In this episode of The Food Professor, Dr. Ian Lee from Carleton University shares insights on competition and Canada's economic outlook. The conversation covers discrepancies in food inflation rates, implications of the US Farm Bill, and the role of automation in the meatpacking industry, highlighting transformative trends in agriculture and economics.
In the latest episode of The Food Professor podcast, hosts Michael LeBlanc and Dr. Sylvain Charlebois are joined by the esteemed Dr. Ian Lee, an Associate Professor at Carleton University. Together, they delve into a series of pressing topics in food and agriculture, leveraging Dr. Lee's extensive knowledge and experience. The discussion covers competition in the food industry, the anticipated impact of the Code of Conduct, and Canada's economic outlook.
The episode kicks off with a crucial conversation about the US Consumer Price Index (CPI) and its potential implications for Canada. The hosts then turn their attention to Statistics Canada's food basket pricing, a topic of significant interest and debate, questioning whether it underestimates or overestimates the real costs. They reference a Toronto Sun column penned by Sylvain that highlights some discrepancies in the pricing.
Attention shifts to the upcoming US Farm Bill, which is anticipated to allocate $1.4 trillion over ten years, juxtaposed against Canada's comparatively modest $3.5 billion Canadian Agricultural Partnership (CAP) over five years. The hosts also correct a previous claim regarding Amazon's "just walk out" technology, clarifying misconceptions about the system's operation.
The conversation further explores the evolving landscape of automation in meatpacking, highlighting Smithfield's initiative to deploy robots for tasks like rib pulling, significantly reducing waste and reassigning workers to less physically demanding roles. This shift toward automation, exemplified by Smithfield's strategy to reassign about 500 employees annually, marks a transformative phase in food production, aiming for higher efficiency and worker safety.
Lastly, we touch upon the wine industry's challenges, noting a significant surplus in California's bulk wine market, showcasing the broader economic and logistical complexities facing today's food and agriculture sectors.
Statistics Canada PHOTO BY TONY CALDWELL/POSTMEDIA
https://www.wsj.com/business/meet-the-robots-slicing-your-barbecue-ribs-338a7794?mod=Searchresults_pos1&page=1
About Ian
I am an Associate Professor at Carleton University in the Sprott School where I started in 1988, teaching the 4th year and(later) the MBA Strategic Management capstone course, as well as related courses such as International Business Strategy, from then to now.
After dropping out of grade 12 in 1971, I worked at a series of minimum wage jobs for 3 years in the early 1970s. In 1974, I started with an American financial services multinational as a credit manager trainee eventually becoming a Branch Manager in several branches in Ottawa and Eastern Ontario. I was then recruited in 1977 by Canada’s oldest bank (that predates Canada by a half century), where I was given outstanding training in banking, economics and management by British bankers. I was employed at the BMO Main Office Branch (4thlargest in all Canada at that time) at 144 Wellington and Sparks opposite Parliament Hill and beside the National Press Club (Parliament subsequently acquired, refurbished and renamed the branch as Sir John A. Macdonald Building for Parliament Hill receptions). As Loan and Mortgage Manager in my mid 20s, I dealt with cabinet ministers in the Trudeau Government, Senators, MPs, national journalists, Supreme Court judges, deputy ministers, national NGOs and staff of embassies including the Chinese and USSR Ambassadors, as well as national institutions such as the Bank of Canada. And in that capacity throughout those years, I evaluatedpersonal and corporate financial statements and lent millions and millions of dollars in demand loans, consumer loans, mortgage loans and business loans.
After completing my entire undergraduate degree on a part time basis in the evenings over 10 years while employed full time, I resigned from the bank to enroll full time in a master’s degree in public policy in 1982 at Carleton University. However, I completed the second year of the master’s degree full time in evenings in 1983-84 as I accepted a position as a full time policy analyst with Canada Post Corporation in Corporate Finance and Banking, Head Office. Upon graduation in 1984, I resigned from Canada Post to enroll in the PhD program in the public policy stream at Carleton University graduating in 1989. My 850 page PhD thesis was titled: The Canadian Post Office: Origins, growth and decay of the state postal function, 1765-1981. While completing my PhD, I was employed for one summer in 1985 in the Privy Council Office, Machinery of Government.
Shortly after starting with the Sprott School on a tenure track in 1988, the Berlin Wall came down in October 1989. Then in 1990-91, Carleton University School of Business was awarded $3 million by Foreign Affairs Canada to establish a Canadian Business School in Poland at theprestigious Central School for Planning and Statistics – later renamed the Warsaw School of Economics. In April 1991, I became the first western professor to teach in a university in a former communist country under an OECD country funded business management program. I have continued to teach at Warsaw School of Economics (in the EMBA since 1997) where I have had a bird’s eye view of the remarkable transformation of Poland from an impoverished, corrupt centralizedsocialist economy managed by the elite nomenklatura to a remarkably vibrant prosperous decentralized democratic country in transition.
Since 1990, I have taught approximately 100 times across the Atlantic or Pacific Oceans, mostly in EMBA programs, in many different countries ranging from Poland to Russia to Iran to Ukraine to Cuba to Romania to Slovenia to Latvia to Czech to Argentina to Croatiato Mexico and after 1997 in China – always inAmerican or Canadian universities in partnership with a local university. I taught a number of times for the University of Washington (Seattle) with ASEBUSS in Bucharest, Romania; Katz Graduate School U Pittsburg in Prague; SUNY Buffalo with Riga Business School, Latvia; Carnegie-Mellon with IMI-Kiev, Ukraine; Carleton Sprott School with Qeshm Institute in Qeshm and Tehran, Iran; University of Ottawa in Hong Kong; Carleton Sprott School with Donghua University in Shanghai; UQAM at Warsaw School of Economics; Kozminski Academy of Entrepreneurship, Warsaw; Czech Management Center, Prague; IEDC, Bled, Slovenia; Zagreb, Croatia.
These extensive international teaching experiencesover a third of a century, provided a much deeper understanding of non-western, often authoritarian, frequently deeply corrupt, state centrally planned or administered countries sometimes transitioning to western, rule of law, decentralized economies and societies.
From 1996-98, I was appointed as Supervisor of the Bachelor of International Business in the Sprott School to address significant structural issues that emerged after this innovative new program had been operational for 2 years. In 2007, I was appointed as Chair of the MBA Restructuring Committee that led to the replacement of the former thesis based master’s degree with a brand new professional MBA degree. We benchmarked key competitor MBA programs and completed extensive consultation with all relevant stakeholders that led to the proposed new structure including 50 new MBA graduate courses. I was then appointed the new MBA Director from 2007-2010 to implement the new program including staffing 50 new MBA courses with permanent faculty and contract instructors.
I completed two sabbaticals in the USA: at American University in Washington DC in 1995 and Cal State Monterey Bay one hour south of Silicon Valley from 2001-2003.
I am presently a member of the Carleton University Board of Governors, 2016-2019. I am also a member of the Sprott School MBA Committee, Carleton University EURUS Advisory Board and the Carleton University Graduate Appeal Committee since 2010.
