n s such a s smoking, render ing can be automated.

I t i s concerned with a p e r i s h a b l e product , c r e a t i n g urgency o f s e l l i n g .

product d i f f e r e n t i a t i o n p o s s i b i l i t i e s less on f r e s h meats than branded l i n e s of processed products . Modest a d v e r t i s - i n g budget . (Only 1 major packer is i n f i r s t 100 Canadian a d v e r t i s e r s ) . S a l e s not made through f r a n c h i s e d d e a l e r s .

Very compet i t ive , f l u i d and v o l a t i l e p r i c e s t r u c t u r e f o r b o t h raw m a t e r i a l and f i n i s h e d products .

R e l a t i v e l y high degree of r e g u l a t i o n compared t o most i n d u s t r i e s (meat i n s p e c t i o n , grad ing , Food and Drug, consumer a f f a i r s , e t c . ) .

The foregoing c h a r a c t e r i s t i c s , a number of which d i f f e r - - markedly from a number of o t h e r l e a d i n g manufactur ing i n d u s t r i e s , h e l p t o account f o r t h e f a c t t h a t managing a meat packing p l a n t o r f i r m c o n s i s t e n t l y a t a p r o f i t i s no s imple t a s k . One of the main reasons f o r this is t h a t most o f t h e compet i t ive f o r c e s i n t h e i n d u s t r y focus on p r i c e -- more so than t h e m a j o r i t y o f o t h e r i n d u s t r i e s .

The margin of p r o f i t i n meat packing is so narrow a s t o leave l i t t l e room f o r e r r o r s i n management d e c i s i o n o r i n e f f i - c i e n c i e s i n opera t ion . The l a r g e s t , and presumably one of t h e most e f f i c i e n t , meat packers , r e p o r t e d t h e fo l lowing n e t p r o f i t experience 1962-66 t o t h e J o i n t Senate-House of Commons committee on Consumer C r e d i t and P r i c e s :

N e t P r o f i t s on Opera t ions R e l a t i n g t o Meat and Meat By-products

$ per lb. % of d o l l a r sales 1962 0.162 0.47 1963 0.161 0.43 1964 0.096 0.27 1965 0.217 0.64

0.52 1966 0.191 5 Y r . Ave. 0.165 0.47

-

The a l t e r n a t i v e compet i t ive market ing channels a v a i l a b l e f o r c a t t l e , and the market ing s t r u c t u r e f o r hogs, makes i t d i f f i c u l t f o r any one packer t o procure l i v e s t o c k a t any s i g - n i f i c a n t l y lower c o s t than h i s compet i tors . S i m i l a r l y u n l e s s a packer can e s t a b l i s h a s p e c i a l r e p u t a t i o n f o r t h e q u a l i t y of h i s branded products , it i s d i f f i c u l t t o o b t a i n a c o n s i s t e n t l y

34

higher p r i ce for h i s products. This means favourable opera t ing r e s u l t s have t o be obtained by a combination of f a c t o r s , including above-average operating e f f i c i ency and lower u n i t c o s t s , maintaining a t l e a s t a s l i g h t p r i c e advantage based on q u a l i t y and by using sound marketing s t r a t egy .

One of the ch ief oppor tuni t ies f o r more p r o f i t a b l e opera- t i ons open t o a meat packer i s t o incorporate more se rv ices of r e a l value t o the consumer with the bas ic products he sells i . e . c r ea t e more value added, and market the combined prcduct- plus-service s k i l l f u l l y . Generally speaking, m e a t processors make higher u n i t p r o f i t s than s laughter ing packers.

The t r a d i t i o n a l operations of beef s l augh te re r s i.e. s e l l i n g the bulk of t h e i r production. a s c h i l l e d s i d e s , quarters o r major c u t s t o customers with s t rong bargaining power, is not conducive t o a very s izeable margin of p r o f i t i n t h i s a c t i v i t y . That i s why a . g r e a t e r f a b r i c a t i o n of beef c u t s b y ' t h e packer seems t o be a log ica l t rend , i n which American firms l i k e Iowa Beef Co. and Monfort of Colorado have demonstrated the p o s s i b i l i t i e s .

The Manaqement Equation i n Meat Packinq

I can think of no more j u s t reward f o r a cons i s t en t c r i t i c of meat packers than t h a t he by some t w i s t of f a t e suddenly came t o assume management of a fa i r - s ized , d i v e r s i f i e d , p l a n t opera- t i on . I be l ieve it would be q u i t e an ed i fy ing experience.

I t used t o be sa id t h a t a l l one needed t o e n t e r the packing business was a k n i f e , a rope and a tree. There are s t i l l a few l o c a l a b a t t o i r s which a r e almost a s rudimentary a s t h i s and managing a small , f resh meat operation is not too complicated. B u t a la rge , f u l l - l i n e s laughter ing and processing opera t ion requi res except iona l management expe r t i s e a t var ious l eve l s -- the middle a s wel l as the top. The normal s lender margin of p r o f i t i n t he indus t ry means t h a t t he over -a l l c a l i b r e of management of a company v i r t u a l l y determines its su rv iva l chances, and i ts growth prospects.

To i l l u s t r a t e how even very competent meat packing management, using the most sophis t ica ted management t o o l s ava i l ab le , can run i n t o unexpected problems, I might c i t e the experience of Wilson and Co. i n 1968 and 1969. This firm is one of t he more successfu l and progressive American packers.

I n its impressively s e t up 1968 Annual Report, Wilson gave q u i t e a convincing p i c t u r e of the company a s a forward-looking, dynamic company, with a c l e a r b luep r in t of i t s fu tu re plans developed, and confident of t h e i r success fu l execution. "The company's two bas ic f inanc ia l ob jec t ives , fo r t he f u t u r e , " t he r epor t s a id , " a re cons i s t en t ly t o produce a ne t r e t u r n of a t l e a s t 15% on ne t worth...and t o achieve an average annual growth r a t e of over 10% i n earnings per share."

3 5

And t h e f i n a n c i a l r e s u l t s Wilson repor ted f o r 1968 were very s a t i s f y i n g . S a l e s topped a b i l l i o n d o l l a r s f o r t h e f i r s t time ($1,024 m i l l i o n ) and n e t income was $10.2 m i l l i o n o r $1.85 p e r s h a r e . Al toge ther a very good looking p i c t u r e .

B u t t h e 1969 r e p o r t , r e l e a s e d a l i t t l e over a month ago, revealed some unexpected r e v e r s e s . While s a l e s l a s t y e a r had reached a new high of $1,285 m i l l i o n , n e t earn ings had f a l l e n t o $ 4 . 1 m i l l i o n o r 85# a s h a r e , down $54 m i l l i o n or $1 a s h a r e from 1968. True t h e r e w e r e v a r i o u s f a c t o r s account ing f o r t h e s h a r p l y reduced earn ings and some were of a type expected t o b e non-recurr ing such a s a d i s a s t r o u s venture w i t h a s u b s i d i a r y o p e r a t i o n i n B r a z i l . Never the less t h e f i n a n c i a l r e s u l t s o f t h e two y e a r s were i n s h a r p c o n t r a s t , and t h i s was a company w i t h an e x c e l l e n t management and earn ings record . I t s e r v e s t o i l l u s t r a t e the inescapable u n c e r t a i n t i e s of meat packing r e s u l t s d e s p i t e t h e bes t - la id p l a n s .

A dramatic i l l u s t r a t i o n of t h e changes which a r e p o s s i b l e i n t h e f i n a n c i a l p o s i t i o n of a company through a change i n management i s the record i n r e c e n t years of t h e Burns Company h e r e i n Canada. This f i r m i n 1961 t o 1965 had two y e a r s i n which its meat opera t ions l o s t money, and having made r a t h e r l a r g e c a p i t a l o u t l a y s dur ing t h i s per iod under two managemegt groups, t h e company was i n poor f i n a n c i a l shape and i t s pros- p e c t s were s e r i o u s l y d e t e r i o r a t i n g . From t h a t p o i n t on, however wi th a new P r e s i d e n t , A . J . E . C h i l d , a t t h e helm, t h e company's e a r n i n g s improved s t r o n g l y and p r o g r e s s i v e l y i n 1967, 1968 and 1969. Had t h e previous t rend n o t been checked, t h i s p ioneer f i rm might not have surv ived . Management made t h e d i f f e r e n c e .

A number of o t h e r examples could be c i t e d from Canadian i n d u s t r y e x e r i e n c e , i l l u s t r a t i n g t h e r e s u l t s of improved management. 7

I n h i s address a t t h e 50th Annual Meeting of t h e Meat packers Counci l , W.F. McLean, P r e s i d e n t of Canada Packers , expressed t h e view and gave l o g i c a l reasons f o r i t , t h a t meat packing r e q u i r e s cons iderably more complex management d e c i s i o n s than many o ther i n d u s t r i e s commonly thought of a s involv ing h i g h e r technology than t h e meat i n d u s t r y .

