Canada’s new 3(d) milk class is sputtering into action

After over a decade of lobbying by the Canadian Restaurant and
Foodservices Association (CRFA), a new milk class has been created to
level the playing field for restaurateurs that make and serve fresh
pizza.

After over a decade of lobbying by the Canadian Restaurant and Foodservices Association (CRFA), a new milk class has been created to level the playing field for restaurateurs that make and serve fresh pizza. The new 3(d) milk class, which took effect June 1, will give processors a reduction of approximately $0.72 per kg on the price of milk, according to the Canadian Dairy Commission (CDC). Since the discount is being given to processors, it is up to restaurants to negotiate the price they pay with their suppliers; however, it is expected that suppliers will pass the savings on to restaurants. The 3(d) class applies to mozzarella cheese made in Canada and sold in packages of not less than 2 kg, including mozzarella, part skim mozzarella, pizza mozzarella and part skim pizza mozzarella. The class does not include brick cheese or cheese blends.

Slowly but surely, the new cheese discount for fresh pizza makers is making its way to the front lines.

Despite advanced warning about the new milk class, processors of mozzarella have been slow to register; something that is frustrating excited restaurant owners who themselves registered immediately to be eligible for the discount. The CDC announced on May 1 that the new 3(d) class had been approved by the Canadian Milk Supply Management Committee (CMSMC) and would take effect June 1, simultaneously sending notices to manufacturers of mozzarella to ensure awareness. For a program that is intended to grow the market for mozzarella in the restaurant sector, benefiting farmers, processors and restaurants alike, the new class seems to be sputtering at the start line.

Tony Sabherwal, owner of the Magic Oven pizza chain, is one of many restaurateurs who applied for a registration number in anticipation of the June 1 launch date, but is unfortunately still waiting for his cheese suppliers to register for the new milk class.

“We were among the first restaurants to sign up for the program to receive our registration number. It’s been a month- and-a-half now and I still have yet to hear from my suppliers . . . . We have three main suppliers that we use. The organic supplier had no idea what we were talking about. Our specialty supplier had an idea of the program, but five weeks later we still haven’t heard from him. We’re not shopping around necessarily, but we’re thinking about it. We spend a substantial amount on cheese,” Sabherwal says.

Josee Pigeon-Laplante, CDC’s manager of the 3(d) milk program, admits that the new cheese class got off to a bumpy start, but says that any initial problems have now been solved. “There were details that needed to be finalized but now almost all of the processors are registered. The big companies, the big manufacturers have registered now,” she assures, reporting that as of mid-July the CDC had 16 processors of mozzarella registered and over 4,000 restaurants registered across Canada.

For those processors that signed the agreement for the new milk class prior to July 11, their registration has been made retroactive to June 1, however it is up to restaurants to negotiate with their suppliers for the discount, Pigeon-Laplante explains. Going forward, registration for participants will be effective from the first day of the month that they register in.

Garth Whyte, president and CEO of the CRFA, says that its members have yet to see any savings.

“People want to know what’s happening. Initially they were really excited. There’s been a lot of anticipation, it’s been a long time coming, but now it’s been long in delivery. Our next steps are to make sure it flows through to our members and we’re going to have to be the honest broker to make sure that everybody’s playing fairly and appropriately,” he says.

Despite an admittedly slow start to the program, restaurateurs and the CRFA are still very excited about its creation. After years of rising cheese prices and the fact that manufacturers of frozen pizza have received a discount under the Special Milk Class Permit Program for some time, the playing field is finally becoming more equal. “It’s been over 10 years and it’s been a real inequity. You’ve seen the proliferation of competition, selling ‘like-delivery’ pizza. It’s just not fair with frozen pizza having a 30 per cent advantage. They still have an advantage, but it’s a step in the right direction,” notes Whyte.

Sabherwal is also excited about the long-awaited program. “The price of cheese has been going up one to one-and-a-half per cent a year and our margins are slipping, so we’re not doing as well as we could be. It’s about being profitable. This program has been a long time coming. The CRFA has been at it for 10 years now and finally it has come to fruition. Obviously we’re all very happy and now we’ll be able to make a real living.”

However, just how much of an impact the new 3(d) class will have on Sabherwal’s business remains to be seen. “It all depends on the kind of savings we receive. I think four years ago when we were expanding we were able to deal directly with the manufacturer to buy loads of cheese as opposed to cases of cheese and we were able to pass on the entire savings to our customers. I don’t think this 3(d) class is going to offer that kind of savings to us. I’ve heard numbers of one to three per cent. I’m not sure if it will affect our menu price in that way, but maybe in our specials or value packed offers,” he explains.

The CRFA is expecting the new milk class to have a very positive impact on its members who serve fresh pizza.

“It should result in a price reduction in their mozza cheese, which is really a major component of all pizza, so they’ll see some real price reductions in the thousands of dollars for some businesses and that’s huge, especially when you’re looking at rising food costs across the board. We’re hoping that should increase business and even for some the quality of their pizzas. They may use more mozza and it may hopefully spur on more pizza sales,” Whyte says.

The CRFA hopes the new program will be a win-win situation for everyone involved including farmers, processors and restaurant operators. The association is now turning its focus to mozzarella processors to ensure they are registered and that the discount they receive is passed on to fresh pizza makers across the country. The pilot program is set to be re-evaluated in 15 months to determine if it is fulfilling its purpose and working well. That means that for its proponents, the pressure is on to ensure the program is running smoothly and that all parties involved are benefiting from the price reduction.

As for what to expect from the 3(d) milk class over the coming year?

“Like anything else, there are administrative challenges, but it’s particularly challenging for an entity that’s never done this type of thing before, and that would be the Canadian Dairy Commission. I think over time it will improve and become more streamlined, people will be more aware and the take-up will be good. I’m hoping that we can extend it. It should be a win-win and I’d love to see it expanded to other members who are using a lot of mozza that’s not for pizza. But first we want to make sure that we can maintain the integrity of the system to ensure it’s being used for what it’s supposed to be used for, and that’s retail and restaurants,” Whyte says.

For an industry that purchases $2.5 billion worth of dairy products annually, Canada’s restaurant owners have much to gain from the discount offered by the new 3(d) milk class. As a result of these savings, dairy processors and farmers are hoping to see a growth in sales of cheese in the restaurant pizza category, making the new milk class a winning combination for all parties.

For further information or to register for the program, please visit the CDC’s website at www.milkingredients.ca or follow the links on CRFA’s website at www.crfa.ca.

Julie Fitz-Gerald is a freelancer writer/editor based in Uxbridge, Ont., and a regular contributor to Canadian Pizza magazine.