'We know where there are flaws.'

Northern Canada's two biggest grocery retailers say they'll support any effort to make the federal government's food mail program more efficient and more beneficial to hard-pressed northern consumers.

"We know it can be better. We work with it every single day. We are one of the largest users and we know where there are flaws in the program," said Andy Morrison, the chief executive officer of Arctic Co-Operatives Ltd.

Last month, Indian and Northern Affairs Canada issued two reports on food mail resulting from a review ordered in 2006.

In one of them , Graeme Dargo, INAC minister Chuck Strahl's special representative on the file, recommends Ottawa take the program away from Canada Post and work out a new food subsidy scheme through direct talks with retailers

In response, Morrison said ACL welcomes that and any other idea from Ottawa that could benefit co-op members.

"We will work with them every step of the way, because that's what our mandate is. Our mandate is to provide good value to our members across the North," Morrison said.

ACL runs 31 co-op stores across Nunavut and the Northwest Territories, most of them in small Inuit and Dene communities.

Like its main competitor, the Northwest Co., ACL uses bulk buying and shipping methods to send food and other goods to its widely-scattered network of retail stores.

For perishable items such as fresh milk, meat, fruit and vegetables, retailers must use the most expensive transportation method – air cargo.

That's where the food mail program comes in. Under it, retailers pay the airlines only 80 cents a kilogram to fly perishable goods from certain mandatory entry points, such as Val d'Or, Quebec.

Real cargo rates from Val d'Or to points in Nunavut normally range from $2 to $5 a kilogram and up to $11 to remote, high-cost communities like Grise Fiord.

It's contracted airlines, such as First Air, that actually pocket the subsidy, which compensates them for the difference between actual and subsidized cargo rates. The cash flows to airlines from Canada Post, using money supplied by INAC.

Users in Nunavut and Nunavik, served primarily by First Air, eat up about 90 per cent of the $60-million a year that the federal government now spends on food mail. But INAC's actual budget for the program is only $27.6 million a year.

Morrison said the food mail program is "essential" and that Ottawa must keep it going, preferably under an expanded budget.

But he also said ACL agrees that food mail is plagued by numerous problems and that it's probably a good idea to have it run by someone other than the post office.

"Part of the problem is the fact that there's a middleman involved in the process. Obviously, that middleman is Canada Post. To remove any middleman would be an important step forward," Morrison said.

Another big problem, Morrison said, is that many northern residents believe retailers don't pass the subsidy onto their customers.

Many others don't even know the food mail program exists, since the federal government does little to publicize it.

"I can assure you that co-operatives are passing on the subsidy. I believe, just based on the competitive nature of retailing, that the other retailers are doing the same," Morrison said.

For their part, Northern Canada's biggest retailer, the Northwest Co., will support any change to the food mail program that the federal government deems necessary, a company spokesperson said last week.

"It's not our call about how it's done," Michael McMullen, the company's head of northern Canadian retail operations said in an interview last week.

"Take the best advice from every group, find an efficient program and let's make sure we work in partnership. We'll work with anyone," McMullen said.

The Northwest Co. runs 129 Northern stores, 10 Quickstops, and seven Northmarts throughout the three territories and the northern regions of the provinces.

Like Morrison, McMullen said the food mail program's entry-point requirement makes it difficult to get fresh food into communities as efficiently as possible

"Its not the same flow that we would use for all our other products and that might lead to additional expense in the process," McMullen said.

Smaller retailers, how­ever, appear to be more skeptical about the idea of changing the food mail system.

Eric Pearson, one of the owners of the popular Newviq'vi grocery store in Kuujjuaq, said INAC did not appear to consult any independent retailers.

"We're a large player in this market. We're not just a little mom and pop store. We're probably the largest retailer in Kuujjuaq so we have some clout coming through the system," Pearson said.

Pearson and his business partner, Colin Aitchison, run Newviq'vi under the same roof as the Tullik retail store.

Unlike the big retailers, he said that as far he's aware, the food mail system is "working well."

But he doesn't like the requirement that Val d'Or be used as a mandatory entry point for most eastern Arctic destinations.

"We buy 90 per cent of our product in Montreal, then ship it to Val d'Or. It's trucked to Val d'Or, which doesn't make an awful lot of sense," Pearson said.