Olymel Plant Shut Down Fuels Worries Over Future of Pork - Selina Wamucii

Olymel, the Canadian processor and distributor of poultry and pork, is planning to shut down its plant in allée-Jonction, Que. The plant handles the company’s slaughtering, cutting and deboning operations.

This is not the first plant the company is closing, and no one can tell if it’ll be the last either. It had already closed the Blainville and Laval plants.

According to the company’s leadership, the shut down will unfortunately bring to an end the jobs of close to a thousand employees – 994 in total. Out of this, 991 are union members while 83 are managers. The union leadership said they only heard about the closure in the media.

This move is necessary, says Olymel, adding that all affected employees have already been duly informed. The company said some employees could be offered options to relocate to other plants.

The plant, one of the four that Olymel operates in Quebec, has been in operation for decades, making it a major player in the local pork industry.

The news sent shockwaves in the community and raised concerns about the future of the pork industry in Quebec, which is Canada’s largest hog producing province. The decision comes amid a series of challenges faced by the meat processing sector, including labor shortages, supply chain disruptions, and changing consumer preferences.

“It’s been a tough two years for Olymel”, lamented CEO Yanick Gervais. Because of this, the closure was inevitable. According to Yanick, the closure of the Chinese market also contributed to the diminishing business environment.

If the plant was to continue operating, the company would have required an investment of at least $40-million to remain a float, though the CEO did not say how long this investment would have helped to keep the “lights on”.

Some observers and analysts have pointed out that this particular plant was too old in terms of facilities, far behind the competition. Olymel seems to agree with these criticisms, but adds that the rest of their plants are not only modern but efficient.

The government has also weighed in on the closure. Patricia Drouin, Vallée-Jonction mayor, termed the impact as “enormous” with a ripple effect that could potentially affect at least 3 people for every job lost.

The pork industry has been a vital part of Quebec’s economy for decades, employing thousands of workers and generating billions of dollars in revenue each year. According to annual figures from statistique Canada, Quebec had produced over 13 million hogs by mid 2022, accounting for more than a third of Canada’s total hog production.

What’s the impact down the supply chain?

Of course, this closure also means that the rest of the supply chain, particularly pig farmers, will also be on the receiving end. Farmers are aware of this, and are already pointing out what should be done to save their pork dependent livelihoods. UPA, the Quebec farmers’ union, specifically called on the Agriculture ministry to perform urgent analysis on pork processing in the region.

The union conducted a survey back in 2021, which established that 50% of farmers expressed fears that their businesses were deteriorating at an alarming rate.

The local government in Quebec was already doing something about the problem and had given Olymel $150 million in 2021. Despite this injection from the government, the company’s woes were clearly overwhelming.

Olymel has been a major player in the province’s meat processing sector. The company operates four plants in Quebec and employs over 15,000 people across Canada. In addition to pork, Olymel processes poultry and supplies its products to retail, foodservice, and industrial customers across North America and abroad.

What’s eating into the meat industry’s profits?

Olymel is not alone in battling the tough times. In 2020, Maxwell Foods LLC announced it was closing its hog operations – permanently. The North Carolina based company is a subsidiary of Goldsboro Milling Co. Like in the case of Olymel, this came as a huge decision considering the company has been operating for close to 30 years. Something big is going wrong somewhere in the pork or meat industry in general? What is it?

In trying to understand where the pork problem is, the most practical place to start is LOSSES. A statement from Maxell explaining the closure pointed to “unsustainable current and projected” financial losses. It’s a no brainer really. Whenever a company starts making a string of losses instead of profits, it’s over.

Maxwell alluded to low prices which made it difficult to turn in profits. They also mentioned COVID pandemic effects, which equally affected many other industries.

Besides the usual market dynamics and unpredictable crises like the pandemic which naturally affect prices across all industries, emerging trends could also be gradually eating into the wider meat market. The one that perhaps sticks out the most is the slowly but surely rising number of people seeking out plant-based alternatives or products that are raised sustainably and ethically. This has put pressure on meat processors to adapt their offerings and production methods to meet these new demands.

Some experts believe that the industry may be facing a period of consolidation and restructuring, as processors seek to streamline their operations.

Be it as it may, the pork industry in North America has a strong foundation that players can leverage to weather the current challenges by investing more in innovation. Moreover, there are opportunities to expand the domestic and international markets for pork, particularly in Asia where demand for high-quality meat is growing.

Governments in the region are also active in safeguarding the industry’s interests. For example, the Canadian government has been aggressive in negotiating new trade agreements with countries like Japan and South Korea, which could open up new export opportunities for pork producers. Get deeper insights into pork prices in South Korea.

At the same time, there is a growing interest among consumers and policymakers in promoting more sustainable and ethical practices in the meat industry. This includes reducing greenhouse gas emissions, improving animal welfare standards, and promoting local and organic farming practices.

To remain competitive, pork producers in North America may need to adopt more sustainable practices and adapt to changing consumer demands.