Thin cattle margins could cause food safety shortcuts

E. coli outbreak | Highly competitive industry likely contributed to food safety issues at XL Foods, says industry expert

Razor thin margins in the beef packing business likely contributed to the E. coli incident at XL Foods Inc., says an industry veteran.

“Packers generally cost their operations in terms of dollars per minute,” said Gerald Third, who spent 32 years in the meat packing business.

“That’s how tight these margins are. I can’t stress that enough. These are brutal margins.”

Third got his start in the industry in 1978 working on the production line. Eventually, he worked his way up to designing, building and operating plants.

Some of the plants he built include Western Canadian Beef Packers Inc. and Natural Valley Farms in Sask-atchewan.

Third got out of the business two years ago after a career that included consulting for meat packers in Canada, the United States, the European Union and Australia.

“I’ve processed just about everything on the planet that walks,” he said.

That experience has taught him that plants are so financially squeezed they’re forced to cut corners, which results in mistakes like the XL Foods E. coli crisis.

Garnet Altwasser, who helped build the Lakeside Packers plant in Brooks, Alta., doesn’t know what led to the E. coli incident at XL Foods but he agreed with Third that margins are problematic.

“In the packing business, you can go from making a lot of money to losing a lot of money just over night. It’s very volatile and at the end of the year it’s a tight game. You can go from a hero to a bum pretty quick,” he said.

He said a professor once told him to stay away from businesses that are capital intensive, labour intensive and that sell perishable products.

“Guess what? The meat packing business that we had has all three of them and quite frankly those are all risks,” said Altwasser.

He said it’s a tough business due to stiff competition from alternative meats and imports.

“It has always been a very thin margin business. Same old story, you try to make it up with volumes,” said Altwasser.

XL Foods was contacted for this story but did not return calls.

Third said tight margins have many operational ramifications in the packing business.

“One of the big problems in this industry is there are no meatheads left. That’s a pretty catty phrase but it sums it up entirely,” he said.

Meatheads are people that know all aspects of the packing business. There was a time in the industry when managers needed to know about engineering, formulation, slaughter, carcass processing, shipping, human resources and occupational health and safety.

“There was always a massive amount of investment in people,” said Third.

But that was expensive and plants can no longer afford that kind of investment. Jobs have become compartmentalized. Today,supervisors will only know about specific task they’ve been assigned.

“They’ve dummied down the industry and they’ve done it on purpose,” said Third.

He said butchers earn less today than they did back in 1985 when the going rate was $12.35 an hour.

“Why would you want to work in an industry that 27 years ago was paying more than it is today?”

Staff turnover and absenteeism are “atrocious,” creating a constant need for workers but limited time to train them.

“You want to give adequate training but it’s just not always the case. A lot of times you just toss these people right in and put them to work,” said Third.

Employees at packing plants are working so hard and fast to keep high volumes of carcasses moving through the plant that instead of trimming off a piece of carcass contaminated with tag dust, they try to rub it off so it’s not visible.

Another problem is that packers failed to reinvest in their plants when they were making money when the Canadian dollar was worth 67 cents against the U.S. dollar.

“Now we’ve got these antiquated plants. They’re not as modern as some of their European counterparts or their American counterparts,” said Third.

“We start looking for ways to address this shortcoming in our operations and stretch those margins. You cut corners. You have to cut corners. I mean, there’s no way around it.”

He feels badly for the management team at XL Foods who have been tainted by the E. coli scandal because he knows what they’re up against trying to run a high throughput business on thin margins with a transient workforce.

“Their operation manager is probably one of the finest in the country,” said Third.

He had a succinct response when asked why anybody would want to own a meat packing business given the tight margins, huge financial risks, staffing headaches and onerous food safety regulation requirements.

“Because they’re insane. It’s terrible.”

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