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August 7, 2020

Canadian food bodies call for code of conduct following fees hike

Food and beverage organisations in Canada have joined forces in a coordinated response after major grocers hiked their fees.

By Leonie Barrie

Food organisations in Canada have joined forces with beverage industry bodies and farming groups to call on the country’s government to take action after major grocers hiked their fees.

The coalition of groups is calling for the introduction of a code of conduct governing the grocery industry in the country.

They said their action was prompted by the local arm of US supermarket giant Walmart advising suppliers late last month of an increase in the fees it charges to sell their products both in stores and online.

The organisations said that United Grocers Inc., a group representing major grocers including Metro and Alimentation Couche-Tard, then told suppliers it expects the same terms as its competitors.

In a joint statement released on Thursday (6 August), seven industry groups – the Canadian Federation of Agriculture, the Canadian Beverage Association, Food & Consumer Products of Canada (FCPC), the Dairy Processors Association of Canada, Food and Beverage Canada, the Canadian Horticultural Council, and the Baking Association of Canada – warned new fees imposed by large grocers would hurt farmers and food and beverage processors.

They suggested if all of the major grocery retailers follow suit, it could mean more than CAD1bn (US$748.5m) in new costs for manufacturers.

The FCPC said: “The joint statement follows recent aggressive moves by Walmart and United Grocers to extract funding from suppliers, despite suppliers’ warnings that the new costs are unreasonable and threaten the affordability and security of the nation’s food supply. More than 90% of food processors are small businesses and the entire sector is continuing to grapple with the profound impacts of the Covid-19 pandemic.  

“The imposition of these arbitrary fees is only the most recent example of grocery retailers’ using power imbalances in the food sector to their own advantage. FCPC has long raised concerns that Canada’s consolidated grocery retail sector and the high cost of doing business contribute to rising food prices, erode Canada’s ability to attract critical investment, and limit new job creation in food and consumer goods manufacturing, as investors find greater returns abroad.”

FCPC CEO Michael Graydon added: “You don’t need to look further than dominant grocery chains’ public earnings statements to see that Canada’s Big Three grocers’ profit margins are as much as double that of a typical food processor. These arbitrary fees will wipe out processors’ slim and shrinking margins, and they will be nothing short of devastating for Canada’s farmers.” 

Walmart, quoted in Canada’s The Globe and Mail newspaper, said its new fees, which take effect from 14 September, will include a 1.25% charge for “infrastructure development” and a 5% “e-commerce development fee” for products sold online. 

In a widely-quoted statement, the grocery giant said it plans to invest in building two distribution centres, to add new technology to create “smart stores” and to renovate 150 of its 408 stores.

It said the investment is intended “to generate significant growth and to make the online and in-store shopping experience simpler, faster and more convenient for Walmart’s customers”.

The Globe and Mail quoted Canada’s Minister of Agriculture and Agri-Food, Marie-Claude Bibeau, as saying the new fees are “disappointing”.

She said: “Given the scale of the costs raised here when compared to the current market-wide conditions and the impacts associated with the ongoing pandemic for both suppliers and retailers, such circumstances should be fully considered in the pending industry discussions.”

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