Ontario dairy producers eye fee increase proposal

Wednesday, July 21, 2010

by SUSAN MANN

The organization representing Ontario’s dairy farmers wants to see an analysis of economic models to determine if a proposed national 15-cents per hectolitre promotion fee increase makes sense.

Earlier this year, the management of Dairy Farmers of Canada (DFC) proposed the increase, which would raise the promotion fee to $1.45 per hl from the current fee of $1.30 per hl.
 
The proposal went to the DFC board in April for their comment. Representatives there agreed to take the proposal to their provincial organizations for decisions.

Ian Harrop, Dairy Farmers of Ontario second vice-chair, says the board doesn’t have a position on the proposal yet: “We're at the stage right now where we'd like to see some very defined numbers on this and to see the best econometric models.” He says it would be tragic if farmers were charged more to pay for advertising with very little gain. “It wouldn’t be good due diligence.”

The national organization would be responsible for providing such analysis, he says, adding that in Ontario any increase in the promotion fee would have to be approved at the annual meeting held in January.

But “realistically for this to work properly all of the provinces have got to agree to increase the fee,” Harrop says.

Ian MacDonald, DFC national director of marketing and nutrition, says it’s very unlikely that some provinces would agree to the promotion fee increase and others wouldn’t. “It’s done by negotiation so they all have the objective of being the same.”

He adds this hasn’t been an issue when previous promotion fee increases were implemented and he doesn’t think it will be this time either. Once all the provinces discuss the proposal and pass it then it is implemented. There isn’t a target date for implementation.

Some provinces have started discussing the proposal, MacDonald says, but so far none have passed it.

MacDonald says there hasn’t been a promotion fee increase since 2003. “Clearly over that period of time costs of doing business in the media world and marketing world have gone up considerably.”

MacDonald says during the last two years the food industry was less affected compared to other industries by the recession and dairy “actually had done quite well.”

In terms of the future, MacDonald says DFC will need to be prepared to deal with public relations concerning nutrition-type issues, such as obesity and the fat content of food.

Next year DFC is slated to spend $59 million for promotion spread across the different categories. DFC does all the promotional activities for Ontario and the Maritimes plus the cheese promotion for the Prairie provinces and British Columbia. The western provinces do their own fluid milk and real cream promotions. Quebec does all its own cheese, fluid milk and real cream advertising by relies on DFC for nutrition-type campaigns. BF