During the past 50 years, in addition to visiting every Canadian province, I completed road trips through 43 of 50 US states and visited 8 of 14 US Presidential libraries. I have visited most West, Central and East European countries including living for 2 years each at RCAF 3 Wing, Zweibrucken, West Germany andRCAF 1 Wing, Marville France in the mid 1950s (where my father flew F-86 Sabre jets and later F-104 Starfighter jets).
Over the years, I appeared extensively in the media including CBC, CTV and Global National News, CBC TV On the Money weekly on The Roundup, and Power and Politics and CBC Radio Syndication. I am a weekly regular on CFRA Rob Snow program and Sirius-National Post Radio as well as the Corus Radio Networkin Toronto. Over the last 10 years, I published 45 Op-Eds in the Globe and Mail, New York Times, National Post, Financial Post and Ottawa Citizen concerning contemporary public policy issues as well as research monographs for the Macdonald-Laurier Institute concerning Canada Post, supply management, alternative payment instruments, deficits and the retirement income system.
Since 2008, I appeared by invitation before House of Commons and Senate finance, banking, industry and trade committees 25 times concerning public policy debates. I have been invited by Global TV to attend every federal budget lockup as one of their expert witnesses since 2008.
I have published multiple times in the annual edition of How Ottawa Spends concerning Canada’s retirement system, the PBO, deficits, corporate income reform and the Liberal downsizing of 1995-97 and the Conservative Government downsizing of 2010-15.
Michael LeBlanc 00:05
Welcome to The Food Professor podcast presented by Caddle. Season 4, episode 28. I'm Michael LeBlanc.
Sylvain Charlebois 00:11
And I'm The Food Professor, Sylvain Charlebois.
Michael LeBlanc 00:15
Our very special guest this episode joins us from the nation's capital, my hometown, Dr. Ian Lee, Associate Professor Carleton University, Sprott School where he teaches the MBA Strategic Management Capstone course.
Amongst others, we have a lively and fast paced conversation around the nature of competition, the prospects for the code of conduct and the economic prospects for Canada.
Sylvain, I think you've been in the same room with Professor Lee, but I've really not had the chance to talk together. So, this is a big first for the people, right?
Sylvain Charlebois 00:44
Absolutely. He's a true professor, a true legend. He's-, he's just an amazing communicator, students love him and let's-, let's face it, I mean, the media will go to him for some advice. He doesn't do any research, but he just articulates things so well and obviously, he had some opinions about the food industry, and I just wanted to give him a platform and so I'm glad that he accepted our invitation.
Michael LeBlanc 01:13
Yeah, I mean, the only advice I'd give him you know, the-, the advice sometimes we get when you go on TV is be yourself plus 10%. If we could have got him a little more enthusiastic about the topics I would have had a better interview.
Sylvain Charlebois 01:25
Did we-, did we actually ask a question, did we actually ask a question, I don't think we asked a question.
Michael LeBlanc 01:31
We tried to ask questions and kind of sandwich them in, but it was really fun and very insightful.
Sylvain Charlebois 01:36
You sent me the script to tell me who's asking what, I'm going why-, why bother, it's Ian Lee man.
Michael LeBlanc 01:44
Anyway, it's a pile of fun and great conversation, and lots of insight. So, we'll get to that in a little bit. Now you sound a bit different and to me, you look a bit different. We're on camera. You're in the-, in the, in the airport in Montreal, what brings you to the fine City of Montreal today?
Michael LeBlanc 01:59
And in case the-, the listeners aren't tracking, what you're doing there is working to get poutine designated by UNESCO as a what's the official designation?
Sylvain Charlebois 01:59
Yeah, well, I was-, basically I flew in this morning, I'm flying back tonight. It was just in and out. I met a couple of companies, met a good friend who's a-, who knows his business. He knows the food business for breakfast and then in the afternoon actually, I met the-, with the dairy processors of Quebec, about UNESCO and you guessed it poutine and cheese curds. So basically, we-, we just, we're in the final phase of-, of completing our dossier for UNESCO. So obviously, some politics are involved and so we have to deal with Ottawa and Quebec and so lots of-, lots of great strategizing going on in the room with the-, with the board of this particular association and that's association, the association is called Como Se [inaudible] Quebec. They represent their processors in Quebec and they're just awesome. They represent all cheesemakers of the province, and they really care about their-, about their art.
Michael LeBlanc 03:16
So, when I was at the restaurants Canada show and wandered around?
Sylvain Charlebois 03:16
As a-, as a immaterial heritage for humanity, basically and the challenge, of course, is that Canada has never ratified the Accord at UNESCO for immaterial heritage, I guess dishes, food, like for example, pizza, the French baguette, [inaudible], Chinese tea, the hamburger from Hamburg, all of these dishes have actually been recognized by UNESCO, but not one dish from Canada yet.
Sylvain Charlebois 03:54
Yea How was it?
Michael LeBlanc 03:55
It was good to ran into our friends-, our friends from [Inaudible]. Vince, just actually in the-, in the medium room.
Sylvain Charlebois 04:01
Yeah. He knows his stuff.
Michael LeBlanc 04:02
Yeah. Usually. He said, you know, he wanted to say hello to you. So that's what I'm doing here. Usual cast of characters on the show floor. Lots of robots actually, like 10, maybe 10 displays of robots, lots of payment type people. Lots of-
Sylvain Charlebois 04:18
So, the number of you felt that the automation theme has grown?
Michael LeBlanc 04:23
Yeah, very much-, yeah, very much. So, if you-, judging by what's on that floor, they had one of those giants french fry making machines. It wasn't really working, which is kind of the-, I don't know where they get these things sometimes, but not very exciting to watch. I saw it-, I saw one working in-, in New York at the NRF show. That was no joke that was made by guys who make robots for Tesla’s, though this one was not really working. So, it wasn't very impressive. It's just a bunch of metal and, you know, lots of lots of different stuff. I mean, you know, the buzz was the buzz was good. The Ontario premier made some announcements about funding so that was good for the industry. You know, but I was listening to some of the education stuff, and you know, times-, there's a real interesting-, you know, in one case, they were saying, listen, times are tough, like, people aren't eating out as much.
Sylvain Charlebois 05:10
That's great. Yeah, I actually, yeah, I think you're right. I mean, you're, you're I think you're reading the market, right? It really depends who you are, how you're managing your business. Of course, there's a huge difference between fast food, casual dining and fine dining and obviously, I think fine dining is-, you got to know your market, you got to adapt. If you're in fine dining, fast food, really, this is the perfect market for them. They're doing very well. If you look at RBIs financials-
Michael LeBlanc 05:10
And then other people are saying this, these have never been better times that people are eating out and coming out and getting together community, I had the opportunity to do an event at Henderson brewery in Toronto, very community based great micro craft brewer, and he's pivoted, we're gonna get him on the pod, the co-founder, he's pivoted because he said, I got in the craft beer business, but that's not a good business anymore. So, he makes a few of his craft beers, outsources the rest and then turned his beer place into an event space and is thriving, because the community comes there. You know, talk about nimble and-, and, and moving. So anyway, you know, restaurant operators are always nimble, and always looking for new things. So, we wish them nothing but the best of luck, anyway.