H e pointed o u t t h a t i n an i n d u s t r y such as e l e c t r o n i c s , once t h e i n i t i a l des ign problems f o r a new product are surmounted, m a t e r i a l can be assembled, c o s t s worked out and t h e product ion and market ing program planned w e l l i n advance.

7 I n 1 9 2 7 , Canada Packers w a s formed tak ing over t h r e e prac-

t i c a l l y defunct f i rms (Davies , Gunns and Canadian packing Co.) and combining these w i t h i n one v i a b l e f i r m (Harris A b a t t o i r ) . Even though t h e d e p r e s s i o n s t r u c k b e f o r e C.P. was w e l l e s t a b - l i s h e d , s k i l l f u l management brought t h e company through and s t a r t e d it on t h e way t o s t e a d y growth.

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I n c o n t r a s t t o t h i s , M r . McLean noted t h a t i n t h e t r a d i n g departments of meat packin7 f i rms t h e r e i s "an almost c o n s t a n t a i r of crisis" due t o t h e n e c e s s i t y of making r a p i d , m u l t i p l e - c h o i c e d e c i s i o n s t o adapt t o an ever-changing market p i c t u r e .

Anyone who could s i t a t t h e elbow of a b e e f , pork o r processed meats department manager of a s i z e a b l e p l a n t d u r i n g a day o r week would c e r t a i n l y be aware of this c r i t i c a l decision-making process . I n t h e c a s e of pork o r p r o v i s i o n s o p e r a t i o n s , the supply of hogs may prove t o be e i t h e r g r e a t e r o r less than expec ted , w i t h r a p i d d e c i s i o n s requi red a s t o where t o g e t product t o f i l l s t a n d i n g o r d e r s o r e x a c t l y what t o do w i t h t h e s u r p l u s . The pork c u t t i n g and process ing departments m u s t be i n s t r u c t e d a s t o t h e a l t e r n a t i v e forms of c u t s t o be produced. For example, hams p r e s e n t v a r i o u s a l t e r n a t i v e s such a s c u r i n g and smoking ( f u l l y o r p a r t i a l l y cooked) , boning out f o r a d i n n e r - s t y l e ham, boning f o r canning, f r e s h f o r t h e e x p o r t t r a d e , and a number of o t h e r forms. Many complex f a c t o r s have t o be taken i n t o account i n co-ord ina t ing t h e whole product ion and market ing process and d e c i d i n g whether t o s t o r e product , buy c u t s from o t h e r packers o r import them, e tc . The depar tmenta l manager m u s t r e p o r t and j u s t i f y h i s d e c i s i o n s t o t h e p l a n t manager, and e v e n t u a l l y a l l t h e c u r r e n t o p e r a t i n g d e c i s i o n s are r e p o r t e d t o t h e g e n e r a l manager f o r h i s wer-v iew and then f i n a l l y t h e g e n e r a l o p e r a t i n g p i c t u r e i s s u b j e c t t o a p p r a i s a l by t h e top management echelon of t h e company a t least weekly.

Today, i n c r e a s i n g l y t h e computer is be ing employed as a management t o o l , a s w e l l as a s t r a i g h t workhorse, i n meat packing a s i n most o t h e r major i n d u s t r i e s . I n t h e meat i n d u s t r y a s p e c i a l i z e d a d a p t a t i o n of t h e computer i s t o a i d i n t h e formu- l a t i o n of sausage and cooked and comminuted meats , accord ing t o t h e c o s t and a v a i l a b i l i t y of a l t e r n a t i v e i n g r e d i e n t s , and t a k i n g company product s t a n d a r d s i n t o account . As the meat i n d u s t r y becomes i n c r e a s i n g l y complex, it would seem l i k e l y t h a t computers may be c a l l e d on t o assist more and more i n t h e c o n s t a n t a l t e r - n a t i v e d e c i s i o n weighing process which f a c e s meat packers .

Management, t h e r e f o r e , is o f r a t h e r unique d i f f i c u l t y and importance i n t h e packing i n d u s t r y . I n many r e s p e c t s running a packing f i r m compares w i t h commanding a n a c t i v e m i l i t a r y campaign. As new information comes i n , s t r a t e g i c d e c i s i o n s have t o be made and o r i g i n a l p l a n s a l t e r e d . I n both c a s e s , l o g i s t i c s p l a y s a n impor tan t r o l e .

I n t h e p a s t meat i n d u s t r y management has s u f f e r e d from i t s s h a r e of "sacred cows", one b e i n g t h a t main ta in ing volume and a "share of t h e marl@ t" i s more important than o p e r a t i n g a t a p r o f i t a b l e margin. These o l d e r r u l e s o f thumb a r e by no means e l i m i n a t e d , b u t most s u c c e s s f u l f i rms a r e g r a d u a l l y coming t o a d o p t a more en l igh tened volume-margin concept .

I t would seem t o be t o t h e advantage of l i v e s t o c k producers tha t packers i n g e n e r a l d o n o t a c t i n a s t r i c t l y r a t i o n a l economic

37

sense and reduce o r c u t down t h e i r buying o f l i v e s t o c k when margins a r e poor o r n e g a t i v e . I n s t e a d they o f t e n i n d i v i d u a l l y t r y t o increase throughput when t h e economics of t h e s i t u a t i o n would suggest a n oppos i te p o l i c y . Also, w h i l e t h e r e is r e a l l y no p r a c t i c a l o b l i g a t i o n on packers t o clear t h e market, regardless of q u a n t i t y o r q u a l i t y , t h e i n d u s t r y p r a c t i c a l l y always acts a s i f it were. This does n o t mean there a r e never temp- o r a r y hold-overs , b u t by and l a r g e a l l l i v e s t o c k shipped t o market f i n d s a buyer wherever and whenever i t i s o f f e r e d f o r s a l e . The a v a i l a b i l i t y of t h i s cont inuous cash market i s very important t o t h e l i v e s t o c k i n d u s t r y .

Livestock Procurement p a t t e r n s

Securing an adequate supply o f l i v e s t o c k of s u i t a b l e q u a l i t y on a c o n s i s t e n t b a s i s i s very important t o a packing p l a n t , and not an easy g o a l t o achieve . Livestock procurement p a t t e r n s f o r packers have tended t o change i n response t o changing supply f a c t o r s f o r l i v e s t o c k , t h e t rend t o fewer and l a r g e r product ion uni t s , developments i n producer market ing o r g a n i z a t i o n and o t h e r f a c t o r s .

I n a way, it seems s t r a n g e t h a t forward c o n t r a c t i n g f o r l i v e s t o c k s u p p l i e s has not been more e x t e n s i v e l y used. Perhaps one main problem is a n e f f e c t i v e method of g s t a b l i s h i n g p r i c e s under such a method. Hog marke t ing board s e l l i n g , of c o u r s e , r u l e s it out f o r t h i s s p e c i e s .

Beef s l a u g h t e r e r s procure c a t t l e through a v a r i e t y of

i z e v i z . t h e c e n t r a l p u b l i c markets where a u c t i o n s a l e i s predominant, l o c a l a u c t i o n s o r community s a l e s , which have become f i r m l y e s t a b l i s h e d since t h e 1940's, e s p e c i a l l y i n O n t a r i o and Alber ta , through producer co-opera t ive marketing

channels , o r by p r i v a t e t r e a t y s a l e s negot ia ted i n t h e c o u n t r y , a t t h e p l a n t o r by te lephone, o f t e n on a r a i l se t t lement b a s i s . Marketing on a grade and y i e l d b a s i s appears t o be more wide ly used i n Ontar io than i n Western Canada. P o s s i b l y a t h i r d of t h e b e t t e r q u a l i t y c a t t l e i n O n t a r i o may be so ld by t h i s method. Today competi t ion f o r a v a i l a b l e l i v e s t o c k is pervas ive , ex tending r i g h t back t o t h e farm o r f e e d l o t , where a l t e r n a t i v e b i d s c a n be secured b e f o r e t h e s t o c k i s shipped.

a l C r n a t i v e channels which producers can f r e e l y e l e c t t o pa t ron-

I n t h e case of hogs, t h e predominant t rend h a s been toward producer marke t ing boards o r commissions. Cent ra l ized s e l l i n g u s i n g t e l e t y p e a u c t i o n i s i n e f f e c t now i n Ontar io , Manitoba, Alber ta and New Brunswick. Nova S c o t i a a l s o has a bca rd b u t h a s not y e t adopted t e l e t y p e s a l e , t h e r e be ing only t w o i n s p e c t - ed p l a n t s t h e r e , one of which i s a co-operat ive.

Provinces account ing f o r two-thirds of hog o u t p u t i n 1969 now have hog market ing p l a n s and a proposa l i s c u r r e n t l y b e f o r e t h e Quebec Marketing Board a s w e l l .

