EdinburghNLP/nunavut-hansard-plusplus huggingface dataset:
Do we have an advantage because of scale? Yes, sir, we do. There is no question about that.
Why would we say anything else? But the question is: should we take advantage of our scale, as we have, to commit to driving through Nutrition North Canada lower prices on healthier products for the consumer, the everyday citizen in Nunavut?
I think the answer is we should use any strength or leverage.
The small guy is nimble and free to foot in many cases and has a quicker time to respond, not through a corporate channel but through their own skill set. Those advantages and strengths of the entrepreneur, and having been one in the past, I appreciate and respect those. Those have to come to bear, but they have to come to bear every single day.
Nutrition North doesn’t change that. Nutrition North will make every single retailer look at their business model and find a way of improving it. That’s the intent.
I think, as businesspeople, we get up every day and we try to excel, and we try to excel by being customer oriented, working within the system and environment that we have, and be the best that we could possibly be. And that’s the business model that exists. Just as our company will be fraught with difficulties in addressing the Walmarts of the world, we have to address them.
Relative size is what we face a disadvantage to but we have to address it and I think it’s the same situation in this case.
Mr. Morrison: Mr. Chairman, the local Co-operatives in communities are, as I have indicated, small businesses.
Obviously, in some cases, they are the size as other independent small businesses in the communities. There is a level playing field.
However, Co-operatives have chosen to operate efficient businesses by pooling their buying power.
When a Co-operative is successful, that benefit stays in the community. It doesn’t go in the pocket of an individual entrepreneur; it goes back to the individuals in the community that supported the service.
We compete head to head every single day with the North West Company. They are a great deal larger than every single individual Co-operative in the north and they are a great deal larger than the consolidated business volume of the local Co-operatives in the north.
However, our owner members have said, “Find ways to be efficient. Find ways to be effective. Assist us in running good businesses, providing services, and providing a competitive environment.
Retain profits in the community.” That’s exactly what the Co-operatives are trying to do.
It sometimes appears to be a daunting task to compete against a very large company. In some communities, I believe that the Co-operative is a dominant retailer. In other communities, our competition is the dominant retailer.
But we continue to strive every day to be efficient and effective and provide good value to our owner members, and independent retailers have to do the same. They have to find ways to be efficient and effective.
I don’t believe that there should be a government program that is not presented equally to the various participants in the program. I believe the Food Mail Program is providing that alternative.
Under the old Food Mail Program and today under the new Nutrition North Canada Program, we negotiate based on our volume. That’s business. That’s the way things operate.
We will not apologize for having put in place procedures that allow us to do that.
We believe that it is in the best interest of the community that that happens, Mr. Chairman.
Hon. Tagak Curley: I appreciate your point of view with respect to relationships with small business retailers and whatnot throughout Nunavut.
I am also interested in finding out from you, you may have already calculated it and have a pretty good understanding of what percentage of the… . After all, we’re talking about the amount of the federal program.
From what we heard, there is a $60 million fund. I don’t know what percentage of it went to Nunavut.
You guys would know that from your records. Compared to the old program and this new regime, will your economic benefit increase and, if so, at what margin will you be receiving from the federal program?
The subsidy is a direct pass-through; there is no marginal benefit.
So if the subsidy comes to the retailer, the auditing process will show that that subsidy is passed directly on to lower the cost of goods, as it was in the previous food mail system.
We have calculated the difference in Nunavut to the consumer right now as just over 6 percent lower costs on the eligible products.
We calculated the benefit to the end consumer as roughly $2 million in Nunavut in lower prices from this.
The combination, how we get to that $2 million, is the new subsidy rates by community, which, as Mr. Morrison has said, have varied; some communities are lower and some communities are higher. We have discussed that with INAC as well.
Where we will gain, but again we will pass on the cost, is the efficiency of our negotiations with two groups, food vendors and transportation vendors. When we negotiate lower transportation rates, we lower our costs. So in that 6 percent reduction we’re seeing now, part of that is from, in some communities, higher subsidy rates in the federal program and in some communities or a combination thereof, the better negotiations that we have accomplished.
Again, that business model is the same for us as it is for the Co-ops as it is for a small business. So the answer to the marginal gain is there is not a marginal gain for us.
Would we become more profitable if we had better negotiations with transportation and vendor groups? Yes, we will, but in the deck, Mr. Curley, the supplemental deck that I distributed, there is a breakdown of our costs and expenses.
So freight and distribution is 13.5 percent, and our earnings and all of our other expenses are detailed there. That’s the model that we had before and that’s largely the model that will be in place in 2011. Thank you, Mr. Chairman.