Michael LeBlanc 06:21
Chains are doing very well, right?
Sylvain Charlebois 06:23
Chains are doing-, not independents.
Michael LeBlanc 06:25
The indies are struggling because the-, you know, the-, and I you know, they gotta manage their food costs they got, you know, the big guys got scaled to help manage those food costs, right.
Sylvain Charlebois 06:33
And that's my biggest concern is we're gonna actually only have chains after we're done with this. I mean, that's really my biggest concern and I'm not-, I'm not-, I have nothing against the Tim Hortons of the world. I mean, they have something to offer, but you need variety too.
Michael LeBlanc 06:48
Yeah. Well, I think the simple answer is there's too many, reality is, too many restaurants for the number of people. It's always been the case, because the-, every-, there's so many restaurants, nobody makes a lot of money. They all cry the blues that it's a low margin, right first words out of the mouth, it's a low margin business. Well, there's a way to fix that, but it's not fun and that is-
Sylvain Charlebois 07:06
Yeah, exactly.
Michael LeBlanc 07:07
Less restaurants. So, I don't wish anybody-, I wish everybody the best, but we'll see how it all sorts out. Let's-, let's get into-, into the news. You start with some economic news that has an impact on consumers, an impact on the nation. The US CPI numbers came out and tell me what you thought of them, and they came out a little hotter than I think was expected. We in Canada-
Sylvain Charlebois 07:32
You weren't expecting hot? I was expecting hot.
Michael LeBlanc 07:35
I don't know. What was it, 3.4%?
Sylvain Charlebois 07:37
3.5 in total, like the general inflation has landed at 3.5, food inflation 2.2, which means clearly that food no longer drives inflation, but at 3.5 man, oh, boy, the dollar was hammered, and I was expecting that, but I-, but I mean, look at the data. If you look at what's going on in the US, that economy is boiling, it is boiling and I wasn't surprised that the-, that the Bank of Canada basically decided to hold today and frankly, I was at-, like four weeks ago was in Toronto on stage. After a Scotiabank economist, a Scotiabank economist said to the group that-, that rates would go down in April and would go down in June and I went on stage, and I said I don't know and it's all about the US. It's because of the US. I mean, the US is boiling like you gotta be careful. You gotta pay attention to what's going on down south, our little Tiffy friend, I think made the right decision today and I-, my expectation is that the Fed may actually, I mean, the chances to see the Fed increase its rate. Next Fall has gone up. I don't know about you, but I think it's gone up.
Michael LeBlanc 09:00
You think they're going to increase; I think they're going to hold but I think the expectation was they were going to start bringing it down, but I think I expect them now to hold.
Sylvain Charlebois 09:08
No, yes. No, I actually thought my expectation was that the Fed will hold.
Michael LeBlanc 09:14
Yes.
Sylvain Charlebois 09:15
Now I'm thinking maybe there's a chance that we could see an increase. Oh, yeah.
Michael LeBlanc 09:21
Yeah.
Sylvain Charlebois 09:22
Oh, yeah. I tell ya.
Michael LeBlanc 09:23
Too close to the election. I don't think they-, I don't think they do it. I don't think they do it, but anyway, there's that thing happening in the US, right? I think that that's a material influence or on what-, what and how to govern that growth. Well, we'll leave that for there. I guess we'll just kind of keep an eye on it and what it means for-, importantly, what it means for the Canadian dollar.
Michael LeBlanc 09:43
Let's talk about Stats Canada's Food Basket, you-, you wrote an article, you talked about it on our last episode. It's not the first time we've talked about data from Stats Canada, but you've got some-, some real anomalies that make us think-, are we really understanding what's happening in-, in the who'd business correctly talk about what you observed and what you're thinking about it.
Sylvain Charlebois 10:03
Now, again, I don't want to criticize Statistics Canada here, but-, but-, but I think we all know that data access has been an issue for the federal agency and it shows I mean, and now of course, the lab, we're now equipped, we do have a food price portal, now we can actually tell you exactly what's going on with the price of bananas, price of ground beef every single day. Even today, I can tell you what happened with ground beef prices today in Canada. So that's-, this is something that a Stats Can can do, should do, is not doing.
Sylvain Charlebois 10:41
So, we're able to now evaluate how off Stats Can is with its-, with its food basket. So, you see, they release the CPI and three weeks later, they release what we call a selected list of food products and there are 77 different products. So it's-, it's very easy for us to take those products and compare those prices with prices we have and so we went through the entire list some products, we didn't have enough data to basically say, well, it's-, it's either yay or nay or is-, is-, is Stats Cans data, an underestimation or overestimation, but in 34 cases, we were confident enough to say, okay, well, Statistics Canada was wrong.
Michael LeBlanc 11:33
But-, just a reminder, that's about 50%, right? You said the basket comes out about 70-some items, so that's-, about-, for half of the items they were materially incorrect, is that what you're saying?
Sylvain Charlebois 11:44
That's right. So, but-, but the average error, okay, if you actually look at all 34, it's about 5.5%, which is a lot. I mean, it's a lot, but it's up or down. So, this is the interesting part I find is that of the 34 items, 41% was an underestimation. Okay, 59% was an overestimation. So, you can't really accuse the Federal Agency of underestimating the inflation right now. So it's hit and miss and my guess, Michael, because I've been looking at this data for a long time, I actually just think that because of the data that's that Stats Can has, it lags, it can't read the situation properly, it's about four to six months behind and right now I can tell you, the month of March, and the month of April, prices are dropping, prices are dropping, there are lots of deals out there. I can tell you and frankly, Farm Credit Canada today released a study suggesting that prices, the food inflation rate actually could go below 2% by June or July, I think I believe them, because that's what we're seeing in our data.
Michael LeBlanc 13:01
In the data that we wish Stats Canada was looking at. So, they're-, it's interesting because of course it drives a lot of inflation, drives a lot of decisions around what the interest rate is, maybe-, maybe the Bank of Canada makes a decision differently when they have different numbers around food inflation, right.
Sylvain Charlebois 13:18
So, if anything, I would say that in February Stats Can, may have overestimated food inflation this time and we could actually see that for the month of March and April as well. Lot of fun playing with data.
Michael LeBlanc 13:34
No kidding. No kidding.
Sylvain Charlebois 13:37
That's what you get when you listen to The Food Professor podcasts.
Michael LeBlanc 13:40
That's right.
Sylvain Charlebois 13:40
You don't have to pay tuition.
Michael LeBlanc 13:42
They don't call you a professor for nothing. Not a nickname. Let's-, let's talk about the US. Let's get back to the US a little bit. Big farm bills. I mean, they've got massive-, a massive market, big bills. What is it, $1.4 trillion, right?
Sylvain Charlebois 13:57
Trillion, can you imagine $1.4 trillion? That's more than our national debt.
Michael LeBlanc 14:03
Now, that's-, you-, don't hold your breath. So that's over 10 years now, what's the equivalent in Canada in terms of-, Well, first of all, what is the Farm Bill, what's it meant to do, what's this money for and then help us understand the context for the Canadian context?
