Inside the BC Tree Fruit Packing House Controversy

Co-op’s CEO Says the Situation Changed, So the Plan Had to Change

Plans to move all packing house operations to Oliver have created a rift within the BC Tree Fruits Cooperative.

The move caught growers by surprise, as the Co-op had purchased land on Old Vernon Road in Kelowna, and planned to build a large packing house operation in that location.

In August, however, the BC Tree Fruits management and board announced that plan had been cancelled, and that it would only be operating one packing house, located in the town of Oliver.

As the BCTF explained, “The situation changed, so the plan had to change.”

That news has led several growers to condemn the decision, accusing the cooperative of failing to consult with the membership. Many of those growers also staged a noisy protest, holding up signs reading “Dictatorship” and “We Have No Voice.”

One of those protesters, Sukh Khun Khun, told reporters he felt such a critical decision should not have been made without the input of the co-op members.

“I’m here because a decision was made, without the consultation of the mass majority, to move facilities to another city, that just financially, economically and morally does not make sense,” Khun Khun said. “So who is benefiting from these decisions? That’s the question we have; who is benefiting, because as you can see behind me, the growers do not feel like they are the ones benefiting.”

Several of the growers at the protests argued it didn’t make sense to sell the original Lake Country packing house, and then buy property for a new packing house in Kelowna, only to cancel that plan and open one in Oliver, two hours drive to the south from growers in the Vernon area.

“When they make such a big decision it should be a general house meeting, not just the directors. The growers should have a say in it,” said Gurjit Pabla.

But BC Tree Fruit Cooperative CEO Warren Sarafinchan told Orchard and Vine that the board was forced into a change of plans by economic forces beyond its control.

“We’ve been actively talking about the need for consolidating our operations for some time, and in fact the discussions go back to 2011 and 2012,”  Sarafinchan said. “The need for this project has been recognized, and with the purchase of the property on Old Vernon Road, and the discussions that have taken place, that seemed to be the lead option, and quite frankly, our management team worked extremely hard to find an option that would have seen that facility built in Kelowna.

“But I think its important to recognize how much the world has changed over the last couple of years,” Sarafinchan added, saying a combination of factors had made the Kelowna project economically unviable. “Construction costs are increasing by, in some cases, 20 and 30 per cent in the last couple of years. When you factor in increases in construction costs, increases in interest rates, and then there’s also a level of urgency to get our returns to a more sustainable level for our growers.

“The difference is, we could have this project completed in Oliver for the 2024 crop, and in fact, the first phase will take place for the 2023 crop. So, we can start to increase grower returns and see benefits from this project as early as next year.”

Sarafinchan explained that as the board was weighing its decision, it was primarily motivated by its primary goal, which is to increase the monetary return to growers for their fruit.

When it came time to do the math, he said, the changes in construction costs and interest rates, combined with the much longer time it would take for the Kelowna packing house to come online, meant the original plan no longer made financial sense.

In fact, Sarafinchan argues that most growers would likely have been much unhappier had the Kelowna project gone ahead, because it would have delayed increases in returns for their fruit by two or three years.

As well, the co-op itself would have faced a much larger debt load, and would not have as much money to help growers through tough times.

“I’ve consistently heard from the day I started, we have to get our returns up as quickly as possible,” Sarafinchan said. “I’ve literally heard that from day one, and we have to get our financial house in order, which we’ve done, so we are now able to invest and grow, and this is the path that will get our growers the highest returns the fastest, while carrying substantially less debt.”

One of the factors is that expanding the operation in Oliver can be done much more quickly and at lower cost than building a new packing house in Kelowna.

“With the Oliver option, we can start increasing those returns in 2023 and more so still in 2024,” Sarafinchan said. “With the Kelowna option, that site wouldn’t be operational until 2025, so when you factor in all of that, it becomes clear that all of those variables together make Oliver the right choice for the cooperative.”

Why Growers Weren’t Told Before the Decision Was Made

O&V also asked Sarafinchan why BC Tree Fruits had not consulted with its growers before making the decision to cancel the Kelowna packing house in favour of a single operation in Oliver, a move that infuriated many of the growers at the protest.

“The board of directors broke our trust, they betrayed us,” said Hardev Aujla, a grower from Vernon. “We chose them and they did represent us. The CEO, he circulated video every week, but he never mentioned anything about this move.”

But Sarafinchan said the board was unable to reveal the decision earlier due to its human resources policies.

The main reason is that BC Tree Fruits has a strict policy that it will not publicly reveal decisions that affect the jobs of its workers, until all of the options have been discussed with those employees. In this case, Sarafinchan said there are 95 employees who will be impacted by the change, and while all of them would be offered a position in Oliver, that would still entail them having to move their homes in order to continue working with BC Tree Fruits.

“Whatever the decision would have been, it was going to impact people in our business,” Sarafinchan explained. “One of our values is we treat people with respect and when we look at a decision like this - and in this case there are around a hundred roles that are going to go away - to have a consultation with the broader grower community on that would not have been appropriate, so we did that out of respect for our team.”

The plan originally was to meet with growers and unveil the plan in detail at a live meeting at the Ramada Hotel in Kelowna, but that meeting was cancelled after the hotel raised concerns about security issues.

“We absolutely wanted to sit down with our growers and have this conversation in a live environment,” Sarafinchan said. “In this particular case we got a call from the venue asking us to put (security) measures in place that would have been impossible to secure in the amount of time that we had. So, recognizing the concern that the venue raised, we felt we just couldn’t get those resources in place, and so we had to move the meeting on to Zoom, (but) we ended up with a good turnout.”

BC Tree Fruits also immediately rescheduled the live meeting with growers, staging one in Oliver and one in Kelowna.

Does It Make Sense to Ship Fruit From Vernon to Oliver?

Many of the growers who oppose the decision are located in the North Okanagan, in and around Vernon.

Mike Mitchell, the owner of B&T Orchards in Lake Country, argues it doesn’t make any sense to ship fruit two hours south, and then ship the bins back to the north

”You can’t transport apples when it is 20 below and then all of sudden the highway in Summerland gets shut down and that food is frozen. The biggest concern for the growers is the distance the fruit is going to have to travel. The consumer wants a perfect apple. Every time an apple gets a little bruised it costs the growers money.”

Sarafinchan, however, says the BCTF’s board has carefully considered the problems and costs of shipping, and that past experience tells them the fruit can reliably be shipped that distance without impacting quality. He also said moving the location to Oliver will not affect grower operations at all.

“You brought up an important question, which is, where will growers deliver their product in the future,” he said. “For all intents and purposes, where growers deliver products today will effectively be the same.

“We will be transferring the fruit down to Oliver, but we already do that to an extent today. On the other side, we also have fruit moving from the South Okanagan and Similkameen Valleys to operations in the north, so there has always been fruit moving in both directions.”

On cost, Sarafinchan said the co-op’s management has crunched the numbers. “We have built that cost into the business case, but the decision is still very clear that Oliver is the place for the cooperative to be in the future,” he said.

Despite protests by some growers, Sarafinchan believes most support the decision, and understand the board had to make a choice that benefits all members of the cooperative.

“A cooperative by definition is a sort of extended family,” he says. “We’re not all going to agree, but the right decision has been made in the best interests of all growers. The changes for growers in the north will be very minimal.

“I understand why growers are saying they want to be consulted, but it is the board’s role to make decisions that are in the best interests of all the growers; not northern growers or southern growers, but all growers within the organization, and that’s what our board did.”