Competing in global commodity markets is a race Canada can’t win long-term, says Ted Bilyea, former executive vice-president of Maple Leaf Foods and distinguished fellow with the Canadian Agri-Food Policy Institute (CAPI).
In this episode of Ag Policy Connection, Bilyea says that Canada’s advantage lies in differentiation — creating food products consumers specifically want and are willing to pay more for — and then scaling those innovations quickly before competitors catch up.
Bilyea points to Canada’s chilled pork exports to Japan as a clear example. He recounts how Maple Leaf Foods helped pioneer chilled pork shipments to Asia, building a premium market by focusing on product quality, genetics, feed rations, and traceability.
“We moved into a category in Japan for the first time where we had no competitors,” Bilyea says, describing it as moving from a commodity market into “white space.”
That differentiation extended back to the farm level, including selecting genetics with more marbling, and feeding barley instead of corn to improve appearance and eating quality. Those choices made it harder for larger competitors, particularly the U.S., to replicate the product at scale.
Bilyea says Canada needs more collaboration across the value chain, from farmers and processors to researchers and government, to create similar success stories in other sectors. He also argues research investments should focus not only on productivity, but on developing products consumers value.
“Productivity for me is not just about more efficiency,” he says. “It’s really more about how do I produce something that somebody really wants.”
Bilyea points to canola as another Canadian example where government research, processors, and farmers aligned to create a globally successful product, adding that future competitiveness will depend on Canada’s ability to continue innovating beyond commodity production.
Want more big ideas? Check out more episodes of the Ag Policy Connection podcast.
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I guess my idea would be that in this world today, where there's so many commodities moving across the world, the only way to really win is to essentially differentiate and be different. And to do that, and once you're successful at that, then you want to be able to scale relatively quickly. It's a big world. The niche today in Canada is not the same as a niche somewhere else in the world. Whether it's the United States or Asia or Europe, it's sometimes beyond the reach of Canadians unless they can learn how to scale quickly.
You're listening to the Ag Policy Connection
brought to you by Real Agriculture in
partnership with the Canadian Agri Food Policy Institute.
We're connecting the dots between the people and the policies that shape agriculture and farming today and into the future. Welcome to the Ag Policy Connection, a podcast where we talk about the big ideas of fresh thinking needed to solve the big challenges and seize the big opportunities and facing Canadian agriculture and food. I'm one of your hosts, Tyler McCann, the managing director at the Canadian Agri Food Policy Institute. I've been working in ag policy and politics for 20 years and I'm a policy wonk and I'm not.
But I'm your other host, Elise Bigley, the Director of Strategic Projects at CAPI Canada's agriculture and food think tank. In this podcast, we'll be talking to leaders across agriculture and food about their big ideas to create generational change in ag policy.
That's right, Elise. We think the time has come for ag policy to catch up with the changes happening on farms, in processing facilities and across the system that produces food and more and gets it to customers in Canada and around the world. We are excited to work with Real Agriculture to bring some of the big ideas for change to you. Make sure to visit capi's website to subscribe to our mailing list. Follow us on our social medias and in order to stay up to date.
And with that, let's get started. So today we're joined by a longtime champion of CAPI who currently serves as one of our distinguished fellows, Ted Billier. Ted is an agri food legend specialising in innovation with clients in both the private and public sector. He retired as Executive Vice President of Maple Leaf Foods after having spent a very successful 35 years with the company. Earlier in his career Ted led teams that pioneered the export of chilled beef from Canada and became the first in North America to export chilled pork to Asia. Under his leadership, Maple Leaf Foods grew into one of Canada's largest food exporters. And we're delighted to have Ted with us today. So welcome to the Ag Policy Connection.
TED thanks, Tyler, and thanks, Elise. It's good to see you.
It's good to see you, too. So, Ted, we'll jump right in. Can you tell us what your big idea is?