Sylvain Charlebois 14:22
Yeah, no, absolutely. I mean, it's important to remind folks that these bills are really about providing a vision to a very important sector in our economy. So basically, it's about funding certain things. It's about picking winners and losers, really and the farm bill in the United States is massive, and it does pick winners and losers and it really fosters a philosophy about competitiveness and-, and frankly, it's about incentivizing farmers as well. Okay and it does. It does subsidize many different sectors, including corn for example but they've committed to that vision. They have a vision, you may disagree with that vision, but they have a vision. In Canada, we have this framework called the Sustainable Canadian Agricultural framework, I believe and the budget for that is $3.5 billion over five years. It's really-, and-, you could think, well, we're only 10% of the US population, but even that ratio doesn't work, either.
Sylvain Charlebois 15:30
I mean, there's no commitment towards agri-food in Canada. If you have to think about a policy. That's why I think-, I mean, the national-, national school-, school food program, to me is a step in the right direction and so we're starting to see a vision and a lot-, I know a lot of people who are listening to us are absolutely in disagreement with that vision, but it's important to have a vision as a country and I-, and this is not just under Prime Minister Trudeau, it was the same under Prime Minister Harper and Prime Minister Chrétien. This is not new. We've-, we've-, we've had these struggles for a long time. In agri-food it's important to have a vision and it's also important to focus on-, on certain sectors, and you can't really please everyone, that's the thing. I mean, right now, Canada's trade reliance, and not necessarily trade focus, but we're doing very well trade wise. I mean, we are exporting more, but we could do even better.
Michael LeBlanc 16:31
Yeah. All right. Well, let's, let's leave that part of the conversation there. Let's leave that section, the first section and let's get to our scintillating interview with-, with Professor Lee, but first, let's hear a few words from our presenting sponsor. Who will be with us next week, by the way she-, Colleen will be making an appearance next week from Caddle.
Michael LeBlanc 16:54
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Ian Lee 17:43
So, it's-, my name is Ian Lee. I'm an associate professor in the Sprott school of business where I teach only one course. I'm a one trick pony. I teach the Strategic Management course, which is the undergraduate fourth year capstone course. I also teach an MBA, and I've been teaching that course, 30-, for 38 years. I started in 1988 in the Sprott School of Business as a tenure track.
Michael LeBlanc 18:11
Well, you started teaching, you started teaching. Pretty much the year I graduated from Carleton, so I'm an alum. Shout out to Carleton University in the-, in the great city of Ottawa. Now what-, did you always want to be a professor-, did you always want to be in business like what started you down this path?
Ian Lee 18:28
I did something very-, very well. I grew up on a farm which will be of interest to Sylvain, a real farm by the way in Eastern Ontario in Lanark County, a real farm with, you know, pigs and chickens and the beef cattle. We didn't have dairy, but many of the people did in the area and that was in the 60s and I can remember vividly when I was about 10, or 11, or 12, our nearest neighbor was a mile away and all I wanted to do was get off the farms so badly. My dream was to go to the city, you know, the-, the big lights and-, and meet lots of people my own age and so we ended up moving to the city. My father sold the farm and-, and then I did something I was overwhelmed by the-, all the things that-, or one could do in the city up to the age of 15, 16, 17. So I dropped out of high school, I am a high school dropout.
Ian Lee 19:16
I never did finish grade 12 or grade 13 and so I bummed around for a-, minimum wage, unemployed and then I realized I wasn't going anywhere in a hurry with my life and so I enrolled part time at Carleton at night as a special student and then I was lucky I got a job as a junior management trainee at AFCO finance and they trained the dickens out of me, how to read balance sheets, income statements and then got promoted to a branch manager and then I was recruited by the Bank of Montreal and this is integral to this story because I was-, started a BMO main office branch, the fourth largest branch of the entire bank in Canada and it was right beside West Block, Parliament Hill, the financial press hub and it was a very unique branch because I had 1/3 Pierre Trudeau's cabinet ministers on my books, I had deputy ministers on my books, ambassadors on my books, very unique branch.
Sylvain Charlebois 20:05
So, in other words, you're the former Auditor General of Canada.
Ian Lee 20:08
I had an amazing number of the-, the most privileged elite decision makers on my books, as did the other branch, the four other branches of the other four banks on this Park Street Mall. And so, I was having the time of my life-, I was in my 20s, Footloose, Fancy Free, you know, single, all that stuff. It was just wonderful, and I was getting promoted each year, and I became mortgage manager when interest rates hit 20%, by the way, and inflation went up to 14% and then they called me in one day and said, you know, you're doing fantastically, we're really happy with you, but you've been promoted. I said, fantastic. They said, you're going to the first Canadian place in downtown Toronto and the look on my face was just one of a shock and they said, what's wrong with that and I said-, well, I blurted out, that's a fate worse than death. I mean, imagine living in Toronto, I mean, what a horrible, horrible thought.
Ian Lee 20:54
And I believe that-, that and I believe it now and that's why I'm not in Toronto and so they didn't fire me. They were very good. They froze you, you couldn't go further and so I decided to go back to school and I didn't want to do a business degree, believe it or not, because I knew arrogant as it sounds, and I still believe it to this day, I knew way more about business than any business professor because I had been trained up the wazoo by both AFCO Finance and the Bank of Montreal, but I also knew from dealing with all these amazing people, I'd been dealing with this as the Loan Manager, mortgage manager, I knew I was an absolute ignoramus about public policy. I knew nothing about public policy and so I applied to the School of Public Men. It was the best thing I've ever done in my life, and it was just one-, it was just fantastic. They said, some professors said, look, you're really doing well, why don't you go for a PhD? So, I applied for a PhD in public policy in the political science department, because that's the only place you can do public policy at Carleton.
Ian Lee 21:45
I graduated in '88, and I got hired because I had business experience. The business school just grabbed me right away. Why these numbers or dates are significant for our conversation about food was in 1989, one of the most momentous decisions of the last 100 years or the most momentous decision of the last 100 years happened. The Berlin Wall came down in October of '89 and then Prime Minister Mulroney, the very distinguished person that he was, announced a program of financial assistance for two countries, Poland and Hungary, and of which some of the money was designated for management education. So, I went to two of my colleagues, who we had recruited from Poland, two of these Polish mathematician types, and they came to Canada illegally, because they'd been in solidarity at the time when solidarity was huge, in opposition to the communist system.
Ian Lee 22:35
So anyways, we it took us a long while, but we got $5 million from the Government of Canada from Joe Clark, the Minister of External Affairs, to set up the first business school and they chose me to go over there, even though I didn't speak a word of any Slavic language and I went over there in March April of 1991 and why this is significant. That's when I really deeply developed my implacable hostility and contempt for centralized command and control systems. Where you know, people at the top believe that they know what's best. Prime Ministers that tell grocery store CEOs what to charge, and what prices and that's-, and I-, the poverty and the despair and the deprivation, I saw, this was-, they hadn't transformed, you know, they-, communism collapsed, but they didn't, the next morning suddenly have stores filled with shelves-, goods on the shelves.