Mr. Morrison: Mr. Chairman, as I understand the old Food Mail Program, Nunavut was the largest user of that program. Once the transitional period takes place or ends in October 2012, I would expect that the percentage of products shipped to Nunavut will likely increase under the new Nutrition North program.
There is no financial benefit to the Co-operatives in the Arctic as a result of the new Nutrition North Canada Program. 100 percent of the subsidy that we receive from Indian and Northern Affairs Canada is passed on to the consumer in the price of goods.
The potential improvements that we hope to see are through better supply chain management, shorter time in getting products to the communities, less spoilage, and ultimately better pricing.
If Co-operatives are more profitable and more successful, those benefits are retained in the community and passed on to Co-op members as patronage refunds. So there are no direct financial benefits from the Nutrition North Canada Program back to the Co-operatives in the Arctic, Mr. Chairman.
Yes, I appreciate that information. It appears to me that it doesn’t have a great impact on prices. I think the public is facing this question.
If this program is so important to reduce your transportation, and that’s exactly the way I understand it, how in the world can you actually survive in Nunavut doing business mainly with the nutritious type of food? Is it worth administering for you or is it obtained in somewhat respects to both companies to have to conform to all of these federal needs?
I don’t believe you’re just going to stockpile to make it affordable or any relevance to your profit margin. That’s what I believe.
I understand exactly that this program will be used to reduce some parts of the costs of doing business, but I assume it’s not going to be passed on to other items that don’t qualify. So the other items of our daily supply needs will continue to rise, but the product that qualifies will be used to reduce the cost, not the profit margin.
Mr. Curley, it’s really refreshing to hear a politician refer to another political body as being a pain, but that’s what we do.
There are a lot of administrative programs outside of Nutrition North Canada that we deal with on a regular basis, very importantly the health and benefits and the laws of the Canadian and territorial governments with how we treat and take care of people.
So administration is part and parcel of the game. If you’re going to be in business, that’s one of the things you accept and you work with.
So would we like administration streamlined? Of course, sir, without a doubt, but it is part of being in the business field.
So we accept it and we will make recommendations that we do to other parts of the Government of Canada and other governments about how to streamline administrative procedures. So again, for us, that’s a normal protocol.
You asked about other items. The way Nutrition North Canada is set up, we can only apply the subsidy to eligible goods on the list. Other items, we cannot.
It would be illegal to apply the subsidy to them. I think that’s what you were asking. So we can’t do that.
Other items, again it’s a competitive business field. If you were buying electronics in our stores from 2008 through now, you would have seen on average a 15 to 20 percent drop in the average cost of a piece of electronics.
Because we have to compete.
Currently we’re testing lower prices on apparel goods in 19 stores at 20 to 30 percent. We’re testing them for the reasons you suggest, sir. Can we sell at lower prices and be profitable?
There has to be something in it for us. So we’re constantly testing other prices that have nothing to do with Nutrition North Canada because it’s a competitive playing field.
I’m not sure if I’m answering your question, but the administration of this program has required extra work.
Is it onerous? To a degree, but so are all of the other regulations the Governments of Canada put in place to safeguard the citizens and to make sure that funds, from whatever political body, are being used appropriately.
So we comply, we accept, and we discuss whether we can streamline it.
Mr. Morrison: Mr. Chairman, from an administrative standpoint, the requirements for retailers under the new Nutrition North program are a great deal more onerous than they were under the old Food Mail Program.
Under the old program, we purchased a product, had it delivered to an entry point, and Canada Post took over from that point. We had virtually no reporting or claiming. We did have auditing procedures where the Food Mail Program would audit pricing and such at the community level.
So the new program is a great deal more onerous from an administrative standpoint.
We do understand some of the requirements of Indian and Northern Affairs in terms of trying to understand the impact of their program.
Is the program contributing to healthy eating? We certainly support that concept and we are committed to providing the kinds of information that they need.
Would we prefer that we not have to do all of the administration? Absolutely. There is a great deal more work involved than we thought there would be, but we want to make sure that there is a good program and without information, INAC is not going to be able to make adjustments to their program.
The second part of your question dealt with the subsidy and other products, non-Nutrition North Canada products.
One of the potential benefits of the new program is that retailers now negotiate freight for their entire inventory.
Under the old program, we negotiated freight contracts for our general cargo only. We did not negotiate freight contracts for perishable nutritious products. They were negotiated by Canada Post.
We now have the capacity.
Our freight volumes have increased very dramatically because we now combine perishable nutritious with general cargo.
So the expectation in that process is that our overall freight negotiations will result in better freight rates combined, resulting in lower landed cost in communities, resulting in lower retail price for products.
