I call this meeting to order.
Welcome to meeting number 37 of the House of Commons Standing Committee on Government Operations and Estimates. The committee is meeting today from 4:31 p.m. to 5:31 p.m. to hear from witnesses as part of its study of the government’s response to the COVID-19 pandemic.
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At this point, we're asking for five minutes of opening statements.
I will now invite Mr. Dyck to make a five minute presentation.
My name is Tyler Dyck. Our family owns and operates western Canada's original craft distillery, Okanagan Spirits. I am also the president of the Craft Distillers Guild of B.C. and the spokesperson for more than 250 craft distilleries right across Canada.
At the heart of our collective lack of preparedness for this pandemic is the overarching issue that, for too long, Canada has abandoned policies that champion value-added made-in-Canada production chains. This, unfortunately, has allowed for an almost total lack of self-sufficiency when catastrophic challenges appear. We have become a nation purchasing the cheapest finished products from afar and have lost most, if not all, capacity to look after ourselves and provide for ourselves when no one else can or will.
This weakness has become brilliantly exposed during COVID-19, especially in regard to an almost total lack of ability to look after our own PPE needs right here at home in Canada. This situation of ill-preparedness could have and should have been avoided, or at least severely reduced, if the sitting and past governments had heeded the calls from Canada's domestic distilling sector to mirror the policies of our greatest trading partners, policies that celebrate and reward start-to-finish domestic industry, calls that we had been making for over a decade.
My hope is that in speaking to you, I can illuminate how important it is for government to meet with our sector so that we can work together to make these changes to allow for an authentic Canadian distilling sector to thrive, not only to avoid being caught in a position of not being able to look after ourselves again but also so that we can collectively reap the massive economic rewards that spin out of supporting made in Canada.
First I'd like to highlight how the lack of a robust domestic industry led to the situation. To set the stage, I want to take you back to the early days of the pandemic. They were scary times. Almost immediately it became apparent that the internationally produced sanitizer we had grown accustomed to depending on was not to be available in Canada.
By this time, dozens of Canadian distilleries, including my own, had already retooled and converted over in an effort to try to fill the void of sanitizer domestically. We did this because we make high-test drinking alcohol. The base for sanitizers is alcohol. If we didn't step in, there would literally be no one else.
Most of us at that time did this entirely with our own funds, without any help or assistance from local government. Many of us were donating our sanitizer just to keep our front-line medical heroes safe so that they would be there in times of need.
Initially we worked with provincial and federal government bodies to highlight and remove the areas of red tape so that we would legally be allowed to produce and, in many cases, continue to produce the sanitizer to fill the growing demand.
While we were doing this, we continually told these government officials and their staff that our distillers could not continue to do this all on their own—they couldn't pay for this all out of their own pockets—but that there was a made-in-Canada solution that would allow us to continue. All we would need would be for the governments, both provincial and federal, to cover the base production cost of the raw materials—no profits, just the base production cost of the hand sanitizer produced and donated in Canada to our Canadian front-line heroes. This would not only allow us to meet a major portion of the domestic demand for sanitizer but also keep Canadian producers working instead of being paid to be at home on CERB.
The response from the federal side was crickets, and when there was a reply, that reply was, “Apply online through our national procurement site for obtaining PPE contracts.” When I reiterated that we were not looking for a fat paycheque or a contract but merely an opportunity that would keep Canadians working as well as provide much-needed sanitizer, again I was directed to tell our members to apply online.
Many of the distillers did, but others, frustrated by the process, just stopped producing. Unfortunately, to my knowledge, almost none of our members have received any help in covering the expenses associated with their altruistic efforts or have received government contracts. Even more shocking, as we found out later only through a CBC investigative series, when contracts were awarded both provincially and federally to companies for that hand sanitizer, they were awarded to foreign companies with little to no domestic presence or to massive corporations. They were basically purchasing non-domestically produced alcohol for the basis for sanitizer. This meant little to no value-added domestic production and hundreds of millions of taxpayers' dollars were going to for-profit production, with most of those dollars leaving the country.
