Quirky Canadian Tomato Juice Regulation May Help Former Heinz Plant

Sunday, March 9, 2014

The Windsor Star/Claire Brownell

By Gerrit De Vynck, Bloomberg, and Claire Brownell, The Windsor Star

A Canadian regulatory quirk that insists tomato juice must come from “sound, ripe, whole” tomatoes may help keep the Leamington Heinz plant from closing.

A group of Ontario investors announced last month they plan to run the century-old plant and take over producing and distributing tomato juice for Heinz in the Canadian market. If negotiations go well, the move may spare 250 of the 740 workers slated to lose their jobs.

Under the Canadian Agricultural Products Act, tomato juice must be made from whole tomatoes and not from concentrated paste as it is at Heinz plants in the U.S.

“It would never work out if the law wasn’t there because then you could locate yourself anywhere,” said Pradeep Sood, a former chairman of the Ontario Chamber of Commerce and one of the investors who formed Highbury Canco Corp. to take over the Heinz plant.

Sandra Pupatello, CEO of the WindsorEssex Economic Development Corporation, downplayed the role the regulation played in the Heinz-Highbury Canco deal. She said Heinz tomato juice production had to stay in Canada because of the regulation, but it didn’t necessarily have to stay in Leamington.

Pupatello said regulations like this are bad for Canada’s economy overall. It’s better to make regulations in Canada the same as those in other countries so our companies can produce goods that can be sold anywhere, she said.

“Usually what happens is multinationals are banging on government doors and saying, why are you making us spend more money on this product in your country than it costs us anywhere else?” Pupatello said. ”We are not that large. So as more emerging markets have larger and growing middle classes where their demand starts being more critical in terms of volume instead of Canada, that’s where multinationals start saying hm, is it really worth it to us?”

The differing standards point to a failure by the U.S. and Canadian governments to deliver on repeated commitments to harmonize food regulations. The two countries announced in 2011 the Beyond the Border agreement, pledging to eliminate the inefficiencies of competing regulations and smooth cross-border travel, burdened by post-Sept. 11, 2001 security requirements.

Heinz had operated in the town since 1908 before announcing in November, five months after Buffett’s Berkshire Hathaway Inc. and 3G Capital took the ketchup-maker private, that they would close the plant along with two others in the U.S.

Highbury said in a Feb. 27 statement it plans to licence Heinz products as a co-packer. The venture wants to finalize the agreement in the next few weeks to give tomato farmers time to prepare for the juice-making season, according to the statement.

Heinz is glad Highbury stepped in with the deal, said Michael Mullen, a spokesman for the Pittsburgh-based company. He declined to comment on whether Heinz could make juice from fresh tomatoes at another plant or how the regulation affected the company’s decision.

Rick Holley, who studies food spoilage as a professor at the University of Manitoba, said he suspects the tomato juice regulation is in place to give consumers a clear idea of what they’re buying. In Canada, juice can’t be made with additives like spices and salt that might find their way into tomato paste, he said in a phone call from Winnipeg.

The regulatory details differ between the U.S. and Canada when it comes to other beverages, Holley said. Drinks south of the border must list the percentage of juice they contain, while Canadian drinks don’t, he said.

“In the case of the tomato juice, the Canadian regulation is more stringent, in the U.S. the drink regulations are more stringent.”