I don't know if it's exactly one big idea, but it's a combination of ideas that make up one big idea, I guess, and that is that there's two issues I think, that we need to really concentrate on. The first is that it's a big world out there. Everybody's moving commodities, and people have to think about the fact that Canada is not a massive producer of any of these commodities, but it is, but is the very significant exporter, because we have such a small population in Canada, so we don't eat a great deal of what we produce. We export a tremendous amount. In fact, one of the most, the largest, one of the largest net exporters of food in the world, simply because we have a small population. But those exports are largely commoditized. And the problem with commoditization is that there's a thing called the global arbitrage. And that global arbitrage, it essentially puts a ceiling on your price because you're compared to every other place that has a commodity or whether they're as large an exporter as you or not. So that's the first problem is that we tend to be very commoditized. And so I'm going to make a case that we need to obviously add value. But the most important piece of that is that we need to differentiate in order to do that. And that differentiation has to be something that consumers can't get elsewhere, that they intently want. And if we do that, then automatically we, we can raise the, the returns through the, through the value system in Canada, both to the processor and the farmer. So the, the second piece of that that we'll get into is that if you get lucky and you do, you know, hit something that consumers like and it's differentiated, you better be able to scale pretty quickly, because if you can't scale quickly, you're going to teach your competitors how to do it, and they're going to copy you, and they have the scale that they can, that they can come back at you, and, and you're back in the Commodity game. So it's a, it's a combination of differentiation which, another way of looking at that is that there's the red ocean that we all live in today and there's the blue ocean and if you're really lucky you can move from the blue ocean even into a white space. And that's, that's a space where you're, you're differentiated. The consumer needs the product you want. They, they, they like the product you want. And then the, the, the key question for Canada is instead of approaching this as all the farm organisations do, it's what's good for on the farm and orally lobbyists for the processors do what's good for that processor. This is intently where we, where the processor and the farmer need to be working hand in hand because we can give some, lots of examples of this. But the, once you've done something significantly different the best way to preserve it is to drive it, drive that differentiation back into the farm because it's very, very hard to, it's easy to copy a process differentiation with. You know, everybody sells equipment, et cetera and, but it's difficult to copy it if part of that differentiation or a substantial part of that differentiation drives back into the on farm portion. Because the large scale people. And again Canada is not large scale on, on virtually anything we, you know, that we produce, we just happen to be a large net exporter that those scale people are definitely not going to want to do anything that you've driven back into the farm side because that would break scale for them. Then they'd have the problem of oh, I've got this kind of production that I do, you know, 90% of the time and I've got to now do a line break to do this part of production that those whack jobs up in Canada are doing. You know, so that's, that's, that's essentially how they look at it. And you remember this scale operators that we, we live next door to one of the largest scale operators in the world, the United States, fully capable and good at copying stuff we, that we can do if they want to. And that's a big if. And other large ones. Brazil is giving them a run for their money on this as well. And China is itself and India, those are massive producers of food. And so I'm not keen on the race to the bottom because we can't win that race. And so the idea I'm putting forward to you is that we need to, we need to really go at the differentiation. There's massive Number of people in the world that can afford it. And so I'm. I'm, you know, I'm sorry that I'm not, you know, an advocate for Feed the world. I'll let somebody else do that because we can't do that physically. We don't have the production to do that. But we can, we can feed people who want to pay for something that they intend they want. And we can get into, you know, what are those, some of those things, or what examples have you got? Whatever you like, but that's kind of the big idea.
So we're looking at differentiation and then coupling that with. With scaling up and needing that ability
to scale up if you want to make money out of it long term. Yeah, you've got to. You've got to be able to scale relatively quickly.
Right.
But also at least, I think you really want to be able to continually renew your differentiation because it's. It's not something. If you don't. It'll last for a while. I've had those experiences. It'll last for a while. But you. You've got to be constant. And it's like the Japanese continuous improvement kanban that they have. It's got to be done on a continuous basis once you've made that breakthrough.
And I want to get more into that especially I want to hear more on that differentiation. Back to the farm and what does that look like? But before we dive into your idea, we want to hear more about the journey that led you to this idea. But you're no stranger to Cappy, you're no stranger to Tyler and I, so we, we kind of. We know you and your storey. So I'm going to ask specifically, I've always wanted to hear more about your experience, kind of the nitty gritty of getting chilled pork to Asia. What was that like? What. What can you tell us about that from that experience?
