Maple Leaf Forever (4): The food cartel: squeezing out the Hub and the co-ops

For your reference

What happened to Hub Meat Packers, the only major beef packer in the Maritimes, after its acquisition by Maple Leaf Foods? – TONY SEED

Moncton abattoir

HALIFAX (April 1, 2007) – IN FEBRUARY, 2002 Maple Leaf Foods acquired Moncton-based Hub Meat Packers (pictured) including Larsen Packers (sales $270 million) – the only major beef packer in the Maritimes.

Maple Leaf issued a press release that was reassuring: “Hub Meat Packers currently has annual sales of approximately $270 million. No changes are currently planned for the businesses or their operations.”

The beef industry in Atlantic Canada was generating $100 million in annual farmgate receipts, so its well-being was very important to the region’s economy. Some hailed the move as promising stability for the region’s beef industry through vertical integration with a multinational meat company. Others feared, correctly as it quickly turned out, that the plant was purchased to achieve market control and would be closed.

After a brief life under the new owners, Maple Leaf shut down the kill floor of Hub Meat Packers (Larsen Packers Moncton), once again giving the customary justification of “restructuring.”

Now, just a few years later, speculation is widespread that Maple Leaf will close the Larsen pork processing plant in Berwick, having just terminated its poultry processing plant plant in Canard – both located in Nova Scotia’s Annapolis Valley – and centralize all pork processing in Brandon, Manitoba.

For beef producers in the region, the consequences of shutting down the Hub were disastrous on two fronts. Farmers were left with the prospect of shipping cattle to Ontario for slaughter and then shipping the meat back – over 750 miles each way – at a cost of $80-100 per animal, above and beyond a transportation subsidy provided by provincial governments.

Secondly, the implications for their Atlantic Tender beef label were also ominous. That’s a niche marketing label that had been developed to promote Maritime beef to compete with the Western beef carried by the supermarket monopolies, and marketed by them as of superior quality to the allegedly inferior Maritime beef.

Forming the Atlantic Beef Producers Cooperative in response

Faced with this situation, the beef producers formed the Atlantic Beef Producers Cooperative in Borden, PEI, to defend their interests and to launch a new independent processing plant. And they worked to develop an association with Co-op Atlantic, a federated co-op with 135 members serving more than 226,000 member-families and also headquartered in Moncton. The plant produces beef under a strict protocol that’s sold in Co-op Atlantic stores throughout the region under the Atlantic Tender Beef label.

Tom Webb, in an article in Rural Development (July, 2005), takes up the story. “Stiff competition from multi-national retailers made it difficult for Co-op Atlantic to invest its planned 50 per cent share to make the beef-processing plant a reality.”

Co-op Atlantic faced two relentless pressures. “Aggressive price competition between the major competitors,” explains Webb, “drove down retail markets and margins, forcing retail co-ops to focus diminished profits on defensive retail strategies. Its planned $1.5 million investment (in the beef-processing plant) had to be reduced to $500,000.”

That is to say, the Maritimes’ “own” Sobeys, together with Atlantic Wholesalers (owned by Loblaws, controlling 34 per cent of the national retail market), both linked with the big US beef processors in Western Canada, retaliated, staging a phoney rice war.

Both behemoths are the result of mergers which took place late in 1998, which also created the largest grocery wholesale companies this country has ever seen. Stellarton-based Empire Co., parent company of Sobeys, bought out the Oshawa Group, as well as Knechtel, Food Town, Bonichoix and Price Chopper chain. Loblaws bought IGA and Agora Food Merchants in Atlantic Canada, and Montreal-based Provigo. These monopolies then forged deals with food suppliers who can service all their chain from coast to coast, not just in one region. So much for “thinking locally.”

Through exclusive contracts with the supermarket chains, Sobeys, Atlantic superstores and Wal-Mart, this food cartel is squeezing all non-monopoly competition, from independent meat-packing facilities to independent retail chains such as the co-ops, as well as the non-corporate farm.

Destroying non-corporate competitors

The squeeze play on the Atlantic Beef Producers Cooperative and Co-op Atlantic was hardly unique; it formed the latest chapter in a well-defined pattern.

According to the National Farmers’ Union report, Farm Crisis and Corporate Profitability (the pdf is available in this edition of Shunpiking Online), “the dominant agri-business corporations work to destroy cooperatives and farmers’ collective-marketing agencies. Such destruction yields corporations a triple benefit:

* Allowing them to capture profits previously returned to farmers through co-ops and marketing boards;

* Reducing farmers’ market power by destroying collective-marketing agencies (this reduction in market power further enhances corporate profits because reduced market power leads to reduced farmgate prices); and

* Destroying the functioning counter-models to corporate-dominated, profit-extracting agribusiness.”

The report cites several examples amongst many:

“In the late-1990s, co-operatives processed two thirds of Canadian milk; today, co-ops process 42 per cent. In the early-1990s, nearly all Western grain moved through farmer-owned and -controlled elevator cooperatives. Those co-ops are gone: bankrupted, privatized, or bought up by the dominant grain companies.”

Today, beef packing and supply in Canada is dominated by two US giants, Cargill and Lakeside Packers Inc., which is a division of Tyson Foods Inc. They also dominate the US beef sector with 20.6 per cent and 27.1 per cent respectively, of the American market. [1] (See also our article, “Who owns the meat?,” this edition)

Finding investment funds for the Atlantic Beef Producers Cooperative became a problem and progress faltered. Moreover, the district director of the National Farmers Union, Danny Hendricken, commenting on financial problems at the plant, says the plant’s volume is simply too small to compete in the commodity market. According to the NFU, banks are reluctant to risk investment in independent, farmer-owned packing plants because of the power of those two corporations, Cargill and Tyson, to crush smaller competitors through direct and indirect means.

The initiative of the beef producers and the Co-op to reduce the space for the monopolies to operate in Canada is positive.

The influence of these few private monopolies in manipulating prices at all levels and determining the world’s food supply is immense. This has ominous implications for both food sovereignty of the nation and food security of Atlantic Canada. This necessitates the expulsion of these foreign monopolies from Canada and liberation from the multinationals.

Endnotes

[1] Oligopoly Watch, “Big Beef”, 4 October 2003, http://www.oligopolywatch.com. The other major players in the US beef packing industry are Swift (46 per cent owned by ConAgra) with 16.1 per cent of the market; Farmland National Beef (7.8 per cent market share), and Smithfield (6.6 per cent market share).

Originally published in Shunpiking Online, May-June 2007

http://www.shunpiking.com/ol0404/0404-AC-TS-MF-foodcartel.htm

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