Session V: Summary and Look Ahead

Wrap-Up Panel

Martin Rice

Canadian Pork Council

Agricultural producers, generally speaking, have been quite motivated to develop alliances and to become more coordinated, at least sec- torally, for some time. This is in important part due to their large numbers, and their limited ability as individuals to influence at a macro level, the quality and merchandising of their products.

Using the hog sector as an example. hori- zontal alliances have been in place for many years with respect to genetic performance evaluation, carcass classification for grading and settlement, and hog price discovery sys- tems.

Vertical alliances have been slower in com- ing, partly due to a commonly held perception that for a sector to reahze improvements in profitability, it needed to obtain a larger por- tion of the total marketing chain’s revenue (as opposed to increasing value added and profit- ability for all segments). This generally meant at another sector’s expense in a reactively low-growth industry. Competing concerns often overshadowed mutual interests.

Other factors inhibiting closer vertical co- ordination within the marketing chain in- cluded a reluctance on the part of processors to engage seriously in discussions with pro- ducers on matters beyond the primary product stage, and the difficulties individual competi- tors have in cooperative activities and sharing of information for concern that their own cus- tomers will be revealed and to avoid creating suspicions of anticompetitive behaviour.

More recently, however, pressure to be competitive internationally simply to survive as an industry has identified needs for more coordination and vertical alliances. A good

example is Canada Pork International, an ex- ’ port development organization created in

1991 by the Canadian Pork Council and the Canadian Meat Council. A recognized need to reduce the industry’s dependence on the U.S. market led producers, packers and traders to decide to work together through this new structure. CPI has contributed to increased recognition of mutual interests which can be carried over into other areas such as technol- ogy development and quality improvement.

While examples of vertical linkages are increasing, there is less horizontal coordina- tion in some areas. For example, as consumer demands become more varied, and as export markets become more diversified and involve greater added value, uniformity of grading and quality improvement programs loses its ap- peal and is replaced with more regional, even firm-specific alternatives to provide the proc- essors with raw material which best meets their needs. However, I expect horizontal ef- forts to become more common in such areas as technology transfer and in the development and monitoring of industry standards for food safety and animal care. Generic product pro- motion is another area of increasing vertical alliances and coordination. In the past, these promotion activities generally have been de- mand-pull in nature (advertising) and funded exclusively by producers. However, in some sectors there now is almost equal emphasis on promotion-push activities involving working relationships between the producer promotion departments and the processors and retailers including training, to ensure the products are merchandised in a manner which is consistent

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with the advertising that is working to enhance consumer demand for the products.

In a number of cases, processors, who have tended to focus exclusively on advertising of their own brands, are investing some of their own funds in these promotion activities such as in the current case of Quebec pork packers investing in a retail training program organ- ized by the producers.

With regard to research possibilities in this area, more case studies of both successful and unsuccessful coordination initiatives would be helpful for industries to use in considering what modus operandi to employ for specific coordination initiatives. This would include examples where the participants’ collective interests and goals can be identified and real-

ized in a situation where the same parties are in strong competition with each other. The structure through which to develop an indus- try export market development program may be quite different from one through which to pursue technology development, perhaps due to differing degrees of commonality of inter- est as well as the potential for ownership rights needing to be established within specific pro- jects.

Another important consideration for cross- sector as well as of multisectoml initiatives is establishing an administrative component which is sufficiently “plugged in” with the industry it is serving to be able to manage the initiative efficiently and effectively.