Meat packing is tough business

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Recently an entrepreneur in Manitoba announced that he and a group of investors will be expanding an existing small abattoir into a 1,000-head-per-week slaughter plant. The investment will be to the tune of $13 million. The announcement came with the usual statements about the need for a local processor that could serve both Manitoba cattle producers and local retailers. The implication always is that everyone will be making more money with a local plant.

It all sounds familiar — wasn’t that the big plan for the defunct Ranchers Beef plant in Balzac? It seems the dreams of producers owning their own cattle-processing plant never seem to die.

There was a time when Manitoba was a fairly large cattle slaughter location. Up to 500,000 head a year were processed in Winnipeg and Brandon. But consolidation, plant closures, cattle numbers and a host of economic realities saw the cattle slaughter business migrate to large plants in Alberta. That may have annoyed cattle folks in Manitoba, but that’s the economics of the business. It works both ways — that same reality saw a massive chunk of the hog-processing business concentrate in Manitoba. Only bits of that business still operate in the other western provinces.

One wishes these entrepreneurs well, but the odds are stacked against them at both ends. Unless this plant is prepared to pay more for local cattle they will go out of the province to the highest bidder. The precedent is that local producers in another ill-fated Manitoba co-op plant concept were not prepared to consign their cattle to that venture in case higher bids were offered elsewhere.

The other more severe reality is at the other end — getting a better price from local meat retailers and grocery chains. Those buyers always promise to buy local, but become quite fickle when price becomes an issue. When that battle starts the big guys with deep pockets always win. It’s the reason there are giant processors and small abattoirs and nothing in between.

An example of this happened years ago, and not a lot has changed in the meat wholesaling business since. A medium-size meat plant operator in the B.C. Peace River once told me about the realities of competition in the meat business. He had built up a fair business serving small villages, oil rigs, and construction sites up the highway all the way into Alaska. He had that business because it was not efficient for the big packers to service those niche ‘out-of-the-way’ small markets.

He said his success caused him to try to expand into grocery chains in the larger towns, but he then started to step on the toes of the big plants who immediately slapped him down through massive discounting and intimidation. He quickly learned his place in the pecking order of the meat-packing business.

I expect this new Manitoba plant will learn that same lesson if it steps into any big dog’s territory. Meat packing is a ruthless, competitive business — there is a message in that.

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