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I t might be noted t h a t t h e r e a r e some s i g n i f i c a n t d i f - fe rences i n the way p r o v i n c i a l hog market ing p l a n s o p e r a t e . For example, whi le the Ontar io and Alber ta Boards handle 100% of the hogs produced i n t h e s e provinces , the Manitoba Hog Marketing Commission handled i n the p a s t y e a r o n l y about 56%. as producers i n t h a t province have an o p t i n g o u t p r i v i l e g e and may s h i p d i r e c t .

Meat packers , a f t e r some e a r l y misunderstandings and i n e q u i t i e s were s t r a i g h t e n e d o u t , and a non-d iscr imina tory method of sale i n s t i t u t e d , have accepted t h e board o r commission method o f s e l l i n g . I t a l lows a very open and c o m p e t i t i v e system of b idding , and s i m p l i f i e s many of t h e former problems of procurement, a s e v e r y l o t is a v a i l a b l e t o a l l p o t e n t i a l buyers .

Packers would regard any move t o i n s t i t u t e r e s t r i c t i v e quotas and/or f i x p r i c e s under a hog market ing p l a n w i t h a g r e a t d e a l of concern. requi red under such a n arrangement i n t r o d u c e s many dangers of s e r i o u s e r r o r , p a r t i c u l a r l y i f both supply and p r i c e s w e r e t o be c o n t r o l l e d . Achieving more s t a b i l i t y o f supply a t an adequate l e v e l is c e r t a i n l y n o t an u n d e s i r a b l e o b j e c t i v e b u t it involves many p r a c t i c a l problems, hazards and p o s s i b l e i n e q u i t i e s .

The c e n t r a l i z e d decision-making

The l i v e s t o c k and meat i n d u s t r y i n r e c e n t y e a r s has fa red much b e t t e r under f l e x i b l e compet i t ive p r i c i n g , ( t h e l a t t e r n o t be ing i n t e r f e r e d w i t h by hog market ing boards) t h a n o t h e r segments of a g r i c u l t u r e where ad justments have been hampered by more r i g i d market ing p o l i c i e s and a r t i f i c i a l s u p p o r t s o f v a r i o u s k i n d s .

C u r r e n t l y a B i l l (C-197) h a s been b e f o r e t h e Canadian Par l iament , designed t o f a c i l i t a t e , where d e s i r e d , n a t i o n a l market ing agencies under t h e g e n e r a l o v e r s i g h t of a N a t i o n a l Marketing Counci l .

One c u r i o u s p r o v i s i o n of t h e B i l l i s t h a t "farm products" a r e def ined t o i n c l u d e "meat" ( a s w e l l a s l i v e s t o c k ) . Obviously meat i s n o t a farm product i n normal t r a d e . It is p o s s i b l e t h a t t h e o b j e c t of th is d e v i c e is t o permi t , i f d e s i r e d , t h e estab- l i shment of a N a t i o n a l Meat Board, s i m i l a r t o t h e Wheat Board. This p r o s p e c t should n o t be very re -assur ing t o any segment of t h e i n d u s t r y . While a Nat iona l Hog Marketing Board would n o t b e o f t h e same concern, it is not c lear how p r a c t i c a l o r nec- e s s a r y such a body would b e , s i n c e c e n t r a l i z e d n a t i o n a l sa le of hogs would seem h a r d l y f e a s i b l e .

The proposed n a t i o n a l l e g i s l a t i o n , l ike i ts p r o v i n c i a l c o u n t e r p a r t s , seems t o be based on t h e phi losophy t h a t i f a l i t t l e power is good, then unl imi ted p o w r w i l l be of un l imi ted b e n e f i t which h a r d l y fol lows. One s e c t i o n of B i l l C-197 p r o v i d e s ,

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f o r example, t h a t t h e market ing agency may "determine t h e q u a n t i t y i n which and t h e p r i c e , time and p lace a t which t h e regula ted products o r any v a r i e t y , c l a s s o r grade t h e r e o f may be marketed i n i n t e r p r o v i n c i a l o r expor t t r a d e " . This i s c e r t a i n l y a very sweeping power. J u s t read it c a r e f u l l y .

I n t e q r a t i o n

One does n o t h e a r a s much concern expressed nowadays regard ing v e r t i c a l i n t e g r a t i o n a s a few y e a r s ago. There h a s , o f c o u r s e , been e x t e n s i v e c o n t r a c t i n t e g r a t i o n i n t h e p o u l t r y i n d u s t r y . and i n some a r e a s c o n s i d e r a b l e c o n t r a c t i n g of hogs , mainly w i t h feed companies involved .

Genera l ly speaking t h e d e g r e e of v e r t i c a l i n t e g r a t i o n w i t h i n t h e Canadian l i v e s t o c k and meat i n d u s t r y has been rela- t i v e l y s l i g h t . Major r e t a i l e r s have not been going i n t o t h e packing b u s i n e s s , a l though some do a c e r t a i n amount of proces- s i n g . Major packers do not own r e t a i l s t o r e s . While i n d i v i d u a l packers do feed some c a t t l e , t h e r e a r e as y e t no beef opera- t i o n s i n Canada approaching t h e impressive feedlot-packinghouse i n t e g r a t e d set-up of Monfort of Colorado. Nor h a s t h e r e been any i n c r e a s i n g t rend toward producer-owned co-opera t ive packing p l a n t s , and d u r i n g 1969 Copaco ceased o p e r a t i o n s i n Ontar io a f t e r over 30 y e a r s .

Where 100% compulsory market ing b a r d s f o r hogs have been e s t a b l i s h e d , t h e i n c e n t i v e f o r v e r t i c a l l y - i n t e g r a t e d o p e r a t i o n s by e i t h e r packers o r producers h a s been removed, a l though n o t n e c e s s a r i l y e l i m i n a t i n g f i n a n c i n g o f hogs by feed companies.

C a p i t a l requirements ac t s as an au tomat ic check on any f u r t h e r r a p i d spread of v e r t i c a l i n t e g r a t i o n , e s p e c i a l l y i n t h e case of beef c a t t l e . The investment i n f e e d e r c a t t l e and f e e d l o t f a c i l i t i e s f o r a p l a n t s l a u g h t e r i n g 3,000 ca t t l e a week might be s e v e r a l times t h e va lue of t h e p l a n t . From t h i s s t a n d p o i n t t h e l i k e l i h o o d of packers going i n t o the e x t e n s i v e feeding of c a t t l e m u l d appear t o be c o n z i d e r a b l y less t h a n t h a t of a l a r g e feeding o p e r a t i o n b u i l d i n g a p l a n t , which was the p r o g r e s s i o n by Monfort. Recent ly I understand a l a r g e modern c a t t l e and hog feeding f a c i l i t y o f f e r e d f o r s a l e i n Saskatche- wan w a s o f fe red t o a t l e a s t one packer , u n s u c c e s s f u l l y .

As long a s the market ing system is e f f i c i e n t , and enables t h e three c h i e f members of the meat team (producer , packer , and r e t a i l e r ) t o main ta in a reasonable b a r g a i n i n g b a l a n c e , w i t h t h e r e t a i l e r and packers e x p e r i e n c i n g reasonable c o n t i n u i t y of

8 The l a r g e s t s l a u g h t e r e r i s repor ted c u r r e n t l y f e e d i n g o n l y

about 3.000 head.

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supply and a b l e t o g e t product of a c c e p t a b l e s p e c i f i c a t i o n s , t h e r e appears t o be no p r e s s i n g need f o r i n t e g r a t i o n .

c a p a c i t y

I would l i k e t o make a few comments about packinghouse c a p a c i t y . From time t o time s u g g e s t i o n s a r e made t o t h e e f f e c t t h e Canadian meat packing i n d u s t r y s u f f e r s from a l o t of excess c a p a c i t y which i n f l a t e s c o s t s and impai rs e f f i c i e n c y . I t h i n k some of t h e s e s ta tements i n d i c a t e a l a c k of f u l l unders tanding a s t o t h e p r e c i s e n a t u r e of packing p l a n t c a p a c i t y .

There i s no doubt , of c o u r s e , t h a t t h e packing i n d u s t r y has c o n s i d e r a b l e r e s e r v e c a p a c i t y f o r handl ing both c a t t l e and hogs, wi th a g r e a t e r r e s e r v e i n some areas than o t h e r s . Seasonal and c y c l i c a l t r e n d s i n l i v e s t o c k product ion have always requi red packers t o main ta in some f l e x i b i l i t y i n throughput . A t t h e peak hog o u t p u t o f World W a r I1 c a p a c i t y was p u t t o a s e v e r e t e s t , b u t w i t h some temporary a d d i t i o n s t o s tockyard space , t h e crisis w a s m e t .