My goal today is not to talk about hurt feelings and missed opportunities. More importantly, it is to call on this government to change course when it comes to supporting and championing domestic industry, domestic industry that, if supported, not only will be there in a far more robust fashion to do its part when the next crisis emerges but also will restore this country's ability to rely on itself as a nation.
On behalf of the hundreds of authentic farm-to-flask distilleries right across this wonderful country, I thank you for your time and thoughtful consideration of this submission.
My name is Germain Guitor, or Gerry for my Anglo friends, and I'm the founder and president of Spirit of York Distillery, located in the Distillery District in Toronto.
First of all, I want to thank all of you for the invitation to speak to you this afternoon. It really is an honour to be here today to share our company's experience during COVID-19. I hope that our story provides this committee some useful insights and helps in guiding any future federal response to these types of national crises. My story won't be as eloquent as Mr. Dyck's. This will be more of a personal story, but I'll walk you through what we experienced during this COVID period.
When the pandemic hit the shores, Spirit of York was one of the first commercial enterprises to pivot to help our communities, and arguably, the first distillery in the country to start shifting operations to produce hand sanitizer to satisfy the incredibly high demand. Our intent was to help front-line staff, the needy and the vulnerable. This effort was consistent with our company values to give back to the community, as the distillery contributes 10% of our profits to assist social and cultural groups in our home province.
As you can imagine, as the first company to pivot, we received a tremendous amount of attention from local, national and international media. In addition to taking advantage of these media opportunities to challenge the business community to get engaged in helping our communities through this tragedy, I openly shared the World Health Organization sanitizer formula we uncovered, in the media and in the hundreds of subsequent calls received from across Canada and all over the world. Suddenly we were bombarded with individuals who volunteered to help and a great many companies that offered tools and assistance. Companies started donating labels, bottling machines and raw materials.
We started by producing hand sanitizer in a small 140-millilitre format that was being sold for three dollars, with all net proceeds going to Ontario food banks. We would distribute these at the front of our distillery, with the product being free for the elderly and for those who could not afford it.
We immediately started donating and distributing sanitizer to local police departments, fire stations, hospitals, community organizations and homes for the elderly. We would even courier sanitizer weekly to the federal government's COVID-19 response at the government operations centre. Because of their role as the lead organization for the coordinated federal response, it was important to help them out in any way we could to ensure that they received support to assist them in maintaining a safe working environment. Over time, we donated tens of thousands of litres of sanitizer.
Suddenly we were getting phone calls from large corporations with critical front-line employees seeking to buy large volumes of hand sanitizer. We were very careful to price our products fairly to ensure that we did not come across as taking advantage of the situation. Again, 10% of the revenue generated from these sales was donated to the food bank. We even took some of the revenue to produce an ad to recognize and thank front-line employees and first responders, which garnered almost a million views across Canada.
All of a sudden, sanitizer became a significant venture for us. Luckily, we kept honing our supply chain to allow us to meet the ever-increasing demand.
This initiative allowed us to hire a significant number of recently unemployed hospitality staff who wanted to work rather than collect CERB. At its peak, we had 50 incremental staff to whom we were paying wages significantly higher than minimum wage. The venture also generated incremental income that allowed us to keep donating sanitizer. We rented another facility to satisfy the ever-increasing demand. It had become a virtuous cycle: sell sanitizer to large corporations, hire unemployed staff, donate sanitizer to first responders and the needy and generate money for the food bank. To this day, we still continue to supply sanitizer to private corporations.
However, when it came to supplying the federal government, we quickly realized it was a whole other game. We started getting a number of phone calls from brokers and sub-brokers, individuals who wanted to buy cheap and sell high to the government. They would tell us that they had connections with the federal government, thereby the ability to bypass the procurement system, and were looking to source very large quantities of hand sanitizer. We would supply pricing and then we would never hear from them again. This probably happened at least a dozen times, and I'm being conservative. It was very difficult to know who was and who wasn't legitimate.
