Farmers, food processors balk at fees from large grocery retailers

OTTAWA – Canada’s farm and food processing lobbies say the latest round of fees introduced by large grocery retailers on their suppliers comes as they already face “a complex web of arbitrary fees and penalties” in their relationships with large grocery retailers, in addition to managing the on-going impact of COVID-19.

In a joint statement issued Aug. 6, seven national farming and food processing associations stated fees and penalties imposed by large grocery retailers on Canadian farmers and food and beverage processors negatively impact Canadian consumers causing lower investments and product innovation.

“Requiring food and beverage suppliers to cover the cost of investments in retail stores will come at the expense of the farmers’ and  processors’ own investments in their Canadian facilities,”  the associations state.

Last month, Walmart announced it would charge suppliers 1.25 per cent on the price of products it purchases from them, as well as an additional 5% on goods sold through e-commerce.

The new fees, slated to take effect Sept. 14, are aimed at helping cover the cost of Walmart’s multi-billion dollar plan to upgrade its Canadian stores, distribution network and online ordering systems, Walmart told its suppliers

Walmart’s move was followed by United Grocers Inc., a national buying group that negotiates supply deals on behalf of Metro Inc., Save-on-Foods and other retailers telling suppliers in a letter that it will “expect to receive any cost reduction” offered to competitors.

Reduced revenues

The associations also contend the charges will reduce revenues for Canadian farmers.

“There is no scenario under which these arbitrary fees and penalties will benefit Canadians. On the contrary, they will ultimately impact Canada’s food security, as small and mid-sized farms and food processors already struggle to continue participating in this retail environment,” the associations state.

The organizations say an ever more concentrated and powerful retail sector versus a food production and processing sector that is being weakened to unsustainable levels led the United Kingdom government to intervene and legislate against inappropriate practices through the introduction of a Groceries Supply Code of Practice in 2009.

“This is an issue of strategic importance for Canada’s food security,” state the organizations, who are calling on the federal and provincial governments to implement a code of practice in Canada to “check this arbitrary conduct from large grocery retailers,” and review all current fees, penalties and after-sale deductions.

The organizations state, “Governments must heed the lessons of the successful UK experience in rebalancing competitive forces in the food sector. In the words of the U.K. Competition Commission 2008 final report on supplies of groceries:  ‘…we found that the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.’”

Signatories to the statement include the Canadian Federation of Agriculture, Canadian Beverage Associations, Dairy Processors Association of Canada, Food and Consumer Products of Canada, Food and Beverage Canada, Canadian Horticulture Council and the Bakers Association of Canada.