Another t es t w a s i n 1966 when p r a c t i c a l l y a l l of t h e p l a n t s of Canada Packers w e r e c l o s e d b y ' a strike f o r some t e n weeks from J u l y 20th t o October 3rd. F o r t u n a t e l y d u r i n g t h i s per iod hog o u t p u t w a s s e a s o n a l l y and c y c l i c a l l y reduced, wi th s laugh- t e r i n g s averaging only 111.400 head a week. While c a t t l e s l a u g h t e r was f a i r l y s i z e a b l e (average 51,300 weekly) t h e rest of t h e i n d u s t r y w a s a b l e t o a d j u s t by u s i n g l a r g e r gangs working e x t r a s h i f t s , and moving beef through c o o l e r s more r a p i d l y t h a n u s u a l .

What then a r e t h e b a s i c f a c t o r s i n packinghouse c a p a c i t y ? c e r t a i n l y i n a s l a u g h t e r i n g p l a n t t h e normal ra te of k i l l p e r hour i s a b a s i c governor of c a p a c i t y . However, i f s u f f i c i e n t l i v e s t o c k are a v a i l a b l e , it is obvious t h a t s imply by o p e r a t i n g a second s h i f t on t h e k i l l i n g f l o o r , s l a u g h t e r c a p a c i t y is doubled, o r by l a r g e r gangs and a f a s t e r c h a i n speed t h e r a t e p e r hour can be increased .

However, r a t e of k i l l i s n o t by any means t h e only f a c t o r i n c a p a c i t y . Carcasses m u s t be promptly c h i l l e d a f t e r s l a u g h t e r , so c o o l e r space is a n impor tan t l i m i t i n g f a c t o r . K i l l i n g can- n o t proceed beyond t h e maximum c a p a c i t y o f c o o l e r s . Here t h e r e i s some d i f f e r e n c e between b e e f and pork o p e r a t i o n s . I n t h e c a s e a f pork, each d a y ' s k i l l can b e c h i l l e d o v e r n i g h t and t h e n c u t up t h e next day, w i t h a c o n s t a n t c y c l e of f i l l i n g and empty- i n g c o o l e r s . With b e e f , however, c o o l e r s are used f o r grad ing , s e l l i n g and ag ing , so a larger r e s e r v e i s r e q u i r e d .

The throughput c a p a c i t y of a packing p l a n t , t h e r e f o r e , whi le designed around a normal f i g u r e , i s a r a t h e r complex and f l e x i b l e f a c t o r which can b e expanded b y overt ime and e x t r a s h i f t s . What average volume goes through t h e p l a n t depends on

41

many co-ordinated f a c t o r s such a s t h e r a t e of procurement of l i v e s t o c k , the p r o d u c t i v i t y o f t h e work f o r c e , t h e r a t e a t which product i s shipped out t o f i l l o r d e r s , e tc . A proper ba lance between k i l l i n g and c h i l l i n g c a p a c i t y must always be cons idered i n p l a n t des ign , b u t many e x i s t i n g p l a n t s have a l t e r e d one or both of these f a c i l i t i e s .

From the s tandpoin t of t h e l i v e s t o c k producer , a reason- a b l e amount of excess packinghouse c a p a c i t y is a p l u s f a c t o r , because it enables packers t o h a n d l e sudden peaks i n market ings and a l s o it keeps packers w i t h e x t r a c a p a c i t y always hungry f o r a l i t t l e e x t r a volume, which adds t o p r i c e buoyancy. Marginal f i rms i n t h e i n d u s t r y a r e probably among those who s u f f e r most when t h e r e is t o o much r e s e r v e c a p a c i t y .

With u n r e s t r i c t e d e n t r y of new f i rms i n t o t h e meat packing i n d u s t r y , and r a t h e r moderate c a p i t a l requirements f o r a p l a n t of s i g n i f i c a n t s i z e , t h e r e i s r e a l l y no way t o ensure mainten- ance of optimum packing i n d u s t r y c a p a c i t y , e s p e c i a l l y cons id- e r i n g t h e c y c l i c a l and s e c u l a r t r e n d s of l i v e s t o c k o u t p u t . The t r e n d has been f o r p l a n t s t o have a t l e a s t some o p e r a t i o n s ex tending round t h e c lock . obvious ly t h e g r e a t e s t o p e r a t i n g e f f i c i e n c y can be achieved by u s i n g expens ive c a p i t a l equipment and f a c i l i t i e s more hours i n t h e day , t h u s reducing over- head c o s t s p e r u n i t .

Labour Costs i n Meat Packinq I n d u s t r y

Wage r a t e s paid by major meat packers average h i g h e r than t h e average of a l l manufactur ing i n d u s t r i e s , and a r e t h e high- e s t among food i n d u s t r i e s . There are v a r i o u s reasons f o r t h i s , i n c l u d i n g the type of s k i l l s r e q u i r e d f o r e x p e r t bu tcher ing , boning and trimming and t h e envi ronmenta l f a c t o r s i n some of t h e p l a n t departments .

While t h e top wage r a t e s p a i d i n t h e meat packing i n d u s t r y a r e r e l a t i v e l y h i g h , t h e r e i s a tremendous v a r i a t i o n w i t h i n t h e i n d u s t r y . Some smal l l o c a l p l a n t s i n v a r i o u s a r e a s have wage r a t e s on ly about h a l f as h i g h as l a r g e inspec ted packers , g i v i n g them a s u b s t a n t i a l advantage i n l a b o u r c o s t s . One l a r g e n a t i o n a l packer dur ing t h e p a s t y e a r c l o s e d down both s l a u g h t - e r i n g and meat process ing o p e r a t i o n s i n Montreal , s t a t i n g t h e d iscrepancy i n labour r a t e s compared t o s m a l l e r compet i tors as t h e main f a c t o r .

The major i ty of p l a n t s i n t h e i n d u s t r y work a 40-hour normal daytime s h i f t , wi th a few s t i l l working a l i t t l e longer week. Most l a r g e r p l a n t s have e x t r a s h i f t s f o r a t l e a s t some o p e r a t i o n s dur ing t h e evening o r a t n i g h t , p l u s overt ime work a s r e q u i r e d , dur ing seasonal peaks of th roughput .

Packers have endeavoured t o automate o p e r a t i o n s a s much a s p o s s i b l e , u s e advanced m a t e r i a l s h a n d l i n g systems, e tc . b u t main ta in ing volume a s c l o s e t o t h e optimum as p o s s i b l e i s a b a s i c way o f keepirg labour c o s t s t o r e a s o n a b l e l e v e l s .

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Beef Operations i n the Meat Industry

Among Canadian federally-inspected p l a n t s , approximately 20 spec ia l i ze in the s laughter of c a t t l e and the s a l e of dressed beef. Some of the newer Western p l an t s a r e of t he " k i l l and sh ip" v a r i e t y -- a r e l a t i v e l y uncomplicated operation. Many other p l an t s combine beef operations with hogs and o tke r spec ies . Medium-size independent beef s l augh te re r s account f o r a su rp r i s ing volume of the beef business i . e . i n Ontario 50% o r b e t t e r .

In terms of tonnage, f r e sh beef is t h e N o . 1 item t o both packers and r e t a i l e r s . A frequent ques t ion is why beef , con- s ide r ing i t s volume and s t rong r a t i n g with consumers, is no t a b e t t e r prof i tgenera tor than it is. I t is almost a matter of "never was so much handled by so many f o r so l i t t l e " . I n o the r words typ ica l beef ha d l ing margins tend t o be narrow, espec- i a l l y t o the packers. 9 .

Unlike pork, the l a r g e s t p a r t of the "block" beef supply is = I d i n f r e sh form, being purchased by r e t a i l e r s f o r s a l e t o consumers, or by the H . R . I . t r ade , as s t eaks , r o a s t s , ground beef and sundry o ther cu t s . The lower q u a l i t y end of t h e beef supply, which i s no t s u i t a b l e fo r s a l e a s "block" beef , is boned o u t f o r manufacturing purposes. Cer ta in beef c u t s such a s p l a t e s and b r i s k e t s , a re c u r e d t o meet t he demand f o r corned beef , pastrami and o ther s p e c i a l t i e s , a growing bus iness i n recent years.

Pork is much more highly-processed wi th in t h e packing p l an t than beef. The carcass i s reduced t o primal c u t s , which i n tu rn a re subjected t o a v a r i e t y of processing opera t ions . Hams may be cured, smoked, bo i l ed , canned, fully-cooked, s l i c e d o r sold i n garnished banquet s t y l e . The l o i n i s one c u t predominantly sold f r e sh , b u t it may a l s o be converted i n t o a boneless back, and e i t h e r cured and smoked f o r Canadian back bacon o r sweet- pickled and corn-mealed. B e l l i e s a r e , of course. predominantly cured and smoked, and sold a s s l i c e d b reak fas t bacon. The shoulder c u t s ( b u t t and p icn ic) may be so ld i n a v a r i e t y of forms, f resh o r cured, bone-in o r boneless. Thus as t he prod- u c t s of a dressed hog leave the packing p l a n t they a re l a rge ly i n consumer u n i t s , many packaged, with cons iderable added value and convenience fea tures incorporated.