Ian Lee 23:28
They went through a period in all these countries and I started teaching in another, I went in Russia, I taught in Bulgaria, taught in Romania, I taught in Ukraine multiple times and the-, the-, the poverty there was just stunning and I didn't realize I always thought the Western Europe and Canada in the US, that the rest of the world was just like us and I realized that that's not true and, and I saw it up close and personal and I was going in three, four times a year in '91, '2, '3, '4, '5. I was there when Balcerowicz, the professor of finance, who became the Minister of Finance, did the cold shock therapy and announced the immediate overnight cancellation of all food subsidies, all rent subsidies, all utility subsidies, and Poland went into this massive, we would say I guess, a depression for about two years and then they came up the other side and then Poland just exploded economically and just boomed and has been booming ever since and I learned and it wasn't just Poland.
Ian Lee 24:22
I learned this in Romania. I learned it in Ukraine, that centrally-, command and control or centrally planning, central planning, it doesn't-, we don't use the word communism, it doesn't matter. It's this idea that the people at the top have better knowledge and insight about the market than markets. You know-
Michael LeBlanc 24:42
Why does it work in China?
Ian Lee 24:43
It-, it what happened in China, and I've been teaching in China by the way since 1997. Every year from then until now, except for the pandemic we stopped for two years. The reason why was because first off, it didn't work until 1992, the real hero and the real father of modern China was not Mao Zedong, who almost destroyed and wrecked China. It was Deng Xiaoping, who was the genius who said we must copy and emulate the West and we must go to a decentralized economy, and he did that the opening of China in 1991, '92 that produced this incredible explosion, that now President Xi is trying to roll back, which is why now their China is in decline and has so many problems. They're trying to re-centralize the system that produced this extraordinary wealth in the last 25 years. So, I'm just giving you that as background because it gives you insights into what I think about the-, and I have testified multiple times before the House of Commons Finance Committee, as Sylvain knows.
Sylvain Charlebois 25:41
We testified together once, yeah.
Ian Lee 25:43
Yes, yes and I'm testifying next Tuesday again on-, before the Finance Committee and-, and I believe-
Michael LeBlanc 25:49
Well, let's get you there now, let's get you there now. Let's-, so let's-, let's hone in-, let's hone in our conversation and let's start with an overview as you see it of competition in the grocery business, Ottawa, your-, your city is a great embodiment of that you've got lots of brands, you get two grocery brands that were born, or at least one, you know, Farm Boy, and you've got Costco headquarters, you've got the grocers there, it's a great petri dish for you to talk about, and how do you see a competition there and across Canada?
Ian Lee 26:21
First off, I'm not going to suggest to you, we don't need more competition, we always need more competition in every industry, I will never ever say we have too much competition, you always need more competition, because it spurs innovation. It's not a competition for the sake of-, of competition. The whole purpose of and I teach this every week in my classes for 35 years, and the students are there their eyes are as big as saucers and I say you've been taught for four years nonsense, absolute nonsense. You've been told that firms exist to make money. I said firms do not exist to make money. I said, and I give as an example, Sylvain, and I use it every year in the beginning class of every strategy course section.
Ian Lee 27:04
I say I go into Loblaws and Sobeys two, three times a week. I said, I've been going into grocery stores for 45 years and sometimes the clerk will come up to me and say, sir, you look a little confused or they may not say that, but they say can I help you, I said, I have never once said, I am here to maximize the shareholder wealth of the Loblaw shareholders. I said, who in God's name, thinks like that, except tenured professors in the ivory tower, because that is not true. You go to Loblaws, to buy cucumbers, or to buy milk, or cheese or fish or some other food to take it home and eat because if I don't eat, I will get I will become sick, I have to eat to survive as a human being like every person firm, and this is straight out of Schumpeter. This is straight out of-, out of Vax Vabre, this is straight out of Michael Porter at Harvard, firms exist to create something of value, a product or a service.
Ian Lee 28:00
Now, if they're really good at creating and maximizing value creation in the value chain, yes, the outcome will be increased market share, increase sales, increase profitability, think of the Apple iPhone, but that's not the purpose of the firm. That's not why firms exist. That's the outcome of successful value creation and there's lots of deeply confused people in the government of Canada, in Industry Canada, and in the universities across Canada who do not understand that fundamental distinction and their students they're sitting there, I can just-, well there's lots of students that don't even agree, I can tell. So I said to them, are you telling me that you come to Carleton University for four years and you spend thousands and thousands of dollars and all you want is a transcript showing 20 courses with a grade beside it. You didn't come here to learn anything, is that true?
Ian Lee 28:52
I said, of course it's not true. That is nonsense. You come to Carleton to get an education. The outcome is a grade beside each course you took, but that's not why you came to Carleton. That's just the outcome that certifies what you learned at Carleton, you come to Carleton to learn, and the outcome is you get a grade for your courses. It's the same thing with firms, firms exist to create something of value. It could be a bank that's offering you banking services, it can be Honda that builds a car and they want you to buy their car and not the other guys-, the other competitors car and if they're really good at it, like Steve Jobs at Apple was, well then he can become yes, fabulously wealthy because he created more value than the other company.
Ian Lee 29:35
So, value, profitability and-, and-, and share price and market share and market capitalization are outcomes of successful value creation. So that's my overview and two specifically and quickly to grocery stores. I do not accept the argument that there isn't competition in Canada. I completely reject that for good reasons. I'm not just asserting it. The reason why, Sylvain, is because a lot of the products, most of the products in a grocery store, and by the way, I should disclose this. I shop regularly at Walmart, unlike most professors who are complete snobs about that, and I know that because they told me-, what, you shop at Walmart? Yes, I do. Yes, I do, because I am not going to pay 50% More for JobX to clean the toilet or TileX to clean the shower, then I can pay for it at Walmart. So the cleaning agents at Walmart are literally 20, 30, 40, 50% cheaper.
Ian Lee 30:34
So yes, I go regularly to Walmart, I'm very aware of Walmart, I also go to Costco, I also go to Loblaws and to Sobeys. So, I'm very familiar with the various stores and what strikes me, and I've talked about this to my students, is that the-, they're, they're basically indistinguishable. I mean, yes, there's a Sobeys at the front of one store, and another one's called Loblaws. They even organize themselves, you walk in the front, and the right-hand side, that's the produce section. The same with Walmart, the same as Sobeys and they're selling the same products, because there's a lot of concentration or oligopoly at the food processor level Maple Leaf foods and so forth.
Ian Lee 31:09
So I said they're selling the same stuff and then what you get is competition, yes, between the chains, but you also get competition between the brands and from-, and so I'm not suggesting we don't need more competition, of course, more competition is always a good thing, but I've never bought into this premise, this thesis or assumption that we have a highly, highly concentrated retailing, when you compare it as I always do using evidence based data and comparing it to other countries. We are not-, it is concentrated, there is a high level of concentration, but no more so-, they're in the same range as other OECD countries.
