Frozen pizza economics

by Aaron Wherry

Yesterday, the Harper government announced $12 million in funding for Dr. Oetker to help the German food processing company set up a frozen pizza factory in London, Ont. The Canadian Restaurant and Food Association, while also noting the effects of the supply management system, is displeased.

We create jobs and play a key role in the economy in every community across Canada.  We do this without handouts or special assistance from government.  Our members are deeply troubled that your government is using tax dollars, paid by our members, as a direct subsidy to their competitors who threaten their market share and ongoing businesses viability.  This is on top of the $7-million subsidy this same pizza manufacturer received from the Government of Ontario last year. 

Your government’s announcement today may be good news for this foreign-based multinational, but it is precisely the opposite for CRFA members.  They are asking why is your government so ready to give multi-million-dollar taxpayer handouts to their competitors, while a “Made in Canada” policy penalizes them. 

The Conservatives say the new plant will create over 300 jobs. (When the Ontario government made its announcement, the math was a bit different.) For 300 jobs, a $12-million investment works out to $40,000 per job.




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Frozen pizza economics

  1. This just goes to show the backwards policies that emanate from supply management.
    Anecdotally, I can probably count on one hand the number of times I’ve ordered out for pizza in the past 5 years. By contrast, I’ll probably have a frozen pizza about once every two weeks (ergo, 26 per year). Why? The cost. Frozen pizza, approx $5-6. Order out for pizza, approx $12-$15. It is instructive to know that this price discrepancy is at least partly driven by government policy (i.e. frozen pizza processors can access the world price for cheese, restaurants must buy at domestic price). Seems like a smarter policy would be to avoid such industry-specific subsidies and let the free market play out as it may.
    Mr Wherry: to be fully thorough in the math, the cost would be $19 million federally and provincially, i.e. $63,333/job.

    • But supermarket frozen pizza is inedible the next day, while take out still is full of yum! So unless you can eat an entire pizza in one sitting (ick!) the price is halved because it will last you two meals instead of one. So they’re about the same price!

      • And homemade pizza tastes even better, and is half the cost of frozen.

      • Not Dr. Oetker…excellent cold.

  2. Heh. So they criticize the federal government for doing the exact same thing the Ontario government did… but no criticism for the Provincial government? Funny, that.

    • Who is ‘they’? I for one am criticizing both levels of government. Stupid policy can be non-partisan.

    • If you go to the restaurant assoc. website, you will see that they made the same criticism of the Provincial Gov’t in July last year, when Provincial support was announced. I tried to post a link, but I guess Disqus doesn’t like that anymore

  3. This is how Canadians do business. Govts at all levels run into the same brick wall.

    Cosh wrote about it a few days ago regarding food trucks in Edmonton.

    Same goes for any other kind of business.

  4. Dr. Oetker makes an excellent product so the plant should do well. If the Canadians want to compete, they need to turn out great products and then they can set up plants and get subsidized. This is about job creation isn’t it? What is the difference between a foreign car plant in Canada v. a foreign food plant?

    • Unless I’m missing the point on your post, then you’re most definitely missing the point the restaurants are making.
      Canadian frozen pizza factories are allowed to buy cheese at world prices (i.e. cheap). Canadian pizza restaurants are forced to buy cheese at domestic prices (i.e. expensive, due to Canada’s supply management policies). The restaurants quite rightly ask why should frozen pizza factories get subsidies given the already unfair advantage they have with respect to ingredient costs.

      The policy is not necessarily creating jobs, what it is doing is providing benefit to one sector (frozen pizza) over another (take out pizza).

    • If the product is so good, then the subsidy shouldn’t be needed, should it?

  5. Whether it’s $40,000 per job, or $63,000 per job, most small business owners, (I’ve been one for over 40 years), would be dumfounded to be handed $200,000 to $300,000 to create a 5 person small business. Corporate welfare is as problematic as EI abuse, or personal welfare abuse. It has to be stopped, because we can’t afford it; financially, or morally.
    I resigned from a PC party board during the election last year, in protest over their endorsement of supply management.
    To add a voice against government overreach, and nanny-statism, I’ve started a blog at http://www.IWUZ.me.
    Incidentally, nanny-statists are Nasts, and “progressives”, because they really are not; are pRegressives,or pReegs.

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