Contrast t h i s with beef . The warm ca rcas s is c h i l l e d over- n igh t and graded the day following s l augh te r . The brandable

9

spread between the average c o s t of a 1,000 l b . Choice s t e e r and the wholesale value of a 575 l b . Red Brand ca rcas s (Toronto) was only $4.80. In the week ended May 16th. t he gross margin was (-)93&.

FOI example, f o r the f i r s t 1 9 weeks of 1970, the gross

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q u a l i t i e s a r e then t y p i c a l l y r a i l e d o u t accordng t o t h e known genera l s p e c i f i c a t i o n s of major r e t a i l buyers f o r t h e i r inspec- t i o n and stamping, a s sales are made. The terms of sale i n c l u d e a n understanding as t o l e n g t h o f time t h e beef w i l l be he ld f o r ag ing , p r i o r t o r i b b i n g and d e l i v e r y . A major p a r t of t h e f r e s h beef volume t h e r e f o r e , l e a v e s t h e p l a n t i n q u a r t e r s o r maior wholesale c u t s wi thout e x t e n s i v e o p e r a t i o n s b e i n g per - formed on i t . Thus t h e p a c k e r ' s e n t i r e r e t u r n i n f r e s h carcass beef is cont ingent on t h e margin between w h a t is pa id f o r t h e whole animal, and what is r e a l i z e d from t h e c a r c a s s and by- products l e s s process ing and handl ing expenses . During t i g h t o p e r a t i n g per iods , t h e c a r c a s s r e t u r n may be less t h a n t h e o r i g i n a l l i v e animal c o s t . A t most times t h e g r o s s margin p e r head of beef i s unbel ievably s m a l l . During t h e week ending May 9 t h i n Toronto Choice steers averaged $33.00 p e r C w t . on t h e p u b l i c market and Choice grade beef wholesaled a t 58#. On a 57)1% y i e l d , a c a r c a s s brought only $3.50 mote t h a n a 1 ,000 l b . steer. I f by-product c r e d i t s were added and p l a n t expenses and beef s e l l i n g c o s t s w e r e deducted , i t i s d o u b t f u l i f a n average packer would n e t over $3-5 per head.

The obvious main a l t e r n a t i v e s t o t h e t r a d i t i o n a l r e t a i l c u t t i n g and packaging of beef a t t h e p o i n t of consumer s a l e a r e :

(1) Performance of more o p e r a t i o n s i n t h e packing p l a n t , by producing trimmed, "block-ready" o r "knife-ready" c u t s which may be p a r t l y o r comple te ly de-boned:

( 2 ) P r e p a r a t i o n of s p e c i f i e d - t r i m c u t s o r por t ion- ready i t e m s by t h e packer which a r e t h e n quick-frozen and s o l d f r o z e n by the r e t a i l e r .

E i t h e r of t h e above procedures obvious ly would make f o r p o t e n t i a l e f f i c i e n c i e s and economies, i n c l u d i n g r e t e n t i o n of f a t t r i m and bones a t t h e p l a n t , where t h e y could go d i r e c t l y i n t o render ing .

For var ious reasons n e i t h e r of t h e s e a p p a r e n t l y e f f i c i e n t , c e n t r a l i z e d o p e r a t i o n s have a s y e t c l e a r l y s i g n i f i e d an e a r l y end t o t h e t r a d i t i o n a l form of beef d i s t r i b u t i o n . I t may be noted , however, t h a t some s p e c i a l i z e d beef p l a n t s s e l l up t o 75-80% of t h e i r beef i n p o r t i o n s less t h a n s i d e s i .e . q u a r t e r s o r c u t s . Some major c h a i n s may buy around h a l f the i r beef i n major wholesale c u t s -- even more when they are f e a t u r i n g a p a r t i c u l a r c u t .

Refer r ing f i r s t t o t h e d i s t r i b u t i o n of beef i n pre-packaged, f rozen c u t s , t h e c h i e f o b s t a c l e h e r e is consumer acceptance . While many customers w i t h household f r e e z e r s buy f r e s h c u t s f o r home f r e e z i n g and s t o r a g e , exper ience t o d a t e h a s shown t h a t shoppers f ind t h e appearance o f f rozen c u t s less a t t r a c t i v e t h a n f r e s h . A major U.S. packer launched i n t o f r o z e n c u t d i s t r i - b u t i o n i n r e c e n t y e a r s w i t h v e r y u n s a t i s f a c t o r y r e s u l t s .

44

Merchandizing frozen cu t s would, of course, r equ i r e a wholesale changeover of r e t a i l f a c i l i t i e s , and from p r a c t i c a l considera- t i ons , i t is hard t o i n i t i a t e a major change l i k e t h i s wi th in the whole t rade .

Based on the apparently successfu l experience of Iowa Beef and Monfort i n marketing block-ready beef c u t s , prepared according t o defined spec i f i ca t ions and packaged under vacuum, a number of Canadian packers a r e experimenting wi th t h i s sys tan . So f a r with most packers it is only an a l t e r n a t i v e they o f fe r t h e i r customers, p a r t i c u l a r l y the H.R . I . t r ade , b u t a t l e a s t one Ontario p l an t s e l l s most of i ts beef t h i s way.

Among the l imi t ing f a c t o r s impeding f a s t e r progress toward t h i s apparently log ica l development a re :

(1) Chain s to re s have e x i s t i n g back-room f a c i l i t i e s and s t a f f :

( 2 ) I n e r t i a and h a b i t -- it is hard t o break down old pre- judices :

( 3 ) Major chains r e luc t an t t o change u n t i l major supp l i e r s change :

(4) Reluctance t o pay e x t r a c o s t s f o r a l e s s wasty, more convenient product:

(5) New equipment and handling rou t ines required fo r boxed, packaged product vs. r a i l e d s i d e s o r qua r t e r s .

Despite the foregoing d i f f i c u l t i t e s , cen t r a l i zed process ing of beef seems t o make economic sense , and s i n c e the beef i s o r ig ina l ly i n the packing p l a n t , i t would be most e f f i c i e n t and economical t o do it the re . I f the packing indus t ry does not begin t o take on t h i s func t ion more aggres- s ive ly , i t is l i k e l y t h a t o the r in te rmediar ies o r r e t a i l e r s w i l l . Some r e t a i l e r s have a l ready s t a r t e d t o .

Regardless of t he trend i n t h e major chain t r ade , block- ready and portion-controlled beef c u t s seem t o be a n a t u r a l fo r t he H . R . I . t r ade , and a l s o fo r t he burgeoning food c a t e r - ing industry.

Unless it is prepared t o be pe rpe tua l ly s a t i s f i e d wi th handling a l a rge volume of product a t a low margin of p r o f i t , the beef processing indus t ry must break away from i t s t r ad - i t i o n a l pa t t e rns and produce more h igh ly processed l i n e s of products with more added va lues , and of dependable s p e c i f i - ca t ions . Beef packers l i k e Ken Monfort see g r e a t fu tu re challenges and oppor tuni t ies i n t h e indus t ry f o r the firms who a re prepared t o c a p i t a l i z e on them.

The proportion of top q u a l i t y beef i n the Canadian beef supply has improved dramat ica l ly over the pas t 20 years . A l s o

45

very s i g n i f i c a n t i s t h e i n c r e a s e i n t h e average weekly o u t p u t o f Canadian beef of brandable q u a l i t i e s . The f a c t t h i s g r e a t l y increased supply h a s moved i n t o domest ic consumption a t r e l a t i v e - l y good p r i c e s , bespeaks e x c e l l e n t consumer acceptance of t h e q u a l i t y of beef they have been g e t t i n g .

Important c o n t r i b u t i n g f a c t o r s i n t h e s i t u a t i o n b v e been t h e t r e n d t o s e l f - s e r v i c e meat c o u n t e r s , t h e growth of c h a i n s t o r e s and t h e i n c r e a s i n g a f f l u e n c e o f Canadian consumers.

The c a r c a s s grad ing and branding system f o r b e e f , i n s t i - t u t e d i n 1928, h a s served t h e i n d u s t r y w e l l . I t i s now under review and wi th n e g o t i a t i o n s i n p r o g r e s s , I w i l l n o t comment f u r t h e r a t t h i s time on t h i s impor tan t s u b j e c t .