It is very clear in the agreements that we have with Indian and Northern Affairs that the subsidy is only for approved products, eligible products only.
It does not cover non-eligible products.
So there is, I believe, the potential to see improved pricing in other categories because we are now negotiating with a bigger freight pie. It’s not just the general cargo pie; it’s the general cargo and the perishable nutritious pie. Ultimately, we believe that that will be beneficial to the communities that we serve, Mr. Chairman.
Hon. Tagak Curley: … (inaudible)… very much.
I believe that if there is any benefit, I hope that would be the case because you’re negotiating on a large scale, but I’m not 100 percent sure. I listened very carefully to the virtues of free enterprise and all of that, but buying into this whole thing doesn’t really label you now as a completely free enterprise because you’re buying into government bureaucracy, and so on.
So my next question will probably clarify what I mean. Do you negotiate with airlines or air carriers at your discretion? Do you actually tender requests for the freight rates and you select the best rate from whoever is qualified to transport your products?
Mr. McMullen: Yes, we negotiate freight rates with our air vendors and we negotiate whether there is one company in that market or several companies.
So it is put out to bid. More often it’s negotiation across the table, looking at each other and saying, “This is the type of deal we would like to strike because that’s the cost we need to be competitive and to be efficient when we bring goods to market.”
Mr. Morrison: Mr. Chairman, we do a combination of both.
We will call for proposals in some instances and we will have direct negotiations with carriers. It will depend on whether there are multiple carriers in a market and it may depend on whether or not we have a contract that’s in place that may just require renegotiation based on changes in circumstances. But we will do both, and our objective is to arrive at the best overall value and price is not always the only issue, particularly when you’re considering transportation airfreight, what other services are involved, but we strive for the best value for our member Co-operatives.
Hon. Tagak Curley: Do you have any guidelines from the feds whether or not certain airlines should be qualified for that? From what I heard from Mr. McMullen, you will pretty much, under your own discretion, choose from which you feel has the cheapest rates that you can negotiate with.
Are there regulations or guidelines that say you should include the main northern air carriers?
We are under no restrictions.
As a matter of fact, INAC has never said, “There’s a list of companies that you should negotiate.” They have not mentioned that once to us, so we have free independent discretion to negotiate with who is available.
Mr. Morrison: Mr. Chairman, we are in the same situation.
There are no requirements for us to negotiate with any particular carrier.
However, we feel that it is appropriate for us to deal with as many carriers as possible to ensure that we get the best value, but there are no regulations or restrictions requiring us to negotiate with any one particular carrier, Mr. Chairman
Hon. Tagak Curley: I’m getting near my point here.
My other question relates to some of the products probably qualified to be shipped through the marine shipping companies.
If certain products qualify to be shipped through a marine cargo shipping company, would you also negotiate certain rates on behalf of the Nutrition North agency?
The Nutrition North Canada Program does not, in any way, extend to the sealift rates.
That would be rates that we would negotiate directly on our own. There is no federal program for us, especially affecting Nunavut, that’s involved or associated with Nutrition North Canada.
Mr. Morrison: Mr. Chairman, we are in the same situation. Nutrition North Canada does not apply to any marine transport, only air transport.
Your last question, Mr. Curley.
Hon. Tagak Curley: I appreciate your responding to me.
It’s somewhat geared towards a federal question because they weren’t willing to appear before this Committee of the Whole or the Assembly, so I appreciate your responses. You did very well.
I also wanted to ask you this very important question.
There are consumers out there who believe that the Food Mail Program worked for them.
They were able to get online, order it directly, and time it with the shipping companies moving it and actually, in some cases, while they’re down at the entry point, qualified for shipping. They would take the products with them and in some cases, deliver them directly to the post office.
It used to happen in Yellowknife quite a bit for Kitikmeot people.
Nowadays, consumers are actually confused. There is no direct consumer-driven program in it now.
It’s really retail and we’re at your mercy.
Why would you accept such a change and not reject it completely in order to allow the feds to renegotiate one that could work by modifying components of the old Food Mail Program?
That’s an interesting… . I think there’s a set of questions there.
First of all, the federal program that came out is the creation of the federal ministries involved.
So whether we accept it wasn’t the question that was ever asked of us.
The program came out. Here it is. INAC engaged in over 70 different community and business meetings and gathered information.
So I think the last part of your question is: why would we reject it?
That was not a choice. This is a program that was set down by the federal government, we had input into it, as did many others, and that’s the end product.
As for the individual consumer, there are less southern retailers signed up for the Nutrition North Canada Program than were signed up in the food mail, but that is still an open system.
