The CEO of Sobeys parent company, Empire Co. Ltd., supports a code of conduct for the grocery industry in Canada, calling recent actions by competitors to increase supplier fees for “Disgusting” and “terrible” to consumers.
Empire is the first of major grocers to join suppliers and small retailers who recently renewed their calls for industry regulation, grocery giants Walmart Canada and Loblaw Companies Ltd. having informed suppliers that the cost of transporting their products would increase.
“This is the worst relationship I have seen in a few decades in the retail business,” Empire CEO Michael Medline said in an online discussion hosted by the Empire Club of Canada Wednesday. “… I don’t think it’s healthy. Some practices… are hard to believe and actually disgusting to me. And taken to extremes, some of this behavior is just plain bad for Canada.
Mr Medline said Empire’s grocery chains – which include Sobeys, Safeway, FreshCo and others – will not follow suit by raising fees. And he added that a code of conduct similar to the one introduced in Britain should be considered.
The latest dispute between retailers and suppliers began this summer, when Walmart Canada announced fee increases starting in September. Retailers typically charge vendors a fee for shelf placement and in-store promotions, reducing what they pay these vendors for their products. Tensions have erupted more than once in the industry over the years, as these agreements have changed.
After Walmart’s notices were sent to suppliers, United Grocers Inc. – which represents 6,500 food retailers, including Metro Inc., Alimentation Couche-Tard Inc., Dollarama Inc. and others – told suppliers that its members are ‘would wait under the same conditions as the competitors. And last week, Loblaw also told vendors it would increase their fees starting in January.
Empire has also renegotiated its supplier fees in recent years, particularly after Mr. Medline joined the company, when he said channels were “gored” by some suppliers because they were not negotiating on a national basis. harmonized. But he said on Wednesday the company would no longer increase its fees now.
“We will not follow suit,” Medline said. “We negotiate