Meat I n d u s t r y P r i c i n q

A t v a r i o u s times i n t h e p a s t , b u t now much more r a r e l y , meat packers have been s u b j e c t t o var ious a l l e g a t i o n s , genera l - l y not well-founded, concerning c o m p e t i t i v e conduct and/or i n d u s t r y p r i c i n g p r a c t i c e s . More r e c e n t l y , however, t h e r e has been a r e f r e s h i n g change i n p u b l i c a t t i t u d e toward t h e i n d u s t r y , because it has f i n a l l y become c l e a r l y e v i d e n t t o many p o p l e t h a t t h e l i v e s t o c k and meat economy e x h i b i t s more real evidence of vigorous compet i t ion and unadminis tered p r i c i n g than does any o t h e r major product grouping. F u r t h e r it appears t h i s f l e x i b l e p r i c i n g s i t u a t i o n , r e f l e c t i n g market c o n d i t i o n s , h a s k e p t animal a g r i c u l t u r e i n a more s t r o n g l y v i a b l e c o n d i t i o n t h a n o t h e r segments r e s o r t i n g t o a h i g h e r degree of market r e g u l a t i o n . I f p r i c i n g i n a l l segments o f the economy r e f l e c t - ed a c t u a l supply and demand c o n d i t i o n s a s w e l l as l i v e s t o c k and meat p r i c e s do, t h e r e m u l d b e l i t t l e need f o r t h e p r i c e and income g u i d e l i n e s now be ing proposed t o reduce i n f l a t i o n .

Consider f o r a moment some c o n t r a s t s between t h e compet- i t i v e p r i c i n g s i t u a t i o n which p r e v a i l s i n t h e meat packing i n d u s t r y , compared t o some o t h e r i n d u s t r i e s . Take petroleum r e f i n i n g , f o r example. I f o i l companies opera ted l ike meat packers , they would b i d d a i l y on t h e open market f o r crude o i l o f f e r i n g s , t h e supply be ing somewhat u n p r e d i c t a b l e and t h e p r i c e f l u i d . Then i f f i n i s h e d g a s o l i n e , f u e l o i l and o t k r petroleum products were so ld l i k e meat , s a l e s would be nego- t i a t e d d a i l y through i n t e n s i v e b a r g a i n i n g w i t h l a r g e c h a i n s of unfranchised d e a l e r s , who w e r e a l s o i n c o n s t a n t touch w i t h o t h e r r e f i n i n g f i rms . One would s u s p e c t t h a t under t h e s e c o n d i t i o n s g a s o l i n e p r i c e s p e c i a l s and f e a t u r e s would be much more pre- v a l e n t . Poss ib ly a l s o t h e e a r n i n g s o f major o i l companies m u l d more c l o s e l y resemble t h o s e of meat packers .

S i m i l a r comparisons could be drawn between meat packing and many o t h e r i n d u s t r i e s . The f a c t s w i l l show t h a t t h e p r i c e s of most consumer goods and s e r v i c e s today exhibit a much h i g h e r degree o f p r i c e management than d o meat p r i c e s . The market p r i c e s f o r l i v e s t o c k and meat a t wholesa le v a r y c o n s t a n t l y ,

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hour by hour, with every change i n supply and demand f a c t o r s , including t h e export and import s i t u a t i o n . While l a rge department s t o r e s and discount houses now o f f e r p r i c e concession4 from the going p r i c e f o r many consumer items, the s k i l l f u l meat shopper may seldom i n f a c t have t o buy any s t a p l e meat items a t t h e " regular" p r i c e . Each week various cha in s t o r e s w i l l be o f f e r ing spec ia l s o r f ea tu re s i n both branded, processed products and f r e sh meat.

The p r a c t i c e of p r i c e "spec ia l ing" seems t o have become r a t h e r s t rong ly ingrained i n t o meat r e t a i l i n g , with various major chains h ighl ight ing t h e i r cu r ren t f ea tu re s i n mid-week adver t i s ing . Deals fo r these spec ia l s are genera l ly made between t h e packer and retailer w e l l i n advance, of t h e i r o f f e r ing , perhaps two weeks o r more. I f it is a f r e s h meat item e.g. a pork l o i n o r a beef r i b r o a s t , t he packer has probably no t y e t even procured t h e necessary raw ma te r i a l and thus assumes considerable r i s k . Many "spec ia l" p r i c e s repre- s e n t a very s u b s t a n t i a l reduct ion over t h e going p r i c e f o r a similar c l a s s of product so ld elsewhere. This lower p r i c e r e s u l t s mainly from t h e r e t a i l e r tak ing a lower mark-up, bu t a l s o he g e t s a lower p r i c e from t h e packer f o r the l a r g e volume s a l e involved.

There seems l i t t l e doubt t h a t spec ia l ing ,does move a l a r g e r volume of a p a r t i c u l a r packe r ' s product i n a p a r t i c u l a r s t o r e (o r chain) during t h e time it is of fered . However, t he ne t over -a l l e f f e c t of t he p r a c t i c e i s harder t o appraise. Consumers wi th home f r eeze r s who do not mind shopping around considerably are able t o c a p i t a l i z e on s p e c i a l s , t he re i s no doubt. Whether they purchase more meat than they otherwise would, i s d i f f i c u l t t o e s t ab l i sh . I t is a l s o l i k e l y that many shoppers a r e somewhat confused by s p e c i a l s , thinking t h e p r i c e has gone up when it may only be t h a t it is no longer on speciaL.

I n general , published meat p r i c e s t a t i s t i c s probably over- s t a t e the p reva i l i ng p r i ce because s p e c i a l s a r e not adequately recognized i n the compilation.

For the most p a r t meat packers do t h e i r own wholesaling, although one s i g n i f i c a n t exception occurs i n connection with the movement of Western beef t o the Montreal market. Wholesale p r i ces a r e cons t an t ly varying up o r dawn by s m a l l increments on various markets and it i s one of t he jobs of packers' beef and pork department managers t o keep c lose ly informed a s t o t h e tone and t rend of t h e market and try t o a s ses s t h e cu r ren t psy- chology of chains and o ther major buyers. The two major types of wholesale p r i c e s which a r e of p a r t i c u l a r s ign i f i cance t o t h e indus t ry are the major sales made t o r e t a i l e r s and t h e p r i ces on inter-packer t r a d e s of product, gene ra l ly made through brokers. The l a t t e r a r e gene ra l ly pitched a t a lower l e v e l than wholesale-to-retail s a l e s . Another important p r i c e f ac to r is t h e c u r r e n t n e t r e tu rn on products cxportbd t o the U.S. market, a s w e l l a s #e reverse i.e. t h e laid-down c o s t of imported product.

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On t h e s u r f a c e , wi th no h o u r l y o r d a i l y r e p o r t s wide ly a v a i l a b l e on a c t u a l wholesa le t r a d i n g , such a s , f o r example, a r e a v a i l a b l e on t h e investment market , i t might appear t h a t the wholesale p r i c e d i s c o v e r y process f o r meat products i s n o t too e f f i c i e n t . However. through exper ience and o b s e r v a t i o n I have come t o a p p r e c i a t e t h a t it is c o n s i d e r a b l y more e f f i c i e n t than might be assumed, a l though s t i l l probably f a l l i n g s h o r t of t h e i d e a l . Some packers undoubtedly s t i l l o p e r a t e t o o much on t h e theory t h a t i f a compet i tor can o f f e r a t a c e r t a i n p r i c e , they can take a c e n t o r two less. I t i s i n f a c t hard t o resist t h i s phi losophy when a p l a n t i s f u l l of product and customers a r e b e a r i s h .

There is a c o n s t a n t c l o s e c o r r e l a t i o n between t h e p r i c e s packers a r e paying f o r l i v e s t o c k and t h e wholesa le p r i c e s be ing obtained. This is n a t u r a l , because i n d i v i d a u l packers a r e c o n s t a n t l y t r y i n g t o purchase l i v e s t o c k a t p r i c e s i n l i n e wi th t h e c u r r e n t wholesa le market and a t the same t ime a r e a l s o aware of t h e i r a c t u a l or a n t i c i p a t e d d r e s s e d c o s t of l i v e s t o c k i n i n s t r u c t i n g salesmen as t o t h e ask ing p r i c e f o r meat. according t o t h e i r e x p e c t a t i o n s . Livestock buyers , i n o r d e r t o g e t s u f f i c i e n t s u p p l i e s f o r e f f i c i e n t p l a n t o p e r a t i o n , may have t o pay more than i n d i c a t e d i n t h e i r i n s t r u c t i o n s , espec- i a l l y when market s u p p l i e s o f l i v e s t o c k a r e a b i t s h o r t . Simi- l a r l y salesmen may f i n d t h a t t h e y may have t o shade ask ing p r i c e s , cons iderably a t t i m e s , o r l o s e impor tan t sales t o major customers.

