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Saturday, October 25, 2014

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Could kosher food be cheaper?

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Thornhill housewife Alison Finkelstein has seen the comments on her Facebook pages questioning the cost of kosher food in Toronto – particularly meat – and whether the fees charged by the Kashruth Council of Canada – which administers the COR hechsher and is also known by that name – contribute to that expense.

Finkelstein, a Thornhill mother of five, has noticed that the price of kosher food in Toronto is higher than in Florida, where she often visits. Her friends have noticed, too.

Finkelstein says that following the demise of locally based Chai Poultry in 2013, the price of kosher chickens rose. She pays about $14 for a package of cut-up chicken that used to cost $9 or $10, she said.

“And the quality seems to have gone down from the Chai days,” she claimed.

“It’s become very expensive for roast too,” she said. “A good cut of London broil for a family of seven usually costs between $35 and $40,” she said.

Lawrence Lax has concerns over the high cost of kosher meat, too.

“There seems to be no voice to speak on behalf of the Jewish community regarding food pricing,” he said. “It would seem appropriate that the largest organization representing the Jewish community, COR, should be a voice of the people.”

Lax said he’s seen people at the meat counter checking the prices, doing a double take, and making the purchase anyways. “People just lay down and roll over on this stuff,” he said. “They don’t feel they can have a voice.”

For years, until the appearance in 2008 of Badatz Toronto on the scene, COR dominated the market on the certification of kosher products, though a few kashrut agencies from other cities, supervised some production. With virtually no competition in the Toronto market, economic theory suggests prices will rise, and quality may suffer.

The kosher chicken and meat situation signals that consumers may be paying the price – but others say it’s just a symptom of the larger problem, which is that COR wields a dominant position when it comes to kosher certification in Toronto.

Timothy Lytton, author of Kosher, Private Regulation in the Age of Industrial Food, believes “competition can be very good for kosher consumers.” However, generally speaking, compared to packaged goods, there is much less competition in the food-service industry, which affects caterers, restaurants and supermarkets, resulting in “much more anti-competitive behaviour.”

In the United States, Lytton explained, large certification agencies such as OU, Kof-K and Star-K work with national food manufacturers that produce kosher foods on supermarket shelves everywhere. “They will generally shy away from food services” and leave that to local agencies. There is a history of “local nasty politics” and “rivalry” among local agencies, he said.

The dispute between COR and the fledgling Badatz certification agency prompted intervention last December by AKO, the U.S.-based Association of Kashrus Organizations.

Rabbi Moshe Elefant, chief operating officer of OU, the world’s largest kashrut certification agency, based in New York, was part of the delegation that came to the city to broker peace. He compared it to diplomats trying to bring Arabs and Israelis together. “We did shuttle diplomacy, but we never sat together,” he said.

On paper, the dispute between COR and Badatz seems like a mismatch. While Badatz is a relative newcomer and supervises about 25 businesses – it recently scored something of a coup, certifying a Passover getaway at the White Oaks resorts attended by more than 600 people – COR is a major player in Canadian kosher supervision.

For decades, COR was part of Canadian Jewish Congress, but in 2000 it was incorporated as a non-profit charitable organization. Its financial information is available to the public on the Canada Revenue  Agency website, but the data raises several questions.

COR’s first filing with the CRA came in 2004, when it listed as its only revenue almost $1.4 million in “total gifts received from other registered charities.” Explaining the large sum, a COR ad that ran recently in The CJN as an “Open Letter to the Jewish Community” noted that a $20,000 annual surplus over 30 years, invested with reasonable returns, gave it more than $1 million for start-up purposes when it left Congress.

The same year COR struck out on its own, it reported making a $1 million gift to the Matan Foundation, a charitable organization about which little is known other than that it was housed in the same building on Bathurst Street as COR at the time. Over the years, the two organizations have had some of the same directors on each board.

COR has not explained the reason for the transfer of funds.

Beginning in 2006, Matan made charitable “gifts to qualified donees” of $464,035 (2006); $255,600 (2007); $49,800 (2008); $2,400 (2010); and $285,000 (2011).

Matan’s CRA documents indicate the “qualified donees” in each case was the Kashruth Council of Canada, except in 2006, when Matan also gave $3,000 to Choson Kallah Fund of Toronto, $3,036 to Toronto Lakewood Minyan and $10,000 to the Mizrachi Organization of Canada, in addition to $448,000 given to COR.

COR’s business has been growing significantly in recent years, according to its CRA filings. In 2005 it reported revenues of nearly $3.7 million and it paid compensation of about $3 million, of which $322,838 was for “administration.” By 2012, COR reported total revenue of just over $5 million and total expenditures on all compensation of almost $4 million. It had 126 full-time employees.

Although it’s a registered charity, it handed out just $13,200 in charitable gifts that year.

In 2013, COR reported total revenue of $5.4 million and salary compensation of $4.1 million, including more than $1 million in administration costs, despite reporting a drop in the number of its full-time employees, from 126 to 37.

The filings indicate that nine of the 37 earned between $80,000 and $119,000 and one earned between $120,000 and $159,999. That left around $3 million in compensation for other employees.

COR also reported it held more than $1 million in cash, bank accounts and short-term investments. Total liabilities amounted to around $246,000.

COR allocated $2,500 in charitable gifts in 2013.

The CRA filings raise a number of questions. Among them: what is the relationship between COR and the Matan Foundation? Why did COR’s total expenditures rise in a year it shed so many full-time employees? And why isn’t the non-profit organization giving back more to the community in the form of charitable donations or lower fees?

COR refused to answer questions posed to it by The CJN. In an emailed statement, the kashrut agency wrote, “There is nothing COR wants more than to see our certified establishments prosper and for consumers to have access to kosher food at competitive prices.”

But Rabbi Moshe Bensalmon, one of the founders of Badatz, isn’t buying it. He estimates that kosher food produced in Toronto “costs consumers 10 to 15 per cent higher [than it otherwise would] because of COR.”

Rabbi Bensalmon’s son, Moti, a spokesperson for Badatz, said Badatz charges its clients fees that are 10 to 15 per cent less than COR’s, sometimes 30 per cent less.

“If we didn’t exist, they [COR] could charge $40 to $50 an hour [for supervision]. Who’s going to keep them in check?” he asked, adding that COR’s fees to caterers for its mashgichim has ranged from $35 to $38 an hour – and $42 to $45  for larger institutional clients – compared to Badatz’s consistent $30 hourly rate.

Though COR’s fees amount to only a fraction of a kosher food producer’s costs, Moti Bensalmon believes they have an impact on the extent of competition in the marketplace.

“There are small companies out there who would like to get certified but can’t afford it, which leads to less competition on certain items, whereby the kosher consumer is stuck buying products with the higher cost,” he said.

And as for COR and its multi-million dollar revenue stream, “I think if COR would act as a non-profit organization they would be able to lower their fees to restaurants and caterers and more places would be able to stay in business.”

But with only about 25 clients, Badatz’s influence on prices is limited.

And that might be one of the reasons  Alison Finkelstein, Lawrence Lax and others like them find the cost of kosher food so high these days.

 

Next week, our “Behind the Label” series  concludes with a look at potential conflicts of interest in the kosher supervision industry and some solutions that might solve the problem.

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