Ian Lee 31:51
I said, I've been teaching the strategy course, from the beginning, which is true. For about five years from '89 or '90 till about 1995. I’ve taught one course a year, which is a lot of fun. It was sort of a spin off or a derivative, if you will and it was called Business, Government Relations in Canada and I had a lot of fun and I brought in people from the associations the-, and because Ottawa is the capital, and there's over 600 associations, the Canadian Bankers Association, the Canadian, you know, Oil and Gas Association, the pipeline's that we know all these associations and so I brought them in because they had a point of view and that was the way I've structured the course. To your question, I have never been opposed to self-regulation, to industries saying, you know, what, we need our own code of conduct in banking or we needed in pipelines or we needed in wherever.
Sylvain Charlebois 31:51
As you know, Ian, there's been a lot of discussion about the grocer code of conduct and I mean, clearly you're devoted to free markets, you believe in market failures, you believe in capitalism, in its pure sense, I guess and the grocer code of conduct is often seen as well, government intervention to be frank, however, and I want you to respond to this argument that many, many publicly traded private companies, independent grocers, who do believe in competition are in favor of the grocery code of conduct. So could you tell us more about well, your overall opinion about the code of conduct-, the concept of it and-, and tell us, you know, how, or why should we consider or not consider it, I guess, in Canada, in our context here?
Ian Lee 33:38
I've never-, there's no-,, I've never been opposed to the idea of self-regulation and by the way, when you said, yeah, of course, I believe in the market economies for a very good reason because the most successful countries in the world with the highest standard of living are the market economies, and the non-market economies have, and one only has to look at the World Bank data by country. They organize all the countries of the world, as you know, into high income, middle income and low income and the low-income countries. The poorest countries in the world who are desperately poor, are the ones that are farthest away from a market economy. So, my-, my view about this is not ideological, as you may have suggested or thought it is grounded in the results. Market-, decentralized market economies produce the highest standard of living in the world. Milton Friedman won a Nobel Prize for his massive study showing that the wealthiest countries are only decentralized market economies in-, in-, in the world.
Ian Lee 34:35
So that's the reason why I've said that, but I have not. I don't want to leave you or your listeners with the idea I'm like some kind of a slobbering Neo-Trumpian. I think Trump is a disgrace. He's a-, he's a rapist, he should not be-, so okay, let's get that off the table, but more of the point. I am from a family of public servants. My late father was 42 years in the Government of Canada. My partner was 35 years, until she retired with the Government of Canada. My two daughters-in-law are in the Government of Canada, I'm a public servant as a professor. This is not an ideological public servants are lazy bums. That's not true. That's not-, I've never said that I do not believe that. What I've said to get to the code of conduct in one second is that the role of government is very, very, very important. They are the referee of the football game. They're the referees that wear the black and white stripes, but they should never, ever tell Patrick Mahomes when to throw the ball on the football game, or to whom to throw the ball to, oh, throw it to Kelse. Can you imagine a referee standing there in the game, refereeing them and telling the players how to play the game of football?
Ian Lee 35:41
That is preposterous nonsense. The role of the government is to referee the game. You have a level playing field hopefully called the rules of the game because people cheat, corporations-, I'm not a naive person, corporations cheat all the time. Just like football players cheat, hockey players cheat, they grab facemask, they trip, they spear, they poke, you know they do all kinds of bad things and the role of the referees is to penalize them when they cheat and to call them out, but it is not to tell them how to run the football game or the hockey game or the soccer game or the baseball game. So to the code of conduct, yes, indeed, if the industry decides we need one, by all means, but the idea that the public servants at 235 Queen Street and downtown Ottawa, where Industry Canada or whatever it's now called IESE, I think, is the acronym, that they have superior knowledge to the people that run airlines or run grocery stores or run banks is preposterous nonsense. It is-, it's called the conceit of the central planners and Hayek also was a Nobel Laureate, by the way.
Sylvain Charlebois 36:46
The proposal right now as it stands, it is-, it would be a government coordinated, industry lead grocer code of conduct. Is that something that you would be comfortable with?
Ian Lee 36:58
No, I'm completely opposed and Sylvain, let me use this as my evidence. So, people again, don't know that's just the ideology of Ian Lee. Okay, I study these countries. I've been to Argentina; I've been using in my classes for 35 years. In 1918 Argentina was one of the richest countries in the world on a per person basis wealthier than Canada, wealthier than Canada per person. So, we're not playing games with sizes of GDPs. Today, they've collapsed, we're 60,000 GDP per person, they're about 10,000.
Sylvain Charlebois 37:28
More than once actually.
Ian Lee 37:30
Yes, more than-, and so what happened was under [inaudible], they did many of the things we're doing, but they did it much more excessively. Command and control, government, [inaudible], you know, choosing which companies will get subsidized picking winners and losers keeping out foreign competition, they just did it much more aggressively, and much more successfully. They destroyed the Argentine economy and-, and-, and so here's my evidence, the most successful dynamic country on the planet Earth since 1880. When it surpassed the United Kingdom, it was right next door called the United States of America. Can anybody, I put this out as a thought experiment in the media, can anybody even imagine President Obama or President Biden, let's not use Republicans, let's use Democratic presidents, Lyndon Johnson, Bill Clinton, saying I'm going to call in the grocery CEOs and tell them to change their prices. I've never heard of anything so preposterous; the Americans would laugh themselves silly. They would think that this is the silliest thing of all.
Michael LeBlanc 38:37
Now what the Americans-, now let's-, let's take a pause there. So, I wanted to-, to widen or open the aperture to talk about the difference between regulation and free market principles. So, as you would likely know, the Justice Department under the Biden government is suing Kroger, and Albertsons to stop the merger. They don't think it's in the best interests of competition-
Sylvain Charlebois 38:58
In America.
Michael LeBlanc 38:59
And they don't think-
Ian Lee 39:00
I support that too, by the way.
Michael LeBlanc 39:02
So, there is there is, you know, this difference between objective and subjective regulation is very interesting, I'm sure to you as well, because occasionally, and you know this very well, in the US, the breakup of the baby bells, the forcing of Microsoft open up their browser, this created tremendous growth in the economy. So how do you-, how do you think about those two things, the role of government in what they spreading market I'm talking about that.
Ian Lee 39:27
If I can gently criticize you, if I can. When I was doing my-, I was doing my PhD in '84 to '88 and it was an incredible period, not because I was there. It was an incredible period because this was the format the-, the intellectual format was astonishing. Margaret Thatcher was in power and privatizing anything that walked. Mulroney was privatizing, like crazy and the Economic Council of Canada had this amazing so called reference on regulation where they commissioned over 200 papers on various aspects of regulation, deregulation, privatization, etc. and there were some astonishingly outstanding papers published, some from Rother by Carlton, some by U of T from Queens, some from the States and they made this very important distinction between economic regulation or direct regulation versus indirect regulation, having a framework called a Competition Act that does not allow an industry to become too concentrated. There was a consensus that that's perfectly legitimate because you're not picking winners and losers, you're saying the industry must not become concentrated. It's a generic statement, you're not telling an individual firm or group of firms how to play the football game, you're not telling them where to put their production plant, or what products to produce.