Nobody wanted to do it. At the time, we were. We were owned by a British. It's always been public company, Canada packers and then Maple Leaf Foods. And we. So we were always public company, but we had a large British shareholder at that point in time who was not interested in spending any money. And I remember distinctly when we brought the subject up, and I can tell you how that came about, but in a minute. But we brought the subject up. The answer was frozen pork is just as good. Why would you, anybody, go to the expense of having chilled pork, which is very dangerous to move? Because it's not. In those days, at least, there was only two types there was fresh pork, you know, which you bought in the supermarket, had a shelf life of maybe 10 days, you know, or something like that. If you kept it cool, maybe even 14 days if you're lucky, you know, it could do that in the fridge and you could still eat it, but not indefinitely. So if you wanted to keep it longer or had distances to cover. Everything in the world traded as frozen pork, but chilli pork is, is, is, is fresh pork in a different form. It's fresh pork with an elongated shelf life. And it tastes better. It tastes a lot better. It's like beef. It ages a bit, you know, and, and when you age it, it tastes better. So when I, the, the way all this happened was, was quite by accident. We were a large exporter of a trader of frozen pork, not only Canada packers, but we had, because we had a, an agent in Japan, was pretty good at the time, and we later became our partner over there. We, we were trading other people's pork as well, other Canadians. And we had a deal with Hormel where we moved all of our males frozen pork because they frankly weren't interested in it. They had a big market in the US and, and you know, for their products in fresh, that's what they were interested in. But happy to move some frozen pork that we, we moved for them to Japan. So I was down there one day in a small plant of theirs that we used for this and looking at our frozen pork, and I wandered over to another line where they were doing their, their domestic stuff, and I couldn't believe what I saw. They were cutting a pork loin in half, and that destroys the value of it. And they were putting it in these small bags and then they were putting the bags in ice. And I said, what are you doing? This is insane. They said, we're getting so many smelly pork claims from New York City. This was in the middle of July. It was the hottest summer I can think they'd had in years. And he says, you know, it's better we, we do this and because we're, we're getting, it's reduced the claims to almost zero. And I said, and, and what's it done with the shelf life? And he says, oh, it's added about another week. And I, I did the quick math in my head and I said, well, you know, you're getting 10 to maybe 14 days. Are you getting close to, you know, three weeks? And he says, not yet, but, you know, it's not quite that good. All I, I couldn't sleep that night because all as I could think about was it's three weeks. If, if I can get three weeks I can ship this stuff to Japan. And, and the, and so we brought a Japanese technician in and we spent the rest of the summer down in this place in the States. And we figured it out not with cutting them in half, but you know how we got in cryback to build a decent bag. You could put the whole loin in and boneless loin and chilled down. And so we played with it and by the fall we made our first shipment and unfort it was just beginning to really catch on. The Japanese couldn't believe their eyes because the only place they ever saw any chill port from was Taiwan. And within a couple of years we didn't even have Taiwan as a competitor because they got foot and mouth and they couldn't chip. But the, but essentially that's, that started there. Unfortunately within several months of doing this, I think it was, or maybe close to the first year when we were really starting to scale up, that plant was on the chopping block of Hormel. And then Lady Luck stepped in again and another funny thing happened is that the plant in Edmonton that Peter Parking owned at the time went bankrupt and, and the Alberta government took over that plant. And I knew the deputy quite well. We were talking about French fries. Oddly enough that, that Lethbridge and he, he looked like hell. I said what's the matter Barry? And he said I got this crazy plant on my hands, is losing all kinds of money and I don't know what to do with it. And I went how would you like to try something really new? You could be the first plant built to you export chilled pork. You know, we, and I explained to him what it was and he was all in. And so we, we went to there and that Gainer's plant became the first plant in North America to be customised, you know, with a customised line to do chilled pork the correct way. Worst place in the world to do it because it was the oldest plant in Canada. And you know, this is a thing where you got to be really clean, no bacteria. But anyway it worked and, and that plant turned around and was making a profit instead of losing tonnes of money. So that was the beginning of, of the, of it. And then you know that the next thing that was happening was Maple Leaf was the Brits sold their, their majority position to Wallace McCain and his group that came in. And within a few days Wallace, after asking me why I was doing so much business with our competitor, not with him And I said, you know, we didn't want to do chilled pork. He fixed that. He got, he got rid of the chapter, was running the Bork operations at the time and built a new plant for me in Brandon. And then we converted a beef plant in Lethbridge to, to pork. And that, that, that essentially was the beginning of it. And the, and the technology was something we built and, and brought to North America. It wasn't putting it in ice anymore. It was extremely, you know, interesting new technology to chill the carcass very rapidly and we got tonnes of shelf life. And then the reason I bring this up is that was what I call the white space. We moved into a category in Japan for the first time where we had no competitors. So think of it, you've gone from a commodity business to no competitors. And in fact, the embarrassing thing was that the Japanese didn't want to tell anybody it was Canadian pork because it was much better for them when it was selling as Japanese pork. Essentially, they, they didn't, they didn't say anything about whose pork it was. And you know, it took about two years before the, in the Japanese farmers were able to push hard enough. They said, no, you got to identify that. So we identified it as maple leaf pork. And that was about the time that the competitors started catching up to us in the technology. And you know, we, we were not hoarding the technology in any way, shape or form because frankly we couldn't supply the market, we didn't have enough product. So they, you know, as others began to get the chill technology first in Canada and then began to see the us, you know, go, oh my goodness, that there's a bit of a business here, maybe we should do this. And that was about the same time as the US was transferring from being a net importer of pork to a net exporter of pork, which is also interesting at the time. So they became somewhat competitive, but the thing that they didn't want to do was the next step. So we went on and said, okay, now the Americans are catching up on the technology. What can we do to stay as the number one brand? Why are we made belief pork and the rest of them are, you know, Danish pork, Irish pork, American pork, Canadian pork, but we're Maple leaf pork in the counter, in the supermarket. And the answer to that was you got to further differentiate them. So we made a big choice in, in when you raise the animal, you know, you, you pick the genetics and the genetics are either going into pork that's ideal for processing or pork that's Ideal for your table meat. That's not the same.
Right.
