National Post

If you look at it from our point of view, how many jobs are being lost in Canada? ... How much innovation is not developed for the Canadian market because of those fees?

Suppliers react to Walmart Canada fees, charging extra

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• Walmart Canada officially started charging its suppliers extra fees on Monday, veering closer to what some in the grocery industry say could be a breaking point in the shaky relationsh­ip between food producers and supermarke­ts.

Suppliers have been pushing back in meetings with Walmart since the retailer announced the new fees earlier this summer, and a major trade organizati­on representi­ng manufactur­ers said many of those negotiatio­ns are still underway, even though the fees came into effect on Monday.

“Will anybody go nuclear? Maybe. We’ll have to wait and see,” said Michael Graydon, chief executive at Food and Consumer Products of Canada ( FCPC), referring to suppliers pulling their products from a retailer’s shelf.

“Those are decisions that will probably be made at the eleventh hour,” he said.

“Not sure whether it’s the right strategy or the wrong strategy. Time will tell. Traditiona­lly, there’s not a lot of manufactur­ers that will take that angle.”

An executive at one multinatio­nal consumer- goods manufactur­er said the company considered the option of delisting products with Walmart, but decided against it. The executive asked not be named for fear of negatively influencin­g negotiatio­ns with Walmart.

“The only recourse you have is to pull your products from the shelves. And that’s Armageddon. That’s the worst it could possibly be,” the source said. “I’ve discussed it with my team, but we’re not there yet, so I don’t want to go down that road.”

As of Monday, Walmart is charging a fee of 1.25 per cent on the cost of all goods sold to Walmart, plus an extra five per cent on goods sold through e- commerce. The fees will help pay for Walmart’s five-year, $3.5-billion plan to revamp its Canadian operations for a new era in retail, with investment­s in grocery delivery, distributi­on centres and store renovation­s. Walmart has said the improvemen­ts will lead to sales growth for suppliers, making the fees a reasonable trade-off.

“We launched the initiative because the Canadian retail industry is evolving and the way we work with suppliers needs to change, t o o ,” Wa l m a r t Canada spokespers­on Adam Grachnik said in an email on Monday. Walmart did not respond to questions about its negotiatio­ns with suppliers.

According to the manufactur­ing executive, Walmart Canada has refused to remove or reduce the fees. They said recent negotiatio­ns have revolved around getting more value in return, through increased order volume or extra promotions. But the fees will also require suppliers to look for savings in their own organizati­ons to offset the added costs.

“Do I cut media? Do I reduce head count? Do I move my manufactur­ing from here to the U. S.? All of those things go on the table,” the source said. “If you look at it from our point of view, how many jobs are being lost in Canada? How much marketing money is not spent in Canada? How much innovation is not developed for the Canadian market because of those fees?”

FCPC said the majority of its members are still negotiatin­g with Walmart in an effort to secure extra perks in exchange for the added fees, such as more sales, or even an agreement that the retailer won’t impose any further fees for a certain period of time.

“Certainly some are satisfied and have concluded the situation, and some are just a long way off,” Graydon said.

Food producers in Canada have for years complained about the rising cost of doing business with the major grocers, including fees to list products on shelves as well as significan­t fines for late deliveries and light shipments. But FCPC has suggested the new fight with Walmart could be different, since the fees have come in the middle of a pandemic while legislator­s in Ottawa are more sensitive about the stability of the country’s food supply chain.

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