Bigger, faster, stronger | XL Foods processes a large share of Canada’s beef but is now involved in the biggest recall in the country’s history
In the mid-1960s, Garnet Altwasser was running a feed mill in Brooks, Alta., and Don Danard was selling 5,000 cattle per day at the Edmonton Stockyards.
Altwasser, along with partners Jim Wilfley and Tor Wigemyr, went on to build Lakeside Packers and Danard became a pioneer in internet cattle marketing at the Calgary Stockyards.
The two men witnessed massive changes in the Canadian beef industry, in which Alberta became a powerhouse in the feedlot and processing industries.
Major companies such as Canada Packers, Burns and Swifts, as well as smaller regional players in every major city, are gone now, replaced by two major plants in Alberta that process 70 percent of the nation’s herd.
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Cheap grain and plenty of cattle were available when Altwasser and his partners decided to build a small packing plant northwest of Brooks. It cost $1 million and could handle 1,000 head per week.
Now owned by XL Foods, Lakeside Packers can process more than 4,000 head per day and is embroiled in Canada’s largest meat recall because of E. coli contamination.
It has signed a deal with Brazil-based JBS to handle its management. The multinational has the option to buy the plant and other assets for $100 million.
To finance the plant in 1974, 20 percent of Lakeside was sold to the Japanese company Mitsubishi, with the hope that it would be the agent to ship beef to Japan. Altwasser said it did not work as well as hoped.
In the meantime, a seismic shift was occurring. He estimates 30 Canadian plants shut down from 1974-94, unable to compete against newer, larger and more powerful companies.
“The cost of production in a large plant with all the efficiencies associated with a large plan, are such that small plants can’t compete. The cost of production is too high,” said Altwasser.
“We saw a multitude of plants go down and then you had a U.S. border that opened and the American plants continued to get bigger and stronger and more powerful and they began to buy live cattle under the noses of the Alberta industry,” he said.
To keep Lakeside afloat, the partners sold to IBP of the United States in 1994. Lakeside was then the largest carcass facility in North America, and IBP invested heavily, adding a boxed beef section, more freezers and a rendering operation.
“That is what needed to be done to make the plant world class and competitive,” Altwasser said.
It also experienced major food recalls, but at the time no one knew much about E. coli O157:H7.
Altwasser remained with the company for another 10 years. By that time, it had been taken over by Tyson Foods.
The plant was running at capacity and the feedlot had expanded to 75,000 head. Brian and Lee Nilsson took over in 2009.
With the entry of JBS, Altwasser and Danard see a new, competent player entering Canada. The company has plenty of liquidity and a good reputation, something Altwasser suggests is needed to restore consumer confidence.
Looking back, Altwasser wonders how his plant survived.
“In that business ,you can go from being a hero to a bum in an instant.”
He does not foresee new plants being built or old ones reopened.
“They are high maintenance plants when they are operating and they continue to deteriorate when they are closed. The smaller plants are not competitive with the large plants,” he said.
Danard agreed it is a tough business, but said that as someone selling cattle, he would prefer more competition.
“Two is better than one in terms of bidding. I would rather have more,” he said. “People say these packers must be making a lot of money. If they were making a lot of money, why do we only have two?”
American bidders help.
“These packers have to compete with the U.S. bids as well and as a result it is competitive. The perception isn’t great, but the fact is, it is competitive not just between the two packing plants but the American interests,” he said.
While Danard welcomes a new player, he also has respect for XL Foods owners Lee and Brian Nilsson, having sold cattle for their father, Bill, and working with the pair since they were teenagers.
“Lee was out buying cattle in the country before he could even drive. He was 14. Brian had a driver’s licence at that point. He was 16 and they travelled together and bought cattle in the country,” said Danard.
Having seen so much, he accepts the change.
“There’s always change. You just have to adapt to it.”