They a r e r a r e l y s u c c e s s f u l i n a c h i e v i n g e i t h e r o b j e c t i v e

u n l i k e manufacturers o f many d u r a b l e goods, meat packers t r a d i t i o n a l l y do n o t have f i r m l y adhered t o p r i c e l i s t s . Major packers do have nominal weekly l i s t p r i c e s , c a l c u l a t e d i n r e l a t i o n t o c u r r e n t raw m a t e r i a l and o p e r a t i n g c o s t s , b u t i n p r a c t i c e c u r r e n t and advance sales have t o be made a t whatever l e v e l s c l o s e l y compet i t ive c o n d i t i o n s d i c t a t e . The l a r g e q u a n t i t i e s of product which major r e t a i l c h a i n s handle g i v e s them a s t r o n barga in ing power, even i n d e a l i n g w i t h a major packer , who h a s t o keep p e r i s h a b l e product moving through h i s p l a n t s .

Wholesale m e a t p r i c e s i n t h e s h o r t r u n a r e , t h e r e f o r e , p r i m a r i l y determined by t h e c u t and t h r u s t of keenly compet- i t i v e t r a d i n g , wi th each i n d i v i d u a l packer t r y i n g a s best h e can t o cover h i s c o s t s and o b t a i n a reasonable margin o f p r o f i t . I n pork o p e r a t i o n s , w i t h t h e g r e e t e r m u l t i p l i c i t y o f products , t h e r e a r e more o p p o r t u n i t i e s t o average out r e l a t i v e - l y p r o f i t a b l e and u n p r o f i t a b l e r e t u r n s . But i n beef o p e r a t i o n s , t h e r e i s l i t t l e o p p o r t u n i t y f o r averaging , except over time, and thus t h e c a r c a s s beef p r i c e m u s t c l o s e l y r e f l e c t the c a t t l e market and v ice-versa , since g e n e r a l l y by-product recovery va lues are i n t h e same range a s p r o c e s s i n g c o s t s .

To Western beef p l a n t s , t h e r e t u r n on s u r p l u s beef shipped t o o u t s i d e markets , t h e p r i n c i p a l one b e i n g Montreal , i s a k e y

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market f ac to r . A r ecen t ly published study by Hawkins and Manning'' provides considerable background, on wholesale beef t rad ing i n Montreal and the au tho r s ' impressions of it. Regrettably t h e i r study s tops s h o r t of o f f e r ing very s p e c i f i c suggestions f o r improving the functioning of t h i s market and some of t h e i r f i n a l conclusions could form the b a s i s fo r an i n t e r e s t i n g debate.

The importance of the Montreal t r ade i n the Canadian beef p r i c ing s t ruc tu re warrants some se r ious s tudy of poss ib le im- provements i n s e l l i n g methods f o r beef i n t h i s market.

Future ChalLenqes and Opportunities

The recent r epor t of t he Federa l Task Force on Agriculture s t a r t s its sec t ioh on l ives tock and p o u l t r y l l i n these words: "The l ives tock and pou l t ry i n d u s t r i e s e x h i b i t a combination of hea l thy trends and growing challenges". After noting some of the encouraging t rends the Task Force caut ions t h a t " these indus t r i e s have immediate and long-run problems". While time does not permit a de t a i l ed comen t on the Force ' s ensuing recommendations, it does appear t h a t a t least two of t h e i r conclusions a r e debatable v i z . (1) t h a t t he beef c a t t l e indus t ry should aim a t a t a r g e t of expor t ing 500,000 feeders by 1980, and (2) t h a t a marked expansion of hog production i n Canada and export of pork products, i s hard ly feas ib le .12 On the whole, the Task Force recommendations on l ives tock and pou l t ry a re inc l ined t o be r a t h e r caut ious and uninspi r ing , considering the "healthy t rends" conceded a t the s t a r t .

I t i s r a the r obvious t h a t t o q u i t e a l a rge ex ten t t he fu ture of t he Canadian meat packing indus t ry depends on the fu ture of animal ag r i cu l tu re . Pro jec t ions which have been made of the pork and beef outlook t o 1980 ind ica t e t h a t a ten-year growth of the meat t r ade of 40 t o 50% o r more, volume-wise, i s q u i t e possible. Commonly these p ro jec t ions a re based on the assumption t h a t the t o t a l domestic demand f o r meat13 w i l l increase by about t h i s amount and t h a t p r i c e s w i l l be s u f f i c i e n t t o induce the necessary expansion i n primary production. approach Soes introduce some p o s s i b i l i t y of e r r o r , of course, i n various d i r ec t ions - 10

A study of the Montreal Wholesale Beef Trade, M.H. Hawkins and T.W..Manning, Research Bu l l e t in N o . 7, Univers i ty of Alberta, Extension Department, March 1970. 11

ATriculture, 1969. 1 2

Report footnote 26. 13

Task Force) suggest an increase t o 100 lb. p e r c a p i t a fo r beef, and a decrease t o 50 lb. f o r pork. The la t ter (pork) seems too conservative.

This

Chapter 6 , pp. 147-178 - Report of the Federal Task Force on

I t w i l l be noted D.L. MacFarlane d issented - See page 171 of

The C.D.A. Supply-Demand Pro jec t ions f o r 1980 (accepted by the

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A t the present t h e , with our l a rge g r a i n surp lus , there a re f ac to r s operating t o increase pork production f a s t e r than domestic demand may expand. This immediately suggests t he need f o r g rea t e r promotional e f f o r t s on pork, which s e e m t o o f f e r p o s s i b i l i t i e s . Increased expor t s , p a r t i c u l a r l y a l a r g e r share of the North American market, and poss ib ly shipments t o Japan, a r e another p o s s i b i l i t y .

There seems no reason t o doubt t h a t t he Canadian meat packing industry w i l l be ab le t o maintain an expansion pace a t l e a s t equal t o meat animal productioc. B u t personally I w i l l be disappointed i f it does only t h i s . There a r e th ree ways i n which the meat business can grow. One i s i n response t o pop- u l a t ion growth i.e. more consumers. A second i s through higher per cap i t a consumption. A t h i r d , and a very promising potent- i a l , i s the provision of excra se rv i ces and convenience f ea tu res along with the bas ic product, o r with e n t i r e l y new va r i a t ions of t r a d i t i o n a l products. There i s v i r t u a l l y no l i m i t t o these l a t t e r p o s s i b i l i t i e s .

Most progressive meat pakcers a r e beginning t o see t h e i r fu ture ro l e as c rea to r s and marketers of new p ro te in foods b u i l t around meat a s a bas ic ingredien t , b u t combined with a v a r i e t y of other mater ia l s i n many d i f f e r e n t forms. This w i l l r equi re a g rea t ly stepped up program of research and development, designed t o produce new product innovations t a i lo red t o modern l i v ing hab i t s .

There has been increasing p u b l i c i t y given t o meat analogs and subs t i t u t e s derived from various sources - a g r i c u l t u r a l (soybean) , marine ( f i s h meal concentrate) and syn the t i c p ro te in (petroleum, e t c . ) . The p o t e n t i a l competit ion of such meat replacements i n fu ture cannot be ignored, although up till now p r i ce and p a l a t a b i l i t y have been l imi t ing f ac to r s . Use of vegetable pro te in (such as soya) t o extend meat products is another a l t e rna t ive . This i s no t y e t approved i n Canada bu t l i k e l y would be i f a s a t i s f a c t o r y method of quan t i t a t ive ana- l y s i s is devised, fo r cont ro l purposes.

The meat packing indus t ry , while not i t s e l f promoting t h e replacement of animal pro te in wi th syn the t i c s o r s u b s t i t u t e s , w i l l have t o watch these developments c lose ly and t r y t o avoid some of the os t r ich- l ike mistakes of the d a i r y industry. Already many v a r i e t i e s of foods, canned p a r t i c u l a r l y , resembling meat bu t containing no animal p ro te in , a r e on the shelves. T o d a t e these a r e mainly imported and not manufactured by meat packers. packers f e e l these meat s u b s t i t u t e s should be regulated a s c lose ly a s meat products i n l a b e l l i n g r e spec t s and otherwise. There seems no good reason why meat packers should be r e s t r i c t e d from producing such products as they become more competitive with meat, i n other words " i f you c a n ' t bea t them, j o i n them".

I n the pas t , meat packers have tended i n the main t o s t i c k too c lose ly t o t r a d i t i o n a l l i n e s of products and marketing s t ruc tu res oriented t o the conventional t h ree meals a day around

50

the family t a b l e , o r two meals a day w i t h a lunch box. Chang- ing l i v i n g h a b i t s of people and g r e a t e r mobi l i ty and af f luence have markedly changed food hab i t s c r e a t i n g dramatic opportun- i t ies i n snack foods, barbecue i t e m s , c a t e r i n g , franchised o u t l e t s , purveying fo r r e s t au ran t s and d r ive - ins , t o s ay nothing of new foods fo r t h e k i tchen which r equ i r e a minimum of preparation. The successfu l meat packer of t he fu tu re w i l l be a highly market-oriented, processed food manufacturer, constant- l y innovating and needing an adequate budget f o r research and development -

I f the present over-production of c e r e a l s proves t o be a permanent problem, and the re i s every s ign t h a t i t may, t he re i s a g rea t challenge t o animal ag r i cu l tu re t o s t e p i n t o the breach and convert l a rge q u a n t i t i e s of surp lus g ra in i n t o animal pro te in . Short run t h i s may w e l l c r e a t e a problem, but long run it is a g rea t opportunity. To take advantage of i t the l ives tock and meat indus t ry w i l l have t o do a l l it can t o fu r the r s t e p up i t s e f f i c i ency , and keep its c o s t s down, so t h a t more people can afford t o consume meat, o r more of it.

