BUSINESS/ECONOMY

War over western hogs

MICHAEL SALTER,GENE LAVERTY December 9 1985
BUSINESS/ECONOMY

War over western hogs

MICHAEL SALTER,GENE LAVERTY December 9 1985

War over western hogs

BUSINESS/ECONOMY

For years many Albertans regarded the meteoric career of Peter Pocklington—the flamboyant entrepreneur who owns the Stanley Cup champion Edmonton Oilers hockey team—as a symbol of the West’s new success. Then the recession struck Western Canada in 1982, and Pocklington’s empire began to crumble.

Indeed, in 1983, at the same time that Pocklington was campaigning for the leadership of the Progressive Conservative party, his most important companies—Fidelity Trust Co. and Patrician Land Corp., both of Edmonton —were about to fail. And last week Pocklington faced a crisis that could end his latest effort to rebuild his shrunken holdings. After leading his profitable Edmonton-based meat packing company, Gainers Inc., in an 18month battle to break the Alberta Pork Producers’ Marketing Board (APPMB)’S control over the sale and pricing of hogs, Pocklington suffered a serious reversal. The APPMB, by signing a two-year contract with Fletcher’s Fine Foods Ltd. of Vancouver for the majority of the hogs sold in Alberta, cut off Gainers supply of pigs—threatening its ability to continue its slaugh-

tering operation.

At a news conference held hours after the board’s decision, a Gainers top executive vowed to continue what has become known locally as the hog war. Gainers’ tough-talking president, Boston-born Leonard Bolanes, whom Pocklington hired in January, 1984, to lead the fight against the board, said the company would stay in operation

Without a steady supply of hogs for his packing companyy Pocklington’splans for financial renewal are threatened

by continuing its three-week-old campaign to bypass the APPMB by purchasing pigs directly from Alberta’s 7,000 hog farmers. Bolanes claimed that the contract was “further collusion between the board and Fletcher’s to squeeze Gainers out of business.”

Still, it is doubtful whether Bolanes can convince enough of Alberta’s hog farmers to risk legal penalties by cir-

cumventing the board—the sole legal sales agent for pigs in Alberta—and sell directly to Gainers. The APPMB’S contract with Fletcher’s, which runs a hog slaughterhouse in Red Deer and is Gainers’ only competitor in the province, permits Fletcher’s to buy up to

36.000 of the 38,000 hogs that are available for sale in an average week in Alberta. Gainers was processing

18.000 hogs a week before it decided on Nov. 15 to outbid the board’s price by $8 per pig if farmers would sell directly to the company. But Gainers is receiving only 10,000 pigs per week, Bolanes has publicly acknowledged.

Although Bolanes said that Gainers can operate by killing only 10,000 pigs weekly, at such reduced levels its profitability-last year Gainers earned less than $20 million on sales of $400 million—is in doubt. And a money-losing Gainers would eliminate Pocklington’s last major source of revenue. Indeed, since the failure of Patrician Land Corp. and Fidelity Trust in 1983, Pocklington has relied on profit from Gainers to finance his business ventures. At one point he pledged his Oilers hockey team and associated television and promotional rights against bank debts. Said Pocklington: “Sure I’m using profit from Gainers in other businesses. I’m a businessman, and that’s what businessmen do.”

Pocklington started the hog war in 1984 when he claimed that because the APPMB owned Fletcher’s, which it bought for $14 million in 1981, his competitor was favored during the daily hog auction. Gainers spokesmen also charged that the board’s practice of setting a minimum price for hogs amounted to price-fixing. Gainers took the price-fixing charge to court, but early last week Mr. Justice W.E. O’Leary of the Alberta Court of Queen’s Bench dismissed the charge.

For his part, Garry MacMillan, president of Fletcher’s, said that Pocklington started the fight with the board in order to drive down prices and get more income from Gainers’ hog operation. He added: “Peter needs a lot of change for his other games. He wants all the money now.”

Indeed, Pocklington wants to expand Gainers into a national company. Last May, Gainers bought Burlington, Ont.based Magic Pantry Foods Ltd., a food processing company. And in October, Pocklington bought three meat-packing plants in St. Louis, Mo., creating a base for Gainers’ U.S. operations.

If Gainers cannot buy enough hogs to continue its operations, Pocklington has said that he may relocate the company in Saskatchewan. But many financial analysts say they doubt that the flamboyant entrepreneur can af-

ford to move Gainers without receiving financial assistance from the Saskatchewan government. Bruce Robinson, an independent financial analyst in Edmonton, estimated last summer that the 75-year-old Gainers plant was worth about $50 million as an operating business.

As well, Gainers might also have difficulty borrowing money to buy a new plant. Indeed, Gainers has already used $42 million of a $70-million line of credit it has with the Toronto-based Continental Bank of Canada.

MacMillan moved swiftly to secure Fletcher’s lock on Alberta’s hog market. In announcing the contract with the APPMB, which increased by nearly 40 per cent the number of hogs that Fletcher’s kills each week, he said that the company will add 130 employees on a second shift in order to handle the increased supply of pigs. Many of the new employees will come from the Gainers plant in Edmonton.

For his part, Pocklington said that the hog war had already cost him $1.5 million in legal and advertising costs. But as Gainers’ supply of hogs dried up last week, the ardent free enterpriser faced the prospect that the battle could cost him far more.

MICHAEL SALTER

GENE LAVERTY