Joint Venture

Tyson Schlegel (left) and Jihad Douglas of Aviagen Turkeys shake on a new joint venture. Also involving Canadian Select Genetics, the endeavour aims to offer Ontario and Eastern Canadian turkey growers “more choice” in supply and genetics.

When it comes to genetics, it’s no secret that choice is fairly limited for Canadian turkey growers. In the 100th anniversary (March 2013) issue of Canadian Poultry, Dr. Peter Hunton wrote: “…in the past 100 years, poultry breeding in Canada has evolved from hundreds (or perhaps thousands) of small, independent farms that did very little in the way of selective breeding, to the point at which most breeding work is done by a handful of multinational companies whose products are distributed and multiplied on an international basis.”

The companies that have survived concentration therefore strive to maintain a competitive edge, and ensure that the products and services they provide to their customers are meeting the needs of the market. But for Aviagen Turkeys, competitive innovation doesn’t always happen as a result of strategic meetings around a boardroom table – sometimes it’s simply the fruit of casual conversations with growers like Tyson Schlegel. It was one such chat – with Rob Walker, a technical sales representative with Aviagen – that a general dialogue about the Ontario turkey industry and what it needs to grow and progress, sparked some more legitimate ideas.

“We were just sitting down, about two years ago, throwing ideas out,” says Schlegel, who, at that time owned Great Lakes Poultry Farms Ltd., and has since acquired Belwood Poultry Ltd, with his father and brother. “We talked about the notion of a new hatchery, of perhaps expanding, and the potentials that could happen from there.”

Previously a wholly commercial turkey operation, Schlegel says the decision to move into breeders as well is 100 percent “new” for the family-owned operation. Schlegel’s Father, Peter, has been involved with poultry all his life, becoming involved in the commercial chicken industry in 1950. He then diversified and entered the turkey business with purchases of commercial turkey farms in the Wingham area in the early 1990s. Tyson purchased his own two farms near Lake Erie while still attending the University of Guelph in 2000.

Not long after his chat with Walker, the junior Schlegel was in more serious talks with Aviagen Turkeys’ President, Jihad Douglas, about the concept of a joint venture. The Schlegels already wanted to grow their business and were known to Aviagen as open-minded growers who understand the Ontario market well. Similarly driven by a vision to be able to supply Ontario and Eastern Canadian turkey farmers with quality poults, with core values that matched, the fit seemed perfect.

 The venture itself can be broken into two parts.  First, Belwood Poultry Ltd. will serve as the breeder farm operation – for now, at least. Breeder flocks are already on the ground in older barns, but new breeder barns are currently being built.

Says Schlegel, “Construction has already started on two state-of-the-art breeding facilities. The first, in Bruce Township, has the capacity for 8,000 breeders. The second farm is in Ashfield Township. There, we have four lay barns going up, one tom barn and an egg service room. It will house about 16,000 breeders, with capacity for about 20,000.”

 The proposed complex will be enclosed, so that employees won’t leave until the end of the day. Use of tunnel ventilation will mean less interference from the outside. In fact, the whole concept is modelled on primary breeding complexes, maintaining the same high level of biosecurity. Based on a more European design, the facility will use a lot more concrete than in traditional breeder barns.

Second is the construction of a breeder hatchery, to be built in Southwestern Ontario within the next two years. The exact location will be finalized after considering factors such as airport and border access, and ready supply of labour. Canadian Select Genetics (CSG) has the responsibility to market the breeder eggs produced.

“The hatchery will be a facility with extremely high-biosecurity and state-of-the-art design for operating efficiencies. It will use single-stage hatching incubator machines and will meet and exceed all Canadian Food Inspection Agency requirements (CFIA) for hatching egg export opportunities. The ability to achieve the required results as mandated by the ownership structure will require a highly qualified team of veterinarians to add and oversee the complete health quality of this program.” says Douglas.

