Major grocer group urges discounts from suppliers

A major network of Canadian grocers is asking suppliers for equal treatment just days after Walmart Canada introduced a controversial plan to charge suppliers more fees to help pay for an infrastructure upgrade.

United Grocers Inc., a national buying group that negotiates supply deals on behalf of Metro Inc., Save-on-foods, Longo’s, Alimentation Couche-tard Inc., and other retailers, told suppliers in a letter on Wednesday that it will “expect to receive any cost reduction you may decide to offer any competitors.”

The move has intensified concerns from Canadian suppliers, who warned last week that Walmart’s extra fees could burst their already-slim margins and threaten the stability of manufacturing in Canada if other retailers followed suit with similar requests.

Last week, Walmart said it will charge suppliers 1.25 per cent on the price of products it purchases from them, as well as an additional five per cent on goods sold through e-commerce. The new fees, which start Sept. 14, will help cover the cost of its five-year, $3.5-billion plan to upgrade its Canadian stores, distribution network and online ordering systems, Walmart told its suppliers on Friday.

UGI president Michael Forgione, who wrote the letter to suppliers on Wednesday, said his members brought the Walmart fees to his attention. UGI, which combines the buying power of its members for benefits like volume discounts, said it represents 34 per cent of Canadian food industry across 6,500 stores. The company started in 1972 to give independents a chance to compete against the big grocery chains, according to its website.

“UGI members will strongly expect from all suppliers to be treated fairly and competitively,” Forgione wrote.

Forgione said UGI won’t implement Walmart-style fees, but wasn’t precise about how his organization will get the same cost reductions from suppliers.

“Through our normal course of business, we’ll continue to work with suppliers to make sure our members are treated fairly,” he said in an interview on Thursday morning, adding it was still early in the process.

Food and Consumer Products Canada (FCPC), an industry group that represents Canadian manufacturers, said the Walmart fees were unsustainable for its members, who typically operate on 4.4-per-cent margins.