All grocers need to sign code of conduct for it to be successful, Metro CEO tells MPs

Some executives say they cannot sign the code in its current form, fearing increasing prices for consumers.
12/13/2023
Woman Shopping in Grocery Store

All major industry players need to sign on to the grocery code of conduct in order for it to be successful, says Metro Inc. president and CEO Eric La Fleche.

La Fleche told MPs at a House of Commons agriculture committee meeting on stabilizing food prices that Metro is willing to sign the code as it's currently drafted. “Our team played a leading role in the development of the code. And we are convinced that the participation of all grocers and suppliers is essential to its success.”

Executives from Walmart Canada and Loblaw Cos. Ltd. told the committee that they can't sign the code in its current form because they're concerned it will raise prices for consumers. Federal Agriculture Minister Lawrence MacAulay and Quebec Agriculture Minister Andre Lamontagne called on all the major grocers to sign the code.

New research by the Centre for Future Work suggests profits in the Canadian grocery sector will likely exceed $6 billion this year, setting a new record. The report by the progressive research institute, released and presented to the committee Monday, found food retailers are now earning more than twice as much profit as they did pre-pandemic.

Citing Statistics Canada data, the report said the net income margin on food and beverage retailing has consistently exceeded 3% of total revenues since mid-2021, more than double the average margin between 2015 and 2019. The data shows retailers took advantage of the pandemic and its aftermath to increase their profits, Jim Stanford, economist and director of the Centre for Future Work, argues in a news release.

“An industry can't double its profits, if it is merely passing on higher expenses,” he says.

The major grocers have been under pressure from the government to help stabilize food prices. Earlier this fall, the heads of the five biggest grocery companies were summoned by the government to present their plans.

La Fleche told MPs that food inflation has been driven by global market forces, and while prices are stabilizing, he said that can't be achieved overnight, and nor can it be the responsibility of grocers. “Metro stands at the end of a very long supply chain, which continues to experience instability. And we are already facing pressure for cost increases in the new year,” he says.

The company is in a blackout period between Nov. 1 and Feb. 1, meaning it won't accept any supplier cost increases, said La Fleche. This is a long-standing practice, he adds. La Fleche continues he met with federal Industry Minister Francois-Philippe Champagne three months ago, and committed to two things: to “continue to work to deliver the best value possible”' and to sign the grocery code. “We have a commitment to delivering value to our customers and offering the best prices. We've always done it and we will keep doing it. And we are doing it even more now in a context of inflation.”

MPs pressed La Fleche on what the grocer is doing to stabilize food prices, with Liberal MP Leah Taylor Roy questioning whether the company is doing anything beyond its normal practices. “What you gave us was the norm. And what we were asking for was something out of the norm, something that could help your customers and show Canadians that the grocery chains do care about the struggles that people are having today,” she says, referring to a submission by Metro to the committee regarding its plans to stabilize food prices.

La Fleche reiterated that the company is committed to delivering value to its customers. He also says that while the amount of money Metro makes has increased over the past two years, the company's profit margins haven't.

Executives from Loblaw, Empire and Walmart shared some details of their plans to stabilize prices with the committee. Loblaw chairman Galen Weston said a meeting with Champagne resulted in “materially lower prices” for 35 often-purchased items and categories, such as milk, butter, eggs and chicken.

In previous appearances before the committee, the grocers pushed back against the idea they have unduly profited from inflation.

MacAulay and his provincial and territorial counterparts, along with Champagne, met to discuss the government's efforts to stabilize food prices and the grocery code of conduct.

“Following over two years of industry negotiations and missed deadlines, Ministers MacAulay and Champagne are extremely disappointed that some supply chain partners, including two of the five major retailers, have indicated that they will not sign on to the code,” the ministers said in a press release. “The government of Canada continues to explore all available options and requested that the provinces and territories do so as well.”

Weston told MPs last week that the company is concerned certain provisions in the code will raise grocery prices for Canadians as it gives too much negotiating power to large multinational manufacturers. He says the grocer will sign the code, but not in its current form.

Walmart Canada CEO Gonzalo Gebara told MPs the company is “not in a position at this time to commit” to the code. He said the current version includes provisions that “create bureaucracy and cost, cost that will inevitably end up on shelf prices.”

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