Agriculture ministers to examine grocery retailers’ fees charged to suppliers

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Amid calls to create a code of conduct for the grocery industry, Canada’s federal, provincial and territorial agriculture ministers have agreed to examine the issue of fees charged by retailers to their suppliers.

Industry groups representing both food producers and small retailers have raised alarms for years about retailers imposing fee increases, and recently renewed calls for the government to consider regulations to oversee the industry.

The ministers’ working group will study the fees and will consult with industry representatives before issuing a report by July, 2021.

The renewed pressure has come in the wake of recent decisions by retailers such as Walmart Canada and Loblaw Companies Ltd. to hike fees for manufacturers. It is standard for retailers to deduct a percentage of what they pay to vendors for each order, to pay for things such as in-store promotions and shelf placement. Retailers have justified recent fee hikes by saying that they are spending money on store upgrades and improvements to e-commerce capabilities.

But suppliers have called foul, saying that the grocery sector has undergone consolidation, leaving them at a disadvantage in negotiating more reasonable fees with retailers that control large parts of the market. And smaller grocers have said this creates an “uneven playing field” because they have to make similar investments out of their own pockets, without concessions from suppliers that bigger chains receive.

“We all recognize that these fees recently imposed by some retailers are really worrying,” federal Agriculture and Agri-food Minister Marie-Claude Bibeau said during a press conference after a meeting with provincial and territorial agriculture ministers on Friday. Ms. Bibeau will co-chair the working group with Quebec’s Minister of Agriculture, Fisheries and Food, André Lamontagne.

Ms. Bibeau signalled that the group is open to creating some kind of code for the industry, which would require co-operation among jurisdictions.

“We’re hopeful they’ll put an emphasis on the creation of a code of conduct so that there is something in place that can create a rule book for the relationship between retailers and suppliers,” said Michael Graydon, chief executive of Food and Consumer Products of Canada, a trade group representing manufacturers. He said that suppliers may also need to make changes – such as providing retailers with greater transparency in forecasting their production capacities to allow for more accurate orders – and acknowledged any regulation would be a “two-way-street.”

Representatives from the Canadian Federation of Independent Grocers and the Dairy Processors Association of Canada echoed Mr. Graydon’s hopes for a code of conduct for the industry.

Loblaw Companies Ltd., Metro Inc. and Walmart declined to comment on the establishment of the working group.

Late last month, the CEO of Sobeys owner Empire Companies Ltd. called some of the practices in the industry “repugnant,” and said that it was time to implement some “ground rules.” Speaking at an online Empire Club of Canada event on Oct. 28, Michael Medline said he was open to a code similar to what Britain has in place. The British code is regulated by the government, but Mr. Medline added that he did not think government-imposed legislation would help. “The industry can fix this,” he said at the time. In an e-mail on Friday, Mr. Medline said he stands by those comments.

Ms. Bibeau also suggested that an industry-led solution would be preferable.

“If the industry moves forward with a code of conduct, that would probably be the best scenario,” she said on Friday. “We will pay close attention to that.”

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