Ian Lee 40:48
That's the distinction between-, so I have no problem whatsoever. In fact, my criticism of the competition board-, bureau, and I sat beside him and the last time I was there, was they were decrying the concentration of firms in Canada, and I said, Who the hell authorized them for the last 15 years, it was the competition bureau, come on, look in the mirror, my friend, okay. In other words, if we believe it's true, I have no problem is saying, even going so far as to say, an industry shall not-, we'll set a benchmark shall not be more than 50% concentration ratio, or just choose your number, some, some number, I have no problem with that, but that's not the same thing, as a government saying, we're going to tell you how to conduct your and run your value chain, we're going to trump the price discovery system, the genius of capitalism is not profit maximization, like a lot of people who do not understand markets, including people live in capitalist countries, that's not the driving force of capitalism.
Ian Lee 41:51
Schumpeter said that, by the way, he said, he said this 70, 80 years ago, its innovation is at the core and the second thing is price discovery, because that's where you find out in the marketplace, if your innovation was a good idea or a bad idea, because then the market decides that they're going to buy your products produced by that innovation and so those are the two key aspects of the market economy is innovation, which arrives from contested markets, because there's entry and exit into the market and then secondly, price discovery, the government repeatedly in our country is trying to modify if not outright suspend price discovery and they're even doing that with, with innovation, because they're making the decision, we want a battery plant, and we're gonna pay $15 billion and that should not be decided by government. That should be decided by private competitive markets. By the way, my views are basically indistinguishable from Andrew Coyne and from David Dodge on these issues, so I'm not some far right-wing coup. This is business liberal think.
Ian Lee 43:04
I understand your question, because of course, politicians do have to live in the real world, they have to deal with the fact that there are people out there who are voters and that's the reality of a democratic, we not only have decentralized markets, we have a decentralized political system and that's what Friedman said was the genius of the success of Western countries. So it's decentralized, meaning it's not top down command and control dictatorships, like in China or Russia, and but it is decentralized mark-, democratic campaigns, elections, and then as decentralized markets, but to your question, I-, I understand what you're saying, but I've testified, as you know, multiple times on this, and I said, you know, you cannot build policy based on fraud or lies and as you know, I've said it multiple times. It is deceitful and dishonest of any politician to come out and talk about the excess profits in this industry, when the net profit margin is running at 3.5% and I've got the Stats Can data, people cannot deny this. I have the audited financial statements going back every year for five years for the three, big three and unless somebody wants to start arguing that all the accounting firms that have done all the audited statements are providing fraudulent audits, and I don't believe that, that's a conspiracy theory.
Sylvain Charlebois 43:04
We don't believe that at all, but I have one last question for you, because as you know, I work with Minister Champagne, we meet on a regular basis on this issue of food price stabilization. If you were Minister Champagne today, the minister of innovation, hearing all of the cries and complaints coming from Canadians because Canadians are really upset right now. Well, what would you do?
Sylvain Charlebois 44:49
That would be a much greater problem.
Ian Lee 44:50
We would have a much greater problem. So, we've got to start with the data. I always tell the students start with the data then you can go to strategy and policy but you gotta start with the data and you just have to get out there and say, as I'm doing every time and yeah, I get hate mail, and that's okay, I write them back, I send them back graphs of the data from Stats Can, by the way, and then I never hear from them again and you got to start with truth to power. That doesn't mean you throw up your hands and do nothing you can say, we're going to revise the reform the Competition Bureau to give it more teeth, to prevent mergers and acquisitions that constantly drive up the concentration ratio, that is the way to deal with it, it's not going to solve the problem overnight, but then neither are there solutions of saying we're going to have a grocery code of conduct anyone that thinks that that's going to produce Nirvana on grocery store pricing, it's nonsense.
Ian Lee 45:41
We know that the prices are coming down. I've been talking about interest rates and in the media, because I lived through '79, '80, when the interest rates went from 4 to 6 to 8 to 10 to 12 to 14 to 20, 20, not 5. I lived through it, it wasn't theory, it was the real world and by God, did they ever kill inflation, they also produced the worst and deepest recession since the Great Depression of the '30s and-, and we went through an horrible recession, unbelievable, but then we killed we murdered inflation for a third of a century, until we let the genie back out of the bottle in the last three or four years because of the pandemic. I won't get into that, but they could-, they could be doing-, acting instead of reactively, they can start by speaking truth to power on this and saying, look, the grocery store, retailing is not making excessive profits, their net profit margin is running three and a half percent and that's on the record from StatsCan and the audits, but that doesn't mean you do nothing.
Ian Lee 46:43
It means you do other things, and you can do things like reducing the barriers to entry, because we have and this is where I'm gonna jump very quickly to the Bank of Canada's speech, which I applauded. We have a culture of protectionism in this country, and it is pernicious and is becoming much worse and we should be going in the opposite direction where we're opening up the door. So that banking, there is competition in banking, there is more competition and groceries, that there is that-, that Verizon can come into Canada, or the French, French telecom system, Orange can come into Canada, we need to open the doors. So, we have LCBO monopolies which is outrageous. The beer-, the beer store. It's an-, it's a monopoly. It's outrageous. You know, we have-, we have interprovincial barriers that the Senate committee said is adding-, costing 5 to 7% of GDP.
Ian Lee 47:35
We've got to take-, that's what we need-, the government should be doing. I don't think it will, by the way, but that's what they should be doing is saying we're going to work assiduously to open markets up so that they're to use Schumpeter's famous phrase that they're contestable and when you have contestability, you then have innovation and when you have innovation, it drives down prices to lower levels. That's the way to go and not this pretend game of code of conduct and calling in grocery CEOs and-, and lecturing them and pretending that you're the-, you know, your President Xi or President Putin.
Michael LeBlanc 48:07
This has been-, you know, I wish you would have brought a little more energy to the conversation or a little more, a little more gumption, but-
Ian Lee 48:14
I promise you; I talk like this in class. I have very good teaching evaluations. Some professor said to me, 'I'm much younger, and when are you going to retire and I have the average for the Sprott school and I'm much higher than the average' and I said when my teaching evaluations are lower than you young people, that's when I'm going to retire.
Sylvain Charlebois 48:31
And when I'm 71, I hope I will have half of your energy, which is great. No, seriously, it was just-, it was just wonderful to listen to you on this podcast.
Michael LeBlanc 48:42
Yeah. It was fantastic. Thanks for joining Sylvain and I here on The Food Professor podcast. We enjoyed the conversation. Very, very stimulating, and I think it had a lot of value. So, thanks, again, continued success in everything you do, and keep doing what you do at Carleton University and in front of our political leaders and haggling and fostering a great discussion is-, is what we're all about. So once again, thanks for joining us.
Ian Lee 49:09
Thank you very much. I really enjoyed this. And I'm glad that we had a chance to talk about these issues, because they're not being talked about nationally, you know, and so this is very important.
Sylvain Charlebois 49:17
That's right. Thank you, Ian.
Ian Lee 49:18
Thank you.
Michael LeBlanc 49:19
All right. Well, I'm practically out of breath. Even just listening to that again, but boy, I learned a lot and I wish I was-, I wish I was one of his students because I think it's an invigorating discussion that-, that needs to be had. So-, so yeah, that was our conversation with Ian. Now, a correction from last episode, I talked about how Amazon was walking away from their just walk out technology and grocery store which is still the case, but the idea that the tech was powered somehow by 1000 folks in India watching monitors was disavowed by Amazon. In an interview with a friend of mine, the top analyst Sucharita Kodali from Forrester, so I take her word on that.