There is a process where retailers can apply. I believe it’s on an annual basis from the south and northern retailers, I believe, can apply at any time.
So, Mr. Curley, it is a competitive market.
We believe this system is going to work and I think, and I can’t predict, that you will see the entry of more southern retailers, maybe not this year but probably next year.
I think it’s a competitive market. If there’s value for them to provide a service to the north, they will jump all over it. I can’t predict when but I would assume that there is an incentive for them.
I know the reason they have said they haven’t participated is the paperwork and the administration, but as Nutrition North Canada gains their legs, I think it’s in their best interest, for not only southern retailers but for northern retailers, for them to trim and streamline their administration process as well.
Mr. Morrison: Mr. Chairman, we participated in extensive consultations with the Department of Indian Affairs throughout the food mail review process and we made many different recommendations to INAC on what should be happening with the Food Mail Program and unfortunately many of our recommendations were not accepted, some were but many were not.
Ultimately the decision on what the Food Mail Program or the Nutrition North Canada Program would be was an INAC decision.
We certainly were not asked our opinion on the criteria of the new program.
The program was publicly announced here in Iqaluit, I believe, on May 21 of last year.
We heard about the program the same way that everyone else heard about the program, from the press releases that were issued.
We were not asked our opinion on various components of the program, so we had no opportunity to accept or reject.
Our opportunity to reject particular components of the program would have been to reject the entire program.
As Co-operatives, we represent 20,000 individual owner members across the north and certainly because of certain components of the program not being acceptable to us or not being laid out as we had recommended, it would certainly not be in the interest of our owner members for us to say that we’re not going to participate in the program because one or two components of the program were not as we had liked them to be.
There are retailers that are still involved in the personal resupply business.
It is different than it was, as are many parts of the activities that we’re involved in. They’re different than they were.
We have accepted this program and we are committed to making the program a good program to provide the best value to our owner members.
If there are problems with the program, I can’t comment. We’re a retailer. We sell products at the community level.
We don’t sell products to individuals from the south to the north.
Generally speaking, this is not something that we are up in arms over that it’s different than it was. We are more committed to ensuring that the program is efficient to allow us to deliver the best value at the community level.
My question is to Mr. McMullen.
In a North West Company news release dated March 31, 2011, you stated that “there are some communities we serve that will not see enough change. That is because neither the federal subsidy nor the freight rates changed enough to equal a change at the cash register. We will keep working with the government, our customers and the leadership in northern communities to find solutions to issues like these as they arise.”
Can you clarify which communities you are referring to and can you discuss what solutions you would support?
There are no specific communities that were covered under that statement in Nunavut.
In particular, we’re referring to four or five communities in northern Manitoba. Lac Brochet, for example, is part of the program. Brochet and Tadoule Lake are not.
Those communities are a very few kilometres apart, so that doesn’t make sense to us.
The criterion that was used by INAC was, “Did those communities participate in the food mail system beforehand?” And the answer was, “No, those communities did not.” At that point in time, even though we could have accessed the Food Mail Program, the freight rates that Canada Post had negotiated with the air carriers in those communities were higher than our freight rates.
So it was more beneficial for us in the food mail system to opt out of INAC for those northern Manitoba communities.
What we will do, as I stated in my submission, is that we will work with INAC and we will provide data, as we will throughout Nunavut, that says, “These are the communities where the subsidy really seems to be working because the consumption of nutritious products is going up,” which is the basic intent, healthier eating.
So we will provide the data that will enable the new INAC to make good decisions for what’s on the eligibility list, what communities should be included, and maybe how the subsidy rates are changed in the future based on the communities’ consumption of the healthier goods. So that’s the data that we can provide. Right now, as I stated in my submission, the early indications are that communities with Nutrition North Canada subsidies are increasing their consumption of healthy products as compared to those without.
I’ll finish on what we did with the Manitoba communities. We went to, amongst others, Grand Chief David Harper and provided our best advice in terms of how they should approach INAC to seek subsidies. So we tried to work with the governments and the tribal councils in Manitoba to alleviate that particular situation, sir.
I wish to ask another question to Mr. McMullen. In a North West Company news release dated March 31, 2011, you also stated that “We work constantly to get more affordable food in the north. The changes we see today are possible because two important changes have occurred… the retailers – like us, are now free to use a more direct, cost effective channel of distribution instead of having to use Canada Post as required by the government for decades.
This means we will have less interruption and fewer delays in the transport of food, which means healthier fresh food. Once these changes came into place we were able to negotiate better freight rates with airlines and trucking firms because we have the advantage of bulk rates.”