Loblaw hikes supply chain charges for its suppliers as transportation costs rise

Loblaw Companies Ltd. is increasing how much it costs suppliers to get products on its grocery and drugstore shelves.

In a letter to suppliers on Oct. 3, the company said it has experienced significant year-over-year increases in many of its supply chain costs, including higher "cartage'' or freight costs.

Loblaw said its supply chain handling fees will go up Jan. 1, 2023, with increases to both distribution centre delivery charges and direct-to-store delivery charges.

"These fee changes reflect those supply chain cost increases,'' Blaine Caldwell, Loblaw senior vice-president of logistics and replenishment, said in the notice to suppliers.

Industry observers say fee increases will likely be passed on to consumers, contributing to higher food prices.

"This is an example of a unilateral decision made by grocers to increase fees and and get suppliers to financially support their operations,'' said Sylvain Charlebois, Dalhousie University professor of food distribution and policy.

Sometimes the higher fees and charges are warranted and reflect the rising cost of doing business, while sometime they are less clear cut, he said.

"It points to why we need a code of conduct,'' Charlebois said.

In a progress report in July, an industry committee set up to establish a grocery code of conduct said it made significant progress but may require government intervention if it fails to resolve the outstanding matters by November.

Loblaw vice-president of communication Catherine Thomas said at this time of year, the company advises its suppliers of fees to move goods through its network for the following year.

"This includes situations where we pick up, ship and deliver their goods for them,'' she said in an emailed statement. "Our costs for handling this business have gone up and consequently we are notifying suppliers of some adjustments to the fees, if they choose to use these services.''

Earlier this week, Loblaw announced it would freeze prices on all its in-house No Name products until Jan. 31, 2023, in an effort to help customers grappling with inflation.

Critics warned the company could look to recoup profit losses elsewhere.