The challenge t o expand i ts output and markets is p a r t i - cu l a r ly s t rong t o the Canadian pork indus t ry , s ince r a t h e r i r o n i c a l l y t h i s i ndus t ry ' s record output da t e s back over 25 years t o 1944. True, s ince the w a r years t he indus t ry has had t o re -or ien t i t s e l f t o opera t ing pr imar i ly wi th in a North American economy instead of depending s t rong ly on the w s r s e a s bacon t rade , a s it used t o do. Thus winning a p l ace f o r a considerably expanded hog indus t ry i n t h i s country presents a major challenge dependeht as t h i s development would have t o be on winning a l a rge r market both a t home and abroad. This would obviously requi re co-ordinated team work by the hog producer and packer.

Consumerism, now recognized as an e s t ab l i shed force of both p o l i t i c a l and p r a c t i c a l concern, p resents both a challenge and an opportunity. Packers and l i ves tock producers would be very unwise t o consider it a s a nuisance which w i l l go away, fo r it w i l l not. There i s a challenge t o produce products which r e a l l y s a t i s f y the consumer, t o b e t t e r inform consumers about products and t h e i r spec i f i ca t ions , and t o make r a t i o n a l choice e a s i e r and more precise. There i s a challenge t o meat packers t o heed the increas ingly i n s i s t e n t voice of consumer- i s m and t o vo lun ta r i ly propose progress ive s t eps which overcome objec t ions and common sources of f r i c t i o n .

The cu r ren t s t r e s s on an t i -po l lu t ion measures, more e l e - gant ly known as the preserva t ion of "environmental qua l i t y" imposes a major challenge f o r the meat packing indus t ry , i n company with many o ther i ndus t r i e s .

The packing indus t ry i s q u i t e conscious of i t s s p e c i a l waste d isposa l problems and major packers +ave f o r some time been co-operating wi th mun ic ipa l i t i e s i n t r y i n g t o reduce o r

51

e l imina te them. This p r e s e n t s a cont inuing cha l lenge t o t h e meat i n d u s t r y , and a n o p p o r t u n i t y t o make a c o n t r i b u t i o n t o p o l l u t i o n c o n t r o l .

I n t e r e s t i n g l y , t h e development of d e t e r g e n t s a few y e a r s ago c u t s h a r p l y i n t o t h e market f o r animal f a t s i n t h e soap i n d u s t r y . I t remains t o be s e e n whether t h e p r e s e n t t r e n d of p u b l i c opinion a g a i n s t high-phosphate d e t e r g e n t s w i l l a i d t o some degree i n t h e recovery of t h e demand f o r soa, and soap c h i p s .

A cont inuing f u t u r e c h a l l e n g e f o r t h e meat i n d u s t r y i s i n t h e development o f f o r e i g n markets . To many, t h i s h a s been a d i s a p p o i n t i n g phase of t h e i n d u s t r y ' s development, a l though a t l e a s t some q u a n t i t i e s o f Canadian m a t and animal by-products go t o w e r 50 f o r e i g n c o u n t r i e s each y e a r .

Pr ice and c o n s i s t e n c y of supply a r e main l i m i t i n g f a c t o r s i n n e a t t r a d e expansion. Canadian beef and pork p r i c e s are h igh r e l a t i v e t o most meat-surplus-export ing c o u n t r i e s . A dependable expor t b u s i n e s s cannot be b u i l t on u n c e r t a i n , f l u c t u a t i n g s u p p l i e s . So t h e r e i s always t h e dilemma of how t o develop an expor t t r a d e w i t h o u t an assured supply, and how t o encourage product ion wi thout r e a s o n a b l e assurance of a market and a t a s a t i s f a c t o r y p r i c e .

Over r e c e n t y e a r s w e have been consuming v i r t u a l l y a l l t h e brandable beef we produce, and a s ~ 1 1 import ing b o t h manufacturing b e e f , canned beef and some high q u a l i t y beef f o r t h e i n s t i t u t i o n a l t r a d e .I4

To d a t e t h e r e h a s been l i t t l e success i n s e l l i n g our t o p grades of @aaddia.i beef i n t h e U.S. market. Cow and b o n e l e s s beef i s t h e major t r a d e . One of t h e main reasons f o r t h e lack of s a l e of our better beef appears t o be i t s f a i l u r e t o grade up h i g h enough under t h e U.S. system.

I n t h e case of pork, t h e r e i s a c o n s t a n t two-way movement. To d a t e Canada h a s been a b l e t o r e t a i n a premium U.S. market f o r c e r t a i n c u t s i n c e r t a i n a r e a s , b u t var ious f a c t o r s are making t h i s t r a d e more d i f f i c u l t . The f u t u r e cha l lenge is t o broaden t h e base of our pork e x p o r t t r a d e i n t h e U . S . , a s w e l l as i n o t h e r p o s s i b l e markets . The q u a l i t y of our pork appears t o appeal t o t h e Japanese t r a d e , a l though t h e r e are s t i l l some holdbacks t o g e t t i n g shipments undeway i n t h e near f u t u r e t o t h a t market on a c o n t i n u i n g b a s i s . A count ry w i t h t h e grain-producing a b i l i t y o f Canada has t h e p o t e n t i a l f o r a greatly-expanded hog output if the image of pork can b e s ign - n i f i c a n t l y upgraded on t h e domest ic market, and some s i z e a b l e

14

i n f o r t h e Toronto h o t e l and r e s t a u r a n t t r a d e each week. For example, it is r e p o r t e d over 1 ,000 U.S. r i b s are brought

52

e x p o r t t r a d e i n W i l t s h i r e

I f some

developed, comparable t o t h e former overseas t r a d e bacon.

of t h e s e c h a l l e n g e s a r e tack led w i t h r e s o l u t i o n , w i t h packers , producers and government agencies co-ord ina t ing their e f f o r t s c o n s t r u c t i v e l y , t h e f u t u r e of t h e i n d u s t r y should be sound, a l though it w i l l l i k e l y cont inue t o be an e n t e r p r i z e i n which success d o e s n ' t come easy .

Epiloque

Over t h e l a s t 25 y e a r s t h e r e h a s been a n o t i c e a b l e c o n s t r u c t i v e change i n the g e n e r a l a t t i t u d e o f l i v e s t o c k prod- u c e r s towards t h e meat packing i n d u s t r y . There i s now a much c l e a r e r r e a l i z a t i o n than t h e r e used t o be of how c l o s e l y t h e i n t e r e s t s of producers and packers i n t e r l o c k . S e v e r a l f a c t o r s account f o r t h i s i .e . t h e development o f producer o r g a n i z a t i o n s (both g e n e r a l and s p e c i f i c a l l y l i v e s t o c k such a s t h e C.C.A. and C.S.C.) who f r e q u e n t l y d i s c u s s matters w i t h meat packers (as represented b y t h e M.P.C.); producers ' exper ience w i t h co-operat ive packing p l a n t s , p rovid ing knowledge of t h e economics of t h e i n d u s t r y and i ts c l o s e margins; c o n t a c t w i t h t h e i n d u s t r y through market ing boards ; and, i n g e n e r a l , a more widespread d isseminat ion o f i n f o r m t i o n .

S ince s l a u g h t e r i n g and meat packing is a n e s s e n t i a l market ing e x t e n s i o n and complet ing p a r t of t h e product ion and f i n i s h i n g of meat animals f o r market , i t i s h i g h l y necessary and d e s i r a b l e t h a t producers and packers co-ord ina te their e f f o r t s and co-operate as c l o s e l y as p o s s i b l e i n f u t u r e . While t h e de te rmina tn ion o f t h e p r i c e and terms of sale a s t h e packer buys t h e l i v e s t o c k from t h e producer w i l l remain a matter where i n d i v i d u a l i n t e r e s t ranks h igh , i n most matters what is good f o r one segment i s a l s o good f o r a n o t k r . The prime concern o f bo th i n t e r e s t s i s t h a t meat en joys the most favourable image p o s s i b l e wi th consumers and t h u s s e l l i n l a r g e volume a t a s a t i s f a c t o r y p r i c e .

canada's meat packing industry

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