We entered our information, a Canadian company with the ability to supply hand sanitizer, in the federal government's purchasing portal. We tried reaching out several times and the guidance was always to ensure that we were identified as a supplier in the portal, which we were. We kept monitoring and waiting for a call to tender, which never came. No one ever contacted us from the federal government to see if it was possible to supply; yet the calls from these brokers kept coming in.
We would then see bottled sanitizers being distributed that were clearly imported from overseas, with local labels, and were told of huge bulk purchases, with contracts being fulfilled with product originating mostly from Asia. In retrospect, it was disappointing that the federal government didn't see the benefit of purchasing locally to satisfy its needs.
I'm not sure those mandated with purchasing decisions were aware that they were being supplied by either importers of overseas-manufactured product or foreign bulk sanitizer. I believe somebody—or somebodies—made tremendous amounts of money acting as an agent for a foreign-manufactured product. Somehow, someone failed to understand that many Canadian companies had pivoted to satisfy the sanitizer demand. Someone missed that these Canadian-based companies would buy raw materials from Canadian farmers, transform the product into sanitizer using Canadian manufacturing sites, buy packaging, labels, bottles and other raw materials from local suppliers, employ local employees, oftentimes the recently unemployed looking for work, and support local distributors and transporters. It was Canadian sanitizer produced by Canadian companies.
I'm not suggesting there was some form of questionable conduct. I know it was a challenging time for everyone to secure supply. People and organizations were scrambling. However, I'm not sure it takes a Ph.D. in economics to understand the benefit of the economic multiplier effect in having truly supported a burgeoning Canadian industry. Also, there may have been a failure to realize the positive social impact of companies like mine, and like Mr. Dyck's, that were donating sanitizer to front-line employees and to the needy in their local communities.
I believe the federal government not only overpaid for their sanitizer needs but also missed a great opportunity to reinvest in local economies and create economic multiples, thus reducing the financial burden on our government and taxpayers, creating employment, and allowing these companies to continue to selflessly contribute to their communities. As I mentioned, I suspect that a few companies made a lot of money due to our failure to understand what was possible in this crisis situation. It would be an interesting case study to understand the cost, both the real cost and the opportunity cost, of the federal government's decision to supply from overseas.
In closing, I think it's important to recognize that Health Canada was a significant and positive contributor during this crisis. They legitimized us quickly by providing product and site licences. They provided guidance on packaging when required and moved quickly to remove companies who were using ingredients that were potentially dangerous. Although there's much to learn about the government's procurement process, I believe Health Canada should be recognized for how they positively handled the sanitizer supply issue.
Mr. Dyck and Mr. Guitor, thanks very much for joining us today, and thanks for your stories.
Mr. Guitor, I grew up in the hotel and restaurant business. A lot of my friends are still suffering badly from this. I'm really appreciative of the efforts you made to reach out and hire hospitality workers. Thank you very much.
Mr. Dyck, my wife used to have a wine distribution and spirits distribution business in B.C., and is still involved in the industry in Alberta. She wanted to pass on her compliments on the absinthes, bitters and fruit brandies that you do. While I'm saying that, there is a distillery in my riding, Hansen Distillery, that does incredible whiskies and moonshine. I'll give a shout-out to them at the same time.
Again, gentlemen, thanks for providing the information. I know that my colleagues on the government side as well as the NDP and the Bloc probably agree and want to move forward with this. I think you'll find some friendly faces asking questions today. Obviously, we want to see these items addressed.
I'm wondering if either one of you could let us know who you reached out to within the government.
Mr. Dyck, I think you said that you reached out several times and just heard crickets. Did you go through the procurement process, filling out the forms and applying online to sell the product? I'm just wondering where the roadblock was.
As the head of the Craft Distillers Guild of B.C., I work with a lot of our distillers across Canada. A lot of the early-stages stuff was working with government to remove roadblocks. If you remember, in the early stages there was even a question—Spirit of York was going to be caught up in this as well—of what happens when we use our own products for making sanitizer. The federal government was still charging us $12.61 a litre on that. Were we going to have to pay it [Technical difficulty—Editor
] have to happen?
