Nutrition North Canada pits winners against losers

Because of a Quebec government subsidy program applied by the Kativik Regional Government to a list of 30 essential items, Nunavik consumers enjoy a 20 per cent reduction in the price of Pampers. (PHOTO BY JANE GEORGE)

Eric Pearson, the owner of Newviq’vi Inc. in Kuujjuaq, is using signage to educate customers about the effect of changing food subsidies. This sign says that the price of eggs will stay the same. (PHOTO BY JANE GEORGE)

The executives who run northern Canada’s biggest retailers all urge the federal government to replace the food mail program with Nutrition North Canada by the scheduled start-up date of April 1, 2011, despite objections from some people who want the new program delayed.

“Is everything perfect the way we would like it? No. But it [Nutrition North] is a huge step forward and we are committed to making it work,” Andy Morrison, the chief executive officer of Arctic Co-operatives Ltd., said Nov. 3 at a meeting of the House of Commons aboriginal affairs committee.

At a hearing held Nov. 1, some witnesses from Nunavik suggested the program be delayed by up to six months to give smaller retailers and others more time to adjust.

But Morrison, along with Michael McMullen, the executive vice-president of the North West Co., urged the federal government to move ahead with Nutrition North on April 1 next year.

McMullen and Morrison told the committee that ACL, North West Co. and Nunavik’s Fédération des coopératives du Nouveau-Québec formed a “northern retail alliance” to present a common position to the federal government on how to replace the food mail program.

They say the Nutrition North program corrects most of what was wrong with food mail and will deliver benefits to northern consumers.

“The new Nutrition North program does not provide any financial benefits to retailers in the North. The freight subsidies in the new program are consumer subsidies, not subsidies to retailers,” Morrison said.

The announcement of the Nutrition North program on May 21, 2010 exposed sharp divisions among northern Canada’s various business entities: between those who fear they will lose customers and those who hope to gain new ones.

For example, many observers believe First Air, despite its expertise and many years of experience, could lose market share after April 1 when its current food mail contract expires and the airline is required to compete with others, such as Canadian North, for eligible nutritious food air freight under Nutrition North.

To press its case at the highest levels of the federal government First Air has hired a lobbyist, Graham Fox, from the Milner Casgrain LLP law firm.

Scott Bateman, First Air’s CEO, told the committee Nov. 3 that from First Air’s point of view, the federal government never proved that Nutrition North is better than the outgoing food mail program.

“We maintain that the necessary improvements could have been achieved within the existing program,” Bateman said.

Bateman also said northern Canada’s air transportation system is in a state of “delicate balance,” with carriers juggling revenue from medical travel, food mail and commercial air cargo to keep their routes viable.

Kenn Harper, president of Arctic Ventures 2000 Ltd. of Iqaluit, predicted the North West Co, operator of the Northmart store and four smaller retail outlets in Iqaluit, will turn out to be big winners under Nutrition North.

That’s because North West Co. can use its “huge purchasing power” to negotiate lower rates with those airlines who will compete for its business.

“The rest of us will have to pay higher freight rates and set our prices accordingly,” Harper said.

The biggest problem with food mail was abuse of the system by those who used it to subsidize the cost of flying in expensive non-food items like truck tires, snowmobile parts and kitchen appliances, Harper said.

Eric Pearson, owner of Newviq’vi Inc. in Kuujjuaq, said his company was hit hard Oct. 3, when, in a transitional move, many non-food items became ineligible for air-freight subsidies.

Pearson said that the announcement of Nutrition North this past May 21 didn’t leave him with enough time to find suppliers and find warehouse space to accommodate a sealift order for the ineligible items.

And Pearson and Harper both said smaller outlets such as theirs could end up getting hurt under the new program.

McMullen, however, responded by telling the committee that the same subsidy will be available to all retailers, large and small.

“No matter what the size of the retailer or the spread of their different business ventures, the objective is always to bring goods to consumers in the most effective manner,” McMullen said.

But one big question for all retailers concerns the new freight-rate subsidy system that the federal government will apply to eligible items: they haven’t yet been announced.

“We have to get some definitive answers for April 1,” Pearson said.

During the hearing, Conservative MPs, such as Shelly Glover of St. Boniface, defended the program, while opposition MPs such as Todd Russell of the Liberal party and Jean Crowder of the NDP tried to poke holes in it.

Yvon Lévesque, the Bloc Québécois MP whose Abitibi riding includes Nunavik, focused solely on the elimination of Val d’Or as a mandatory entry point for eastern Arctic food mail.

Val d’Or, with its big population of non-aboriginal francophone Québécois, is a Bloc stronghold whose voters helped Lévesque take the seat away from the Liberal party in 2006.

Lévesque suggested the use of entry points such as Ottawa, Montreal and Winnipeg after April 1 would make air freight more expensive.

But Bateman said the extra cost of flying big cargo jets in and out of Val d’Or towards northern destinations such as Kuujjuaq is enormous.

And all players said they’re happy with the elimination of Val d’Or and other mandatory entry points, a requirement that retailers complained about for years.

McMullen said the new system will help retailers move nutritious food into northern communities more efficiently and with greater speed — a crucial factor in guaranteeing fresh product.

“The Nutrition North Canada model supports a supply chain for eligible food items that is efficient and more cost-effective,” McMullen said.

And McMullen, along with Morrison of ACL, said his company is prepared to co-operate with INAC and Health Canada to make the program work for consumers.

“We think we can make a good, good program here,” McMullen said.

The committee, made up of MPs from all parties, began studying the Nutrition North program in late September.

Later this month, the committee is expected to hear from national Health Minister Leona Aglukkaq and representatives from the Canadian North airline.