When asked about capacity, Douglas, Schlegel and Jorge Cota of CSG admit that that’s one big factor yet to be determined, but what they will ensure is that whatever the initial capacity the venture, the plan is to allow for an easily expandable business process as the market grows. The farm and building design, therefore, is vitally important.

“What we can say is that it will be large enough to supply Ontario and Eastern Canada,” says Douglas. “It will be at least that big, and able to export internationally.” From a primary breeder business viewpoint, having a hatchery in Canada will potentially allow Aviagen to offset disease risks by having production in several countries.

Cota notes, “We’ll work in collaboration with hatcheries we have in the U.S. so we can work as a back-up to them in case of disease issues. That will create a lot of synergies in terms of moving product back and forth and dealing with disease issues. Secure supply on each side of the border is very important to being able to serve our customers.”

As the President of Aviagen Turkeys, Douglas will be hands-off once the venture is off the ground, leaving Cota to serve as the general manager, while Schlegel will formally be the president. While focus will be on the hatchery and marketing of the eggs (currently, all eggs are being exported to the U.S., until the hatchery is built), Cota says CSG will also play a large role in the management of the farms. Douglas adds that there are specific areas of Southwestern Ontario where they know that labour is easier to find – the key is to ensure that anyone they hire has the proper technical expertise.

The fact that the Schlegels are growers and can identify themselves with other growers quite easily makes face-to-face perhaps the best way of marketing the new endeavour. Further opportunity to grow the business and service the market may arise after operating for a while, so Schlegel says they’ll be doing ongoing business reviews to ensure they’re on the right track. Logistically, the goal of serving local producers works in the short term but neither Schlegel or Douglas rules out export of eggs from the breeder farms to countries outside of North America – hopefully to create a strong and sustainable international business.

“If you look at the history of the multiplier-breeder business, nobody has invested in any new facilities for at least the last 10 years in Ontario,” notes Schlegel. “I think we’re one of the few that have invested money in brand new barns. In fact, we did a lot of research and visited some of Aviagen’s existing barns in the U.S. to see what we could do here.”

Determining what type of genetics best suit the Ontario and Eastern-Canadian markets is key to the venture.

“We have several products that could fit the Ontario market,” says Douglas. “We have the large product, the Nicholas 700 and which is a market leader worldwide. We have the option to do ‘super selection,’ which would place more genetic selection on the toms – something like 25 per cent. That will enhance the performance of the final product. It doesn’t impact the reproductive traits because we are selecting more on the male side.

“We have other options, if they fit the Ontario market and Eastern Canadian market, such as the Nicholas 500. Our newer product, the Premium, will be tested in Ontario shortly. Our focus, when it comes to genetics is threefold: give choice to the consumer; practice super-selection; and test options that could specifically fit the Canadian market. We look at weight, feed conversion, yield, liveability / legs and welfare – all of them as a package, because we have a balanced selection program.

“I think the options in Ontario were getting limited,” says Douglas. “We will be allowing the industry to have the luxury of choice. We believe that it’s in the best interest of the customer to have healthy competition. It’s good for us, it’s good for the competition and it’s good for the market. The risks are too high if you don’t have those options for Ontario and Eastern Canada. We need to be smarter, healthier, more innovative and more service responsive than our competition. If you are a good supplier, provide good service, good quality poults, good genetics and build relationships, you’re going to be rewarded by having good customers.”

Before anything moved ahead though, Schlegel is quick to point out that he and Douglas met with many fellow turkey growers – including the Chair of Turkey Farmers of Ontario, Ingrid DeVisser – to share their vision and ensure that it had support.

“We’ve been very transparent with the Ontario marketing board about the whole thing,” says Schlegel. “We told them how we see things working and what our plans are. We made sure we had support from the beginning.

“With us being a larger turkey grower, to have control and be part of the process to ensure that we’re getting as good of a poult possible on our farm is key,” says Schlegel. “We know what the returns are and we want to make sure all growers in Ontario and Eastern Canada have access to good, quality poults.”