A lot of the stuff I was dealing with in terms of government was about what sorts of roadblocks needed to be removed. It was also at the provincial level immediately, and then at the federal, saying, “Hey, there are some really great opportunities here to have a made-in-Canada solution.” As my colleague stated, it was already occurring. Letters went out [Technical difficulty—Editor] 's Office at the federal level, because I deal with excise a lot federally. I was dealing with the Ministry of Agriculture and the Ministry of Finance, sending letters through just saying that this made good economic sense.
We have a structure in place across Canada—it's maybe not as robust as it could be—of 250-plus distilleries. A lot of them were already starting to pivot or were following the lead of Spirit of York and Okanagan Spirits and were going ahead despite the rules that were blocking them.
I think it's fair to say that we reached out to almost everyone we possibly could. Yes, we encouraged all of our members to go through the federal procurement site and the provincial ones.
You have to remember that at that time everything was pretty much shuttered. People weren't coming in and buying high-end, premium products, and that's what made-in-Canada products are. They're not mass producing this stuff.
The proposition was, “Hey, there are many of us who are already doing this.” They were using their own base materials from the Canadian grains and fruit to produce alcohol and then basically destroying that alcohol and turning it into sanitizer. We were saying, “Just cover the cost. Get that base material and keep our staff working.”
That, actually, as a make-work thing would be sensible, because otherwise we were having to lay off all of our staff. Now, lots of us who really were champions of that continued to go forward with our own funds, because it was the right thing to do, and we wanted to protect our communities. That offer was definitely out there, and it was out there at the federal and provincial levels.
I get it. You know, it's complicated when you're running a big business. It's hard to run a sort of “Hey, we'll have your back”, but my dad likened it to the forest fires coming to our doorsteps out here in B.C. The guys with the skidders and the operators are right out there plowing those division roads, but they almost always get reimbursed for that. The government says, “Hey, we have your back. You guys do the right thing, and we're going to go through.” They don't stop and wait for it. What happened here was that the companies that stopped and waited, and waited for the paycheque, got rewarded, and the ones that got in early were overlooked.
Well, look, that's what makes this country great. I'm speaking, of course, about the comment about the skidder operators and companies like your own and Mr. Guitor's that stepped up and supplied this material, and you're certainly to be commended for that.
The federal government, as you're both undoubtedly aware, is not, in the end, a major consumer of hand sanitizer. Certainly hospitals are. Clearly a number of federal government departments and agencies are major users, and I suspect that hand sanitizer will be a permanent fixture, if it was not already.
Did you approach those other major consumers of hand sanitizer? I'm thinking of health authorities, provincial governments, municipal governments, private businesses, retail chains and others who presumably had demands for hand sanitizer that, in aggregate, would far exceed those of the federal government.
No, we've gone back to making our products. Our story is a little different from Mr. Dyck's.
When we announced that we would start making disinfectant, we received a lot of media attention. Then, large companies with critical pandemic activities needed disinfectant for their employees.
In this regard, I will tell you an anecdote. A company contacted me and offered me $30 a litre for my disinfectant. I told her that was too much. She asked me how much I wanted and I told her I wasn't sure and suggested $20 a litre. She then said she would pay me $25 a litre. We were just raising money to help the needy. So I said we would take $25 a litre, but $3 or 10% or 15% of that would go to food banks. The company said they would give us $28 a litre. So that's how the adventure started.
So then all the companies that needed disinfectant for their workers, especially first responders, started ordering it. So we took their money and made disinfectant for police departments, hospitals, and so on. Our story is a bit like Robin Hood's.
As far as I know, none of our members have received assistance directly linked to production changeover. I'm talking about B.C. We have 70 craft distilleries here in B.C.
Early on there were only a couple of dozen who did the conversion. A bunch of others were waiting to see. With the positive words coming out of Ottawa and out of our own province—John Horgan was doing the same thing, saying, “Hey, we've got your back, thanks for doing the right thing”—I think it's fair to say that a lot of national distillers were emboldened by that and they doubled down. I know we did.