Once, you know, we were able to make that distinction because so much of our business was export. So we decided table meat was where we wanted to go. The rest of the world can knock yourself out on pro on pork for processing, which is very lean. And so when we went down that table meat route, the second piece of what I've been talking about began to kick in. Because the Americans didn't want to go there. They wanted to raise one hog that could do both, and they didn't want. Because the last thing they wanted to do was go back to their farmers and say. Which I had to say. And then. So after my company fought with me until Wallace came along and they thought I was completely crazy. But the farmers also thought I was a menace. They, you know, I didn't have a lot of pork farm friends in those days. Later I did. It was. It was like, I'm sorry we beat you up so much, you know, but. Because what I was asking to do was something they obviously wouldn't want to do, because I was asking him to spend more money, because fat is more. When you're doing genetics, it costs more money to put fat on a pig than lean, quite a bit more. And so I was asking them, change your genetics. I want some internal marbling so that it looks like Japanese pork, and I want it to taste really good, because it doesn't taste anything if it's just. If there's no fat. So that was the first step in. In the operation. And the second one, which was even more controversial to some extent, is where are you? Especially for our Lethbridge operation, I said, we want a barley diet. No, not corn. And that's because we got a. The fat became much whiter and wasn't. It wasn't necessarily any healthier, but there was whiter and the. And so it looked gorgeous in the counters. You had. You had internal marbling and white, and it garnered a premium right through that. Well, the last thing in the world was the Americans didn't want to do that. They weren't going to break scale for that. That was crazy. And so we maintained that position and that went on. And we continue to layer in stuff that we actually did. DNA traceability for the first time in the world. You know, when I was over there with Michael McCain one day, and we were asked, you know, which. Which of these five pork chops are yours? And we get back to you in a few days. And we were able to do that. We were able to that's our poor job. And by the way, we can tell you a little bit about the other ones too. Maybe you don't want to know. So. So it was. We had a pretty good deal here. And the last one was we. That before, until I retired, we kept Ractopamine out of the hog herd in Canada, you know, essentially for, you know, boosting the fatness of the pig faster. And once I retired, it went in for a few months and then I got a call and said, can you help us tell the CFIA that we don't want it anymore? That you. CIA CFIA had approved it? And then they wanted to take the approval. Its farmers wanted to take the approval back because the packers wouldn't. Couldn't buy the. Couldn't buy the pork because Japan didn't want it and China absolutely wouldn't allow it. So we. Those were our layered differentiations. They got us into a white space that we lived in for quite a while. And I think the challenge now is so we're still in that space as Canada. And the example of that, Elise, is pretty interesting. This last November, Canada won something called the Golden Apple Award in Shanghai. And that goes to branding that people trust. And so that was an amazing thing in that we got that in. You know, we certainly got it. We could. If there was such an award, we would have had it in Japan, but they got it in Shanghai. And the last thing I'll say, and this is the proof of this in numbers, is that Canada, with 18% of the hogs that the U.S. has, has 55% of the Japanese chilled market. We don't have that percent in frozen. I guess we got the rest of the world to compete with. But when we went to chilled, we eliminated Europe, Brazil. Still can't do it. You have to have. You got to be able to move that product to Japan in good short order. So we eliminated a lot of the competitors just from the technology. And then we. We managed to move ahead of the US because we. Of the further differentiation. So that would be kind of my. I mean, what I would say is. Is a good example of how it goes. And it certainly wasn't the first time Canada had done something like that. The. The history of the pork business in Canada goes back to William Davies, and he did the same thing in the. In late 1890s when he brought British hogs over that were lean, when all the hogs in North America were lard hogs, because you can imagine people needed fat to, you know, cook with. And so for the next Half century or so, we were quite different than the Americans and didn't survive huge problems with the American tariffs that went on after the Civil War, largely because we differentiated that as well.
So we're building kind of this recipe for success of that continuous differentiation, that ability to scale. But from your storey, I feel like you need to throw luck in there in that recipe that, that you mentioned. I know Tyler has another question. Just diving into that big idea and you brought up a couple examples brought more broadly in Canada. So I'll pass things over to Tyler now.
Yeah.
Tyler, I want to start though with. You spent your time in kind of this commercial business. You spend your time doing this kind of business around the world. Why and when did you get so interested in the policy space and, and why have you been kind of involved with CAPI for a long time? What, what kind of made that connection for you?
I think it was. It was largely because a lot of the stuff we were doing kept running up against issues either in Ottawa or the provinces. And so I. Not sure I ever was any different when I was in the commercial. When, when, you know, when I finally moved out of being vice president of the international operations into executive vp, they also handed me and said, you can do government relations as well. Just like, you know, you do it anyway, so you might as well keep doing it. So I don't think there was any real change, but it was always because we were pushing some boundary somewhere and, and, and always running in, into issues. And as I said, you know, it's, it's difficult when you're, you're dealing when you're not sitting together as an industry working on a, on a true strategy, you're competing with each other. So we were competing with other Canadian pork companies, other Canadian beef companies at the time, whatever. And so it's hard, you know, well, it's illegal to sit down and talk to them about what you want to do, for starters. And that, That I think is a. Is a problem that we need to. Tyler, you should be probably working on is that in the day and age that we have today, you know, where we have industrial strategies and mercantilism, we need to take a different look at how we talk to our competitors. And then the second thing is, as I said earlier, we need to realise that our great strength would be in working with the farm population and the farmers need to figure out how they can work together, because you can't work with, you know, 300 different silos, all representing some piece of a crop or some province. And and trying to get them on the same page, it's, it's sometimes almost hopeless. So I don't. I think my interest in policy became simply, was that I could see the writing on the wall pretty early. I hadn't come to the conclusion that we need a mercantilist policy or industrial strategy at that point in time, but we sure do now. But.
So, Ted, what's government's job then in doing this? Right, if we go back to your idea that we need to differentiate, that we need to look at how do we scale, what role does government play in making that a reality?
