Customers pack a Sobeys grocery store in St. John's on Tuesday, January 21, 2020.The head of Sobeys Inc. says the grocer won't follow its Canadian competitors in unilaterally hiking supplier fees, calling the practice "hard to believe and repugnant." THE CANADIAN PRESS/Andrew Vaughan

Sobeys CEO calls competitors’ fee increases on suppliers ‘repugnant’

Sobeys CEO calls competitors’ fee increases on suppliers ‘repugnant’

The head of Sobeys Inc. says the grocer won’t follow its Canadian competitors in unilaterally hiking supplier fees, calling the practice “hard to believe and repugnant.”

Michael Medline, president and chief executive of Sobeys and its parent company Empire Company Ltd., said the move by some grocery retailers to impose fee increases on suppliers has left consumer goods companies feeling bullied.

“This is the worst relationship I’ve ever seen in my couple of decades in retail,” he said during a virtual talk with the Empire Club of Canada on Wednesday.

“I don’t think it’s healthy … some of these behaviours are just plain bad for Canada.”

Medline added: “It discourages innovation in terms of products. It hollows out our country in terms of head offices for (consumer packaged goods) companies and jobs.”

Medline said it’s time for a code of conduct in the grocery industry – the first CEO of a major grocery chain in Canada to publicly support the idea.

Grocery stores charge vendors fees for services like marketing, shelf placement, inventory costs, packaging and deliveries.

Loblaw Companies Ltd., Walmart Canada and a national buying group that represents Metro Inc. have all said they plan to increase fees.

While these costs have historically been negotiated between retailers and suppliers, the big grocery chains are increasingly unilaterally imposing the charges. They’re also introducing new fees for capital investments such as upgrades to stores and e-commerce operations.

Based in Stellarton, N.S., Sobeys operates across Canada under several banners including Sobeys, FreshCo and Safeway.

Medline said the practice of having a small handful of large grocers impose fees on suppliers risks hurting farmers, consumers and “mom and pop” food retailers in Canada.

“We negotiate and communicate and discuss things with our supplier partners,” Medline said. “Sometimes supplier partners aren’t going to like what they hear and sometimes we won’t. But across-the-board goring of each other does not work.”

Medline said he is open to a code of conduct if it were fair and applied to all grocers and suppliers.

“It has to cut both ways,” he said. “Suppliers need to also promise to play fair.”

A number of groups that represent independent grocers, producers and suppliers have repeatedly called for a code of conduct.

In a letter Tuesday to federal Agriculture and Agri-Food Minister Marie Claude Bibeau and Ontario’s Minister of Agriculture and Food Ernie Hardeman, eight organizations said consolidation in the food industry has distorted fair market practices.

The groups, which include the Canadian Federation of Independent Grocers, said large retail chains like Walmart and Loblaws are imposing unilateral costs on suppliers, fining suppliers for shortages and offloading operating costs onto suppliers.

“These practices have and will continue to have, a significant impact on the ability of Canada’s independent retail grocers, farmers, food and beverage producers and processors, to compete fairly and at the same time, innovate and invest in their own businesses,” the letter said.

“There is also no doubt that these practices, if left unchecked, will continue to impact food security, food prices and employment,” it added.

The organizations are asking for the issue to be added to the agenda at the next meeting of agriculture ministers in November.

The federation applauded Medline’s support for a grocery code of conduct for Canada.

“We have fought many years for this code on behalf of independent grocers, but we believe the development of such a document is also in the best interests of the food industry as a whole,” spokesman Gary Sands wrote in an email.

“Our goal now is to see a process developed under the auspices of government, that allows industry to work together at developing a fair and balanced code of conduct that applies to all stakeholders — retailers, suppliers, wholesalers and distributors — in the industry.”

Walmart Canada announced a fee hike in July that prompted United Grocers Inc., a national buying group that represents Metro Inc., to tell suppliers it expects the same costs as competitors.

Last week, Loblaw told some suppliers that the cost of getting products on shelves would go up in January.

Citing plans to improve its in-store and digital operations over the next five years, the grocery giant said existing charges for delivery would go up, and a new 1.2 per cent fee would be introduced.

This report by The Canadian Press was first published Oct. 28, 2020.