My dad said, “Well, they are going to do the right thing. Why wouldn't they?” Maybe we were naive. I work with lots of people at the national and provincial levels, and I always hear the same thing, “Well, you guys could have just waited. Your members could have waited for more demand and more desperation and then signed the cheques.” That's not what we are all about, and remember, those were very scary times.
Many of the members did eventually have to pivot across for paying. Some were doing a sort of combination where they would sell to a corporation that could afford it, and then they would use those funds to make more to donate to hospitals and front-line workers, but, yes—
I want to thank the witnesses who are here before us.
I'm the member representing Hamilton Centre, but I certainly know the west coast perspective. Both and have been up in the House talking about the great work coming out of the west coast. Certainly, we have distillers in Ontario.
In fact, I will even state at the outset that at some of our darkest points during COVID, our government, in fact all governments and I believe Canadian society, looked to those good-news stories, those stories of goodwill and the all hands on deck, team Canada approach. While I'm not government, I want to begin my comments by thanking you for not being cynical and for doing everything in your ability, within your association and within your sector, to provide one of the most critical PPEs, hand sanitizers. To change up that production on the fly, to just do the right thing because it was the right thing to do, is really commendable. As a member of Parliament, I just want to take this moment to thank you.
You mentioned, Mr. Dyck, that it was about more than hurt feelings. I do want to get into some deeper understanding about whether your association has done any preliminary estimates on what it would take to be made whole. Perhaps Mr. Guitor from Ontario could also comment.
We have heard what individual distilleries have put out, but have you, from a national perspective, looked at the amount of, I will say, goodwill—but these are real dollars—that you have invested into this recovery? Could you estimate the amount that would make these distillers whole for the contribution they had early on and without any promise of profit?
It's a difficult one. I can tell you in talking with distillers across Canada, I think most of us are much more interested in working collaboratively with government to find solutions that would allow our industry to be more robust moving forward.
Almost all of our other G7 trading partners have changed federal acts and excise taxation policy to promote domestically made products. These are not trade violations because they are not saying you have to use 100% Canadian grain to do it, but they are policies that have allowed.... South of the border in 2017, they changed their federal excise on the first amount of volume of distilleries, so it champions small to medium-size distilleries right here in Canada. Almost across the board, those distilleries use 100% Canadian grains and fruits to distinguish themselves from everything else.
Policies like that, which have spurred over 1,000 new distillery starts in the States in the last couple of years, have built a robust and nationally proud industry. Despite having to ask our government for repetitive meetings on, “Hey, can we change this, can we copy this, otherwise you're going to leave us behind”, there has been no response. They keep escalating our excise rate where we—
When you have a contact, it can work, but when you don't, you're left spinning in the void.
In the beginning, the government [Technical difficulty—Editor]; we understand that. The situation was urgent.
However, when the government asked everyone in Canada to make an effort, everyone did. When we realized that they were buying products from China or elsewhere in the world, we didn't understand why, since Canada has products to offer. It's problematic, obviously.
Mr. Dyck, you mentioned on December 11 that it was obscene. That's what we read in an article. You mentioned that everyone had set up their equipment, their production and you had kept your staff instead of asking for subsidies.
In your opinion, did the government fail to help SMEs? On the one hand, some SMEs closed down and applied for subsidies and waited. On the other hand, and this is your case, you made a big effort, but you lost out?
Is that how you see it?
It was actually easy for us. If you're actually making alcohol, you're already making it 96% proof. The challenge was to find the proper recipe. A lot of distilleries would take 70% ethanol and put it in a bottle and add water. That just wasn't sufficient. We did some research and we found the recipe of the World Health Organization, which was a combination of ethanol, hydrogen peroxide, glycerine and distilled water. Very quickly after we challenged the production team to find a solution, we were able to find that recipe and eventually we evolved it to gel, but the raw ingredients were just there. I think the biggest challenge we had was finding a supply of glycerine and hydrogen peroxide, but luckily we were able to fill the supply chain.
For other challenges we had regarding bottles, spray tops and containers, the industry stepped up. People were calling me—and I hope it was the same for my colleague out west—and they were offering to help us source this stuff. People were offering free labelling machines, free labels.
