The Guardian (Charlottetown)

Supplier fears intensify

Group asking for equal treatment in wake of Walmart Canada’s controvers­ial plan to charge more fees

- FINANCIAL POST STAFF

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 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 this week’s letter to suppliers, 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 have been made aware of communicat­ion you have received from a competitor, requesting major cost reduction through the introducti­on of new fees,” Forgione wrote in his letter to suppliers. “UGI members will strongly expect from all suppliers to be treated fairly and competitiv­ely.”

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, 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. FCPC chief executive Michael Graydon told the Financial Post last week that the new fees would slowly become the norm in the “consolidat­ed” Canadian grocery business.

The UGI letter was “what we expected,” Graydon said. “This is how the industry works. When one asks, everybody wants.”

Graydon said FCPC has been in contact with federal and provincial government­s, asking for an interventi­on to stop the increasing fees.

Politician­s in Quebec criticized the Walmart decision, with provincial agricultur­e minister André Lamontagne calling it “disappoint­ing” in a statement to the Journal de Quebec. Walmart’s fiercest critic in Quebec, however, appears to be opposition leader Dominique Anglade, of the Quebec Liberal Party, who has railed against the fees as “unacceptab­le” on Twitter and in media interviews.

In Ontario, Premier Doug Ford’s office criticized the extra costs to suppliers, but declined FCPC’s request to intervene.

“This decision is disappoint­ing, especially at a time when businesses are struggling to cope with the unpreceden­ted pressures presented by COVID-19,” Ivana Yelich, the premier’s spokespers­on, said in an email. “That said, the province does not regulate the supplier-retailer relationsh­ip, nor pricing and fees. We are encouragin­g retailers to work with suppliers and processors to ensure the continued affordabil­ity of food and consumer goods during these extraordin­ary times.”

 ?? EDUARDO MUNOZ • REUTERS ?? 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.
EDUARDO MUNOZ • REUTERS 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.

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