I think they should be essentially encouraging, that's the first role, encouraging all parts of the chain, right up to the consumer backwards, to be working in concert to essentially do two things. One, make sure we have food security and two, to make sure we have a prosperous industry that in Canada, food security, as you know, is, you know, we've got the availability of food for the most part, we have accessibility, we have some affordability issues. And so there's lots of room for government on that. And strategic thinking will help a lot because some of the stuff is not like, it's rarely strategic. And that goes back to what I said, because we're working with people. They're very smart people, Tyler, in the, in the. Everybody in, in their own business is very smart, but they're an inch wide and a mile deep in that smartness. And so it's just like you've got all these silos that are all in their own way brilliant, but they don't. There's very little cross silo activity and that's where strategy comes into play. So one of the things that Cappy, I think has done and historically pretty well, and I think Unilisa are doing an excellent job at it, is trying to bring those silos together. And, and, and that's government. That's, that's where government should be playing. I mean, because if it's gonna, if you take a silo in Canada and you put them up against, you know, the rest of the world in these, that have got these massive amounts of production or huge problems to solve that Canada doesn't have to worry about on the, on the issue of, you know, fear of running out of food, you know, that those are, those are going to swamp anything we can do. So that's why I come back to saying, you know, if you're, if you're going to have a success in this government's role is to kind of encourage people to work together. And the Second piece I would put in this because it had a lot of, been pretty active in a lot of this lately is research has to, has to come into play here in a much bigger way, particularly if we want productivity to be half decent. And productivity for me is not just about more efficiency. You know, how do I produce more pounds on an animal or more tonnes from a field crop? Productivity is really, really more about, you know, how do I produce something that somebody really wants and is good for them and they're gonna, and they're gonna, they're going to want to come back to it rather than something, something else. So it's, it's product. So where is that research? And because most of the research that I've seen is focused on the first part of it, I want to get more bushels per acre or more pounds on an animal, but not necessarily a product that somebody's going to really want at the other end. And if you don't, if your research doesn't go through to the end consumer, then how are you ever going to get the processors and the farmers working together to create something that's of significant value, that beyond just more tonnes? And the consequence of that, unfortunately, is when you do that is you get swamped in that race to the bottom around the world. So when you have an example, if you think about what's an example that everybody comes to mind that we're, we actually did this, right? Usually it's canola people. Oh my God, yeah. Because until canola came along, you, you were growing wheat, you know, in, in, in, in, in the west and, and you, you know, you kind of could also grow grass and you could grow barley. But when canola came along, it changed the game. And, but what people don't understand about that is that that was great government research, you know, with how to deal with rapeseed because it works so well. But it was also interesting enough my old companies had a big piece in that too, because, you know, canola, unlike soybean, canola is a seed oil. Soybeans is largely a meal oil which also, sorry, a meal seed which also has an oil content, whereas canola is an oil seed with a meal content. And that was a major thing. And the hardest, one of the hardest things to do was figure out how to refine that oil, you know, in, in to make it into a useful product. That's what Canada packers did. They, their, their refineries figured that out. So when you, when you, you had something, you had processor working with the government in the research, working with the farmers to create a new, entirely new product. That's the kind of, that's the kind of cross research that I'm, I'm, I think is necessary. And you'll never get that unless you can, you can get some scale in some of these companies so that they can afford to have research operations. And the old Canada packers on Sinclair Avenue had 21 PhDs working in that one office, you know, on with the best research, food research centre in North America. The reason I was exporting Hormel's frozen pork was because we did all the research for Hormel. We, we developed their canned meat lines on St. Clair Avenue along with our own and we had a wonderful lab there for oil products as well as animal feed products. So I'm encouraging something. The government's role is to encourage Canadian companies to grow, to get big enough and to begin to fund research themselves or fund research in universities, rather than government just funding research. And the way government can do that is through the tax system, so they can encourage companies to spend money on developing stuff that consumers want.
Right, so you've talked about kind of what government can do. Why is this needed now? What about our current context makes this kind of recipe for success so critical?
Well, I think there's many, there's many issues that are driving us. Not just one, but certain. Certainly the, the. One of the biggest changes has been that we see we've, we've gone from a situation where countries were, it's. We had free trade, we had relatively low duties on any product we moved and restrictions going into other countries. That's, that's all kind of gone by the board, sort of. And we also have now an enormous amount of money, something over 800. Sorry, I don't want to give you the number because I'll get it wrong. But massive amount of money being spent by different countries on essentially funding their farm organisations to stay in business. So whether it's the US or the EU or China, all of them are spending massive amounts of money. It's in the hundreds of billions. And this is changing everything because how do you compete with that if you're Canada? The only thing we are shown to be spending much money on in the agricultural field is they count our supply management, you know, as essentially help for farmers and the, and, but beyond that, we're, you know, we're on our own. So that's the first driver. And the second one has, Second one has been the use of, of your sense of removing your, your market, you know, taking your market away. As, as China did with us on the, on the Canola originally, as a way to kind of bring you to heal and that. That weaponization of food is going on globally. So I think there's, there's many drivers of it, but those are, those are certainly the big ones.
