XL Foods' Nilsson family maintains silence

XL Foods was ill-suited to run Canada’s biggest beef plant.

When it comes to communication, Brian and Lee Nilsson, the Edmonton-based co-CEOs of XL Foods, hew to tradition. If the Edmonton-based brothers have nothing nice to say, they rarely say anything at all.

The Nilssons remained silent and invisible through most of their private company’s very public unravelling this fall. The two waited more than a month after inspectors found E. coli in XL beef before granting any interviews. Even then, they gave only one each: Brian to a national news wire, Lee to the industry press. Not for them the kind of televised mea culpa by CEO Michael McCain that set Maple Leaf Foods on the mend after its 2008 listeria outbreak.

In the absence of information from the company, speculation ran wild. At least three major newspapers ran long stories probing the family behind XL. Public-relations experts had a field day critiquing the company’s crisis management.

“We’re hearing from the disaffected workers. We’re hearing from the union. We’re seeing stories on…the ‘mysterious’ characters behind XL Foods.” says Neil Everton, a partner at Podium Media and Communications Coaching in Nova Scotia. The only ones we weren’t hearing from were the owners. This was one case where appearances, or the lack thereof, really did have a bearing on reality.

Then, after-hours on Oct. 16, XL announced that a subsidiary of a Brazilian agri-foods giant was taking over management of the company’s beleaguered Lakeside Packers plant. As part of the deal, JBS USA also got an exclusive option to acquire Lakeside, which had been closed since September, and the rest of XL’s Canadian and U.S. operations.

The price, US$100 million, is considerably less than the Nilssons paid for Lakeside alone three years ago, and it immediately raised questions about their finances. Less than 24 hours after the deal was announced, the Calgary Herald published evidence that XL was likely drowning in red ink. Some began to question how the Nilssons, who 20 years ago had barely a toehold in meat packing, had so quickly become dominant players in the Canadian industry. (With Lakeside, XL Foods was Canada’s second-largest meat-packing concern after U.S.-based Cargill Inc.)

The Nilsson family has been in the Alberta cattle business for three generations, mostly on the auction side, until it bought XL Foods in 1998. The company then picked up Lakeside from Tyson Foods in 2009. “I was really puzzled by that,” says Ian MacLachlan, an agricultural economist at the University of Lethbridge. “I didn’t think XL had the capital resources to do it.”

In retrospect, that may well have been the case. Doug O’Halloran, president of the union local that represents Lakeside workers, believes the new owners were in over their heads from the beginning. The Nilssons never once met with the union, despite repeated requests, and refused any advice on plant safety or operations, he claims. “I believe they didn’t know 50% of what was going on at this plant.”

If the brothers are reclusive now, they haven’t always been that way. Back in 1983, Lee Nilsson was appearing in The Globe and Mail wearing a straw-coloured Stetson and joking about the family’s new live-by-satellite auction business. Up to 2010, Brian Nilsson often spoke publicly on behalf of the meat-packing industry. At some point, for some reason, that changed. Only the Nilssons themselves can explain why. But if the past six weeks are any sign, they aren’t likely to do that any time soon.