I know that among our team there were a lot of tears because it was a real community effort. Everybody wanted to contribute. Just as an anecdote, there was a positive contribution to the community. People would come in to buy the $3 sanitizer and give money to the food bank. They'd give us $100 and say, “Give that to the food bank.” Somebody would show up and say, “Here's $50 for one bottle, and I'll pay for the next 12 in line.” It was that kind of community response.
As much as we could get a little cynical, I felt that we saw the best of the community through this experience. Obviously we all hoped we could maybe benefit from the national procurement strategy, but overall for our team it was somewhat of an enriching experience, though I do think we may have missed the opportunity to really help create more robust microdistilleries, especially the farm-to-glass companies like my own and those of my colleagues here.
That's excellent. I appreciate that as it provides me with a better understanding of what that process looked like and some of the challenges that you both experienced.
I wonder if the quality of the hand sanitizer evolved over time, whether the recipe, as you called it, over time had to be tweaked by you or other distilleries.
I ask that because my wife is a nurse practitioner. As nurses know, hand sanitizer is applied throughout the day countless times, hundreds of times. The trick is that the hand sanitizer has to be strong enough to do what it's designed to do, but at the same time, it has to be sort of gentle on their hands, or kind to their hands, because honestly, they're applying it throughout their entire shift.
I'm just wondering if there were tweaks. Was the recipe changed? Did you get feedback? I want to understand that process a bit.
The issue was that it was very uneven. Some distilleries actually followed the World Health Organization and used the proper materials within their products. They used what was considered food grade ethanol, but as it evolved, there were less than.... I don't want to say unsavoury characters, but there were characters who were putting in technical grade ethanol.
Speaking for ourselves, and I'm sure for my colleague, our sanitizer was probably the most expensive sanitizer you can get on the marketplace, because we produce a premium product, but that's okay. Companies like ours decided to do that for the greater good.
No, we followed strict rules. When Health Canada got engaged, we would follow Health Canada. When we evolved to a gel, we would follow that. We wanted to make sure that we were absolutely 100% copacetic with Health Canada. That can't be said for all of those who supplied. It can't be said for people who were using the technical grade just to get some revenue, to generate some cash, or for product coming from overseas that sometimes was also very questionable.
I hope that answers your question.
Yes. Actually, Health Canada was great to work with. They very quickly approved things when we pointed out areas that just seemed like unnecessary red tape. They seemed to come up with a workaround, at least a temporary one. They were very easy to work with on that.
Again, hand sanitizer is not rocket science. If you look at what's on the market, the stuff that was being made here in Canada probably far exceeded world standards, and probably 99% of the time it was way better. In fact, when journalists did the exposé on it, I was told through them that a large amount of the government stuff that was bought in these big procurements is still sitting in warehouses because it didn't meet Health Canada standards. Whether that's hearsay or not, that's just a repeat from me, directly from the reporter coming back.
There is a lot of really shady stuff that comes in. I would say that for the producers that were doing it here, if there was a problem, it might have been that they made an honest mistake on something. For the most part, the stuff that you had on your hands here, it actually used to be a whisky. It's got all the nice natural oils in it. The only thing that was very, very difficult with it was seeing my dad cry every night when he looked at something that used to be whisky converted into hand sanitizer.
Voices: Oh, oh!
Thank you, Mr. Jowhari. I appreciate it.
Mr. Guitor, I have a question for you. First of all, I congratulate you for speaking French in Toronto. As a Franco-Ontarian, I commend you.
I am fortunate to represent the riding in which Beau's Brewery is located, which had a lot of surplus alcohol and whose beer barrels were about to exceed their expiry date. The brewery worked extensively in partnership with Green Beaver and Dunrobin Distilleries. Together they produced an average of 20,000 litres of hand sanitizer per week. However, their clients, the City of Ottawa and the National Capital Commission, are organizations that are not as large as the federal government.
There was talk of 20,000 litres per week, but were you able to produce 100,000 or 200,000 litres per week?