But, Ted, I want to go back to kind of. So you've talked a couple times about government needs to kind of support and encourage. You mentioned using tax credits to encourage investments in R and D. But. But I'm curious as to kind of what beyond that you have in mind. Is this a matter of getting the industries together, stakeholders together, businesses, farmers, whoever in the room and saying, hey guys, we need to take this seriously, we need to come up with a plan. And I'll give you kind of two examples over the last decade that I think have been really interesting where if you look at growth and export success, the bakery sector in Canada has been this, I think, underreported success storey. We major, major trade surplus with the United States that did not come because somebody in government said, hey, let's become a North American bakery superpower. And yet I think that there's a good storey to be told there. On the other hand, government did say we want to be a protein industry, protein ingredient, super power. They invested significantly behind that and we haven't seen the same success in that sector. And so where do you see kind of the role of government in that? Because there are. Government doesn't maybe have a great track record when it comes out and says, like, hey, we've got this great, great idea.
I go back to. I think. I think the government's got to be very careful about picking winners. That's not, I don't think their role. But the encouragement through the tax system, Tyler, is. Is partly what is one of the issues behind the bakery one, you know, if we, if we look at all. I mean, I think the first thing to just draw a line under is what you said is that bakery's not alone here, but I'll talk about bakery in a sec. But the. We have about five or six sort of sectors like that chocolate would be the next one in pork and beef and, and actually processed vegetables are in that list as well. I can't remember what else is there, but that. Those are the, those are the ones that from about 2:12, 213, 214 onward, we went from being a U.S. had a surplus exporting to Canada processed foods. When I grew up, I just always thought of the US as supplying us with all the processed foods we supply them with the raw material. But that changed dramatically around to somewhere between 212, 214 and Canada became a net exporter of processed foods as well as raw material. And the driver of that as when we Cappy did some work on that and you can refer to some of that, but the driver of that was the differentiation in Canada that was local. It was, you know, it was essentially small and medium sized companies and some of them, some of them that have become, you know, national companies, if not continental that were, that were starting out with something that was a niche, relatively niche. A lot of, you know, Canada had a large immigrant population and a lot of this stuff in the bakery side was highly specialised stuff every, you know, and eventually companies even like Maple Leaf. Once we acquired Maple Leaf Mills and Canada Bread, we we had some of the sweets and, and my first experience was with, with this was bagels. And so you know, we had authentic bagels that from dough that, that gave you a diff. Totally different taste. And whether it was through the US or you know, first that niche was filled in Canada by ethnic bagel companies. And then we had a, we had a really good one and the, and we eventually started exporting that even to the UK and eventually built a plant in the UK and as well as export bagels from actually from Calgary to the UK and the reason we did so well was the same reason that we were doing okay in the United States with some of this when we started is because when the first time I tasted a bagel in the UK to see what they were like, it was basically bread with a hole in it. That's, that's what it was. Whereas Canadian bagels, they were different. And so we rapidly took over that market. So that's the kind of thing if you look at the people in that business, they, they all started with something that was quite unique, whether it was some sort of a biscuit or a, or you know, cracker or whatever. And, and then they went on to, to find that their, their niche in the market in Canada was a bigger niche when they went to the States. And so you've got, you've got Canadians operating in the US today that are, are quite large and they've scaled up. And the government, I think the government had very little to do with that. In in fact but what would have helped immensely and I, and I've talked to some of these people in that business and they do have small amounts of their own ability to, to work in in lab sort of sense in their own companies. But what would really help tremendously is if, if, if there was a way to essentially do more research at the company level and, and connect that research back into the farm. There is a connection to the farm on, on the bagels and there is a connection on the bread. And that is. Tyler, you know that yes, we get a small premium generally for Canadian wheat as anywhere in the world. And why is that? It's because you need, most of the world needs Canadian wheat to blend their own wheat to make bread. Otherwise their falling number in the thing which, you know, gives them the, the protein that they require is just not there. And so we, the other point I think I missed that I should have made is that things work best when you're building on two issues. You talk about comparative advantage and competitive advantage. And the first layer of that cake is comparative advantage. Those are things that, what do we have in Canada that nobody else has? We didn't make them, you know, they're God given. So we, we have water, we have a lot of, a lot of natural environment. We have winter, which is a great pesticide, you know, wonderful pesticide. So if you begin to add up those, those are your comparative advantages in Canada. Your and, and your competitive advantages are how you build on those comparative advantages and make something that the consumer wants that's a little harder to get. If you're trying to, you know, you get a current example that's got a lot of controversy. I think I've seen it is Maple Leafs, you know, wants to do, to push, raised without antibiotics. There's a lot of people don't like that because they don't want to do it. It reminds me of some of my history where you're up against the forces. Why are they these whack jobs doing that? You know, so I don't want to do that. But that is building on something that is uniquely Canadian because you, you, you can't raise animals in some parts of the world without antibiotics because there's so much disease around them that it's crazy or they're, or there's so many animals. So that's a point of differentiation that given the, given the fact that, you know, one of the greatest risks in the world today is essentially resistance to antibiot. I mean, that's killing enormous number of people around the world. So if you have any respect for that, you've got to think that, you know, maybe if there is a way to do this, you know, we should be doing it. But it gives, it gives you a sense that this is, this is a Never ending storey. But I, I forgot to say start with the layer. You're building a cake. First layer is what can I build on my, you know, comparative advantage. Then I talk about how do, how do I layer in my competitive advantages. And, and some, some of those are, you know, things we don't think of often, Tyler. But it's, it's, we have, we have a pretty good brain trust in Canada, you know, well educated people and we have this uniqueness to us that, you know, we're, we have a lot of immigration, so we have a lot of different access to many different countries. Not just because the language issues and people travelling back and forth, but because we come up with new products and they're happening all the time in Canada. You can walk in any store and see all kinds of stuff you wouldn't have seen 10 years ago or 20 years ago.