Companies in this story: (TSX:L, TSX:MRU, TSX:EMP.A)

Brett Bundale, The Canadian Press

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer RCMP say a 30-year-old man faces sexual charges against a teen. (File photo by Advocate staff)
Man killed in two-vehicle collision near Penhold, says Blackfalds RCMP

A 46-year-old man is dead following a two-vehicle collision on Highway 42… Continue reading

(Photo by Paul Cowley/ Advocate Staff)
Mask bylaws not popular in rural areas

Red Deer and Blackfalds bylaws requiring masks in public places kick in on Monday

Red Deer RCMP say a 30-year-old man faces sexual charges against a teen. (File photo by Advocate staff)
Innisfail RCMP arrest man following ‘lengthy pursuit’

Innisfail RCMP say a “lengthy pursuit” through a rural area ended with… Continue reading

hay
Hay’s Daze: Giraffe knows filling wishes can sometimes be a tall order

Last weekend, I had a lovely breakfast. “So what?” you may say.… Continue reading

A person enters a building as snow falls in Ottawa, Sunday, Nov. 22, 2020. Ottawa has been successful in limiting the spread of COVID-19 during its second wave thanks to the city’s residents who have been wearing masks and staying home, said Ottawa’s medical officer of health Dr. Vera Etches. THE CANADIAN PRESS/Justin Tang
People to thank for Ottawa’s success with curbing COVID-19: health officer

The city’s chief medical officer said much of the credit goes to the people who live in Ottawa

NDP Leader Jagmeet Singh asks a question during question period in the House of Commons on Parliament Hill, in Ottawa, Thursday, Nov. 26, 2020. NDP Leader Jagmeet Singh says tonight's public video gaming session with Alexandria Ocasio-Cortez is about reaching young people where they hang. THE CANADIAN PRESS/Sean Kilpatrick
NDP leader stoked over ‘epic crossover’ in video gaming sesh with AOC

Singh and AOC discussed importance of universal pharmacare, political civility, a living wage

A south view of the Ward Hunt Ice Shelf breaking apart is seen from Ward Hunt Island, Nunavut, in an Aug. 20, 2011, handout photo. The remote area in the northern reach of the Nunavut Territory, has seen ice cover shrink from over 4 metres thick in the 1950s to complete loss, according to scientists, during recent years of record warming. Scientists are urging the federal government to permanently protect a vast stretch of Canada's remotest High Arctic called the Last Ice Area. THE CANADIAN PRESS/HO-CEN/Laval University, *MANDATORY CREDIT*
Scientists urge permanent protection of Last Ice Area in Canada’s High Arctic

Tuvaijuittuq has the thickest and oldest ice in the Arctic

In this file photo, a lotto Max ticket is shown in Toronto on Monday Feb. 26, 2018. (By THE CANADIAN PRESS)
No winning ticket for Friday night’s $55 million Lotto Max jackpot

No winning ticket was sold for the $55 million jackpot in Friday… Continue reading

In this Friday, March 13, 2020, photo, Nic Talbott looks up from his computer at his home in Lisbon, Ohio. Talbott was participating in an Army ROTC program after an Obama administration policy permitted transgender people already serving in the military to be allowed to do so openly. As vice president in 2012, Joe Biden endeared himself to many LGBTQ Americans by endorsing same-sex marriage even before Obama. Now, as president-elect, Biden is making sweeping promises to LGBTQ activists, proposing to carry out virtually every major proposal on their wish lists. (AP Photo/Keith Srakocic)
Biden plans swift moves to protect and advance LGBTQ rights

As vice-president in 2012, Joe Biden endeared himself to many LGBTQ Americans… Continue reading

Canadian Olympic gymnast and National Sport School alumni Kyle Shewfelt announces his retirement in Calgary, Thursday, May 21, 2009. Calgary's board of education will close the National Sport School that has produced Olympic and Paralympic champions for 26 years. THE CANADIAN PRESS/Jeff McIntosh
Calgary’s National Sport School to close, looks to join a different school division

Calgary’s National Sport School to close, looks to join a different school division

Canada's Erica Wiebe, left, celebrates after defeating Nigeria's Blessing Onyebuchi, right on the ground, to win Gold medal in women's FS 76Kg wrestling at the Commonwealth Games on Gold Coast, Australia, Thursday, April 12, 2018. THE CANADIAN PRESS/AP-Manish Swarup
Canada’s Olympic champion wrestler Erica Wiebe eyes return to competition

Canada’s Olympic champion wrestler Erica Wiebe eyes return to competition

Most Read