The Canadian division of French dairy giant Lactalis is reportedly in a stand off with the country’s supermarkets over fines the grocers are attempting to impose for light shipments.

It is the latest demonstration of tension between Canada’s grocers and food suppliers following an ongoing spat over supermarket groups increasing the fees they charge food manufacturers for selling their products.

According to the country’s Financial Post newspaper, the latest row is linked to volatile customer demand during the Covid-19 pandemic.

The newspaper reported that supermarkets have historically charged suppliers penalties when their shipments come up short but some in the sector argue those fines are no longer fair given that food producers are facing volatile demand and absenteeism in their factories as a result of Covid-19.

It said Lactalis Canada – behind brands such Beatrice, Lactantia, Cracker Barrel and Black Diamond – told retailers in a letter last week that it is making cheese at maximum capacity in order to stay on top of rising demand driven by stay-at-home orders and the holiday season.

A letter from the dairy company to grocers obtained by the newspaper read: “In the spirit of fair and cooperative practice, Lactalis Canada will not accept any penalties or fines over the holidays effective immediately until January 11, 2021.”

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The newspaper reported that most Canadian grocery chains stopped charging fines during the first months of the pandemic in the spring but some supermarket groups have now started to reimpose the charges.

The growing tension between the country’s food suppliers was highlighted in a statement last week from Michael Graydon, CEO of Canadian Food industry body FHCP.

He said: “For far too long, some large grocery retailers have used farmers and suppliers as a piggy bank, imposing arbitrary fees, raising costs, and paying suppliers less than they are owed – all while charging shoppers more and more.

“The consequences are severe. When farmers and suppliers are forced to pay retail giants’ bills, they struggle to pay their own and must cut back on innovating new products, investing in new facilities, and creating new jobs. ‘Made in Canada’ food becomes more expensive, and our food system weakens.”

The Financial Post contacted Canadian grocery majors Loblaw, Walmart Canada and Sobeys but they declined to comment. Metro told the newspaper it will “continue to exercise judgment in our procurement policies”.

just-food has contacted Lactalis Canada seeking further comment on this issue.