So Ted, I'm just wondering why, why aren't we doing this today? Why aren't we able to compete globally? Like do we have Canadian companies that have the potential to scale and if so, what do they have that others don't?
That's the $64,000 question. So the, you know, we have two companies that I, I think are generous. They certainly McCain's is a global, unique global company. And, and the, and what, what can. We should look at that and try to understand how they did that and, and why can't we have more of that? Because they operate in all these countries. They operate plants, but they're still, still spending lots of money in Canada. You know, the new plant that they put up in, in Alberta is, is tremendous. And they, and they, and their, and their exports are great. So, and Saputo is probably the second one that would go in there as operating in variety of countries. But then you have a list of I don't know, 30 or 40 companies maybe in Canada that I would call nationals or continentals or both. And that group is invaluable to us. First off, it's really important that we try to make sure they stay Canadian. So you, you can, if you can think of a large Canadian entity, they're probably in that list and in the agri food because if they stay Canadian, then the brain trust that runs it will stay here. And the, and, and that's extremely important from where we started the discussion, which is how do I, you know, how do I deal with this global arbitrage? Once you're Canadian, once your Canadian companies are hauled out and your, and your industry becomes run by foreigners, foreigners are necessarily their bad they're not bad people. I don't want to discourage them from coming, but what I do want them is to have significant Canadian competition when they get here. And the, and, and the, you know, so we have, we've got whole industries now that are, are really being changed dramatically. So if you, if you, our grain industry used to be largely Canadian export. The majority of that is now non Canadian in export. And that's going to ripple back into the farm because the first thing you're going to want to do is you're going to want those standards very similar with Australia, Brazil, United States. So they're interchangeable. That's the global arbitration.
But Ted, sorry. Ted, how do we stop that from happening? Are you saying that we should prevent foreign ownership or majority shares of Canadian companies?
That'd be too simple, Tyler. I mean, that'd be simple and probably wrong because on the one hand we're trying to attract investment, right? So what you want is you want strong enough Canadian companies that you'll get foreign investment. It just won't be controlled. You know, you want, you want an inflow of capital for sure, but you'd like them buying those shares and not running the board. So there's a difference. And so what I'm trying to do is set it up. So here's the, here's the toughest example for you. I'd like to set it up so that there's a reason why the Canadian pension funds would be able, right now, they're not able to, to invest much in the Canadian companies because the Canadian companies are too small. They don't hit the minimum requirement. You know, I think I, I, I'm, I'm sure I'm, I'm talking out of school, but they certainly, I would think, you know, Canada pension fund is one of close to half a billion in order to make an investment. Otherwise, how do you run something with a whole bunch of little investments on the, you know, on a pension fund that large? So what we need to do is to concentrate on. Not so much on trying to create the scenario. No. That you just mentioned because that's the wrong, the wrong approach. What you want to do is figure out how do I encourage these 50 companies so they can grow and what, what would, what would that look like? So you, you really want, you, you, it's time that the government went to the CEOs and said, hey, you know, we've got some, and it sounds like there is some of this money around. As far as I understand with FCC and it's, it's partners. We'll see what happens. But if, if one of those 50, you know, national or continental Canadian companies came up with a good idea, the money's, the money should flow. And, and, and that good idea has to be. I'm, I'm, I'm going to be, I'm going to be in a multinational. I'm going to be able to invest offshore so that I can, I can carry through as close to the consumer as possible. Even if that means building plants in other countries, you're still going to get the benefit back in Canada because everybody that's done that, the benefit flows here. The second thing I'd say, Tyler, is we've got to stop the Canadian government from essentially deciding that they want to turn down the Canadian companies when they want to get bigger and there's a history of that and instead allow American companies to do things in terms of the competitions Bureau that Canadian companies can't do. And you know, there's some pretty frightening examples of that. You know, both earlier when Maple Leaf Mills wanted to merge with Ogilvy, it was a merger. Competition Bureau turned that down but let ADM buy both of them. I mean, give your head a shake. And the, and, and the, essentially we, you know, we've seen the Wheat Board, the sale of the Wheat Board was decaying. Companies were told all, all the big three grain companies in the west were Canadian were told you can't buy this. So that went, that went to Saudi Arabia instead and the, and, and essentially the, the latest deal where essentially by Tara is essentially now part of bungay and that, that headquarters is going to be moving to St. Louis when the five years are up. You know, this is, this is not helping the farm population in Canada and it is not certainly, certainly not helping us in, in this idea that we want to, you know, be, and grow that, grow this sector and, and be significant in with new bracket products, etc. So I, I think the answer is do it through the tax, tax system and encourage. The first thing you got to encourage is in investment in, in R D in the companies not, you know, in the universities can be part of that but not handing out cheques to, to people in universities to go here, go, go develop something and that you like. You know, where, where that winds up. Usually, usually the, that winds up in a foreign country. Somebody in the United States can buy it and pay more, you know, for the, for the ownership of that ip. I'm, I'm really concerned about that. And that IP needs to stay here. It needs to drive Canada. And, and I think that's. That's where you need to lean into it, Taylor, with the politics of it.