Michael LeBlanc 49:57
So, for those-, it's funny-, it was a funny piece of news, but Amazon said we don't even know where that came from. There's a little bit of this-, a little bit of that. So anyway, I wanted to make that-, that correction. Couple of last things. This-, I've been thinking about the wine glut around the world, I was reading in Australia, they're ripping out vines, they're just got way too much wine. And I was reading this report out of California, that they've just got massive amounts of wine. I mean, they're trying to there's a brokerage that-, called the Turrentine Brokerage, trying to sell 19 million gallons statewide at the end of the second quarter last year and this year, it's 24 million, just because they're not selling enough. The gold of wine. So, we're really starting to see the changes of consumption. Consumption patterns around wine and beer really kick in, right.
Sylvain Charlebois 50:45
Yeah, no, absolutely and I think a lot of people are noticing, and-, and yeah, absolutely and it's going to impact strategies all over the world, including our beautiful wine industry in Ontario, actually, I was meeting with-, with grape growers last week, in Niagara. I was meeting them virtually, but I didn't have some great news for them because, as you noted, I mean, consumer behavior is actually shifting everywhere and there's more awareness around health and-, and people are a bit more careful. I think they're still enjoying wine; they're just not drinking as much.
Michael LeBlanc 51:21
Yeah, and you know, there's other-, other categories ready to drink beverages are pretty big and so the wine industry is, you know, still a huge important industry, but people are just drinking less wine. So we'll keep a close eye on that because it's just interesting to see the dynamics of these different industries from-, from craft beer to wine to cannabis. We're gonna talk about cannabis next week because we're coming up on 4/20 and we did some custom research with our friends from-, from Caddle, we're gonna hear about.
Michael LeBlanc 51:49
I wanted to end; we talked a little bit about at the beginning robots at the RC show. There's this great article in the Wall Street Journal. I don't know if you saw it, but the meatpacking robots they show there and in Smithfield, so the largest US pork producers, Smithfield is now rolling out automated rib pullers and you watch this video, I'll put a link in, and it-, it leaves less meat on the bone it just relentless and you know, that's a tough job, right, it's hard to you know the-, the spokesman says we're allowing workers to be reassigned, they've got to say that I guess they're paid to say that the reality is we can't find the people and we're going to need less people, but nobody wants those jobs, but you got to say, you know, other people are going to do other things.
Michael LeBlanc 52:29
So, they had 35,000 people in the US, they plan to reassign 500 people a year. I don't know if they're going to reassign, they can't find them anyway. So, you know, it can turn out 20 to 30% more chicken nugget strips and wings with 250 fewer people. So, listen, I think what we're starting to see you've been calling for this since the beginning of this podcast, and even longer is there's no way to keep these plants gone without tremendous investment in innovation and we're seeing it in the US market and we're seeing that coming out in their productivity numbers, I think. What do you think?
Sylvain Charlebois 53:04
Yeah, no, absolutely, I think it's, it's critical and frankly, it's-, it's becoming dangerous, really, for all of us and so you know, you want to upgrade the system as much as possible as quickly as possible. So I don't know what's going to take I mean-, I mean, the listeria crisis back in 2008, I thought I thought it was gonna-, it was going to be the wake up call and then after that, of course, COVID in 2020, we saw-, we saw a lot of plants being impacted by COVID and, and a lot of people were thinking about upgrading a lot of these plants, and nothing really happened some band aid solutions were brought forward. And that's about it and I don't think it's going to be enough.
Michael LeBlanc 53:51
Well, Smithfield, just to close on that, say they're going to put 1.3 billion into just automation of their operations, from processing to packaging and I-
Sylvain Charlebois 54:02
Just today, in Montreal, I was visiting. I'm not going to tell you which-, which company but that's exactly their dilemma they need to remain competitive with-, with competitive price points at retail, it's a B2C model. So, they want to make sure that their products remain competitive. So, what are they doing, they're reinvesting in their facilities, they have five facilities, they're reinvesting to actually increase yields, and reduce costs and that's the game and that's gonna impact the entire system. I mean, just looking at what's going on retail, that pressure is gonna go up the food chain, and it's-, it is impacting manufacturing, for sure.
Michael LeBlanc 54:40
Well, and, and, you know, so they're not calling for more temporary foreign workers to work in the meat plants. They're investing in technology, and I think we got to pay close attention to that, because I think this has a tremendous impact on the productivity of our nation.
Sylvain Charlebois 54:52
Yeah.
Michael LeBlanc 54:52
And, you know, I've heard many leaders say their fellow businesspeople are not investing enough in this country. And we're starting to see that kind of, Delta opens up and so anyway, this Wall Street Journal article caught my attention because I know you've been very passionate about it for many years and
Sylvain Charlebois 55:08
Absolutely, yeah.
Michael LeBlanc 55:09
Anyway, all right, well, listen, it was a busy, busy episode, we got a bunch of stuff to talking about next week where like I said, we're gonna have Colleen from Caddle pop in with some custom research, we want to understand what's happening in the consumable market and you know, we're celebrating 4/20 and-, and legal cannabis. So, we wanted to understand that, just to time that in for-, for the week, so she'll be our, our pop in guest, but we also have another guest next week. Guests upon guest, upon guests to look forward to lots of super interesting people lined up and then speaking of Montreal, you and I will be at SIAL. You and I will be the official podcast of SIAL in Montreal in mid-May.
Michael LeBlanc 55:49
So super-, really looking forward to that. So, I was talking about that actually, on the RC floor ran into our friend Joanne McArthur, who's-, will see us there, she's a judge and involved and all that stuff and she's very into the SIAL show. So anyway, and-, you will be on stage. I'm moderating a session on innovation in-, in the-, in the food business, which would be wonderful. Tell everybody a bit more about that. So, run don't walk, get your tickets for SIAL and stop by our big fishbowl have a podcast studio and-
Sylvain Charlebois 56:19
Oh, yeah, yes.
Michael LeBlanc 56:20
And say hi, well, listen, you're headed back home from Montreal and thank you for making the time squeezing it in, because you're-, you're on the move all the time. So, thanks for-, for squeezing this in.
Sylvain Charlebois 56:33
Well, thank you for accommodating my schedule. Geez. Yeah.
Michael LeBlanc 56:37
Hey, no-, there's no 'I' in 'team'. There you go. There you go and speaking of I-, I am Michael LeBlanc, consumer growth consultant, advisor, podcaster, media guy, I guess, and you are?
Sylvain Charlebois 56:55
The Food Professor, Sylvain Charlebois, live from Montreal.
Michael LeBlanc 56:59
Live from Montreal, the great city of Montreal, where once again we'll be very soon, and we'll be together. That's the next time you and I will be together in the same place. So super looking forward to that. So, until then, everybody be safe. Sylvain have a safe drive home or flight home; I should say and I will talk to everybody next week.
Sylvain Charlebois 57:14
Take care!
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