So, Ted, I get to ask the last question. It's a bit of a dangerous one. But what is one thing out of all our conversation? I have many more questions to ask you. But what is one thing you want the audience to take away from this conversation and your big idea?
We could be better. I really, really worry about that. I think there was a time at least we wear better. That's even scarier. You know, we had. We had companies that were significantly better at the time. And part of that, you know, part of that goes back to the fact that we go. We had trade agreements that actually were really good. We were better in some cases than the U.S. now that's all gone. And, you know, because we had dirty breach preferential tariff for a good many years, and that was pretty good deal. So anyway, I might. My takeaway was we could. We can be a lot better. And we need to be. We need to be working very hard on strategy, and we need that strategy to go from consumer back to farm, not farm forward.
That will get you that, Ted, is a good note to end on and I think a good challenge to all of us that work in this policy space every day. Thank you very much, Ted, for taking the time to be with us.
Thanks, Ted.
Thank you.
Well, Elise, what did you think of Ted's big idea?
I was really struck by this idea of kind of a recipe for success. So how do we compete globally? And there are a lot of ingredients in that recipe. And I know we talked about constant differentiation, the ability to scale up. I knew I threw luck in there. I do think that plays a big part in a lot of kind of those things falling together. But when you really boil it down, that differentiation is, as Ted said, making people want something and something that is good for them. So chilled pork tasted better. And ultimately, I think that also drove to its success. So it goes back to thinking about these things are. It's quite simple. Like, the answer is simple, yet so difficult to do. And I think the other thing that struck me was leading into that the we need to bring the silos together. And he highlighted a lot of work that Cappy does on that and where government maybe should be playing, bringing kind of the farmer and the consumer, everyone in the supply chain together and what that looks like and where that's lacking
right now, I think the issue is. And he talked a bit about this at the end around. You need to Kind of put the consumer at the front and it gets into this idea of kind of offering people what they want. And that just really isn't how we do business, unfortunately. I think too often we look at what do we have and how can we have the world take it, when now you've got examples with EU hormone beef into Europe and kind of a fight that goes on there, carcass washes that are there. We've got kind of a variety of different products into Asia where we're kind of trying to take them and take what Canada has, rather than looking at kind of what is the demand for and how do we play out there. I think kind of the biggest issue in all of this remains of those value added products today. The vast majority of them are going into the United States. And how do we deal with that kind of major risk of, of the United States and how do we kind of bring that into it? But, but to Ted's point, what we need to do ultimately do is get everybody in the same room and have a more, more thoughtful conversation about what, what does this look like at the
end of the day?
How do you kind of being happy and thinking about that, what would that look like in terms of our research and our approach to things?
Well, so like, I think it looks as simple as we need to get more people in the room together more often. And government does need to. And I think government is taking a more activist role today. And I think. But it's activists in a different sense. I think if you look in the AI context, we had a period of a couple of years where we had a very activist government that a government that puts sustainability first and foremost on the agenda. A government that was aligned with some parts of the agriculture sector was not aligned with others. We've got a government now that's looking to be more activist, more interventionist from a different context, more from that investment perspective. But I don't think agriculture has kind of really wrapped its head around that the same way. I don't think that we see the same types of conversations. And so I think it's a matter of how do we just create the conditions where we're thinking about what does that investment opportunity look like. I mean, there's been a lot of criticism of the idea of a sovereign wealth fund, but I think when Ted was talking about a vehicle to make investments in companies like that, it's part of the idea that's there. And so I think part of what we can do, what government can do, is bring more people together more often looking at what does this actually look like in practise? How do we shift how we think about these things and how do we think a little bit more strategically to ted's point, about what the future looks like and where it goes?
Yeah. And to put it simply, there's lots of room for us to be better, as Ted put it at the end. Yes, I want to thank our listeners for joining us today. So if you have any big ideas yourself, we want to hear from you. So please contact us if you have a big idea for change in Canadian agriculture and food.
And thank you to TED for joining us. And thank you all for tuning in to capi's Ag Policy Connection, a podcast where we talk about the big ideas and fresh thinking needed to solve the big challenges and seize the big opportunities facing Canadian agriculture and food. Thank you, Elise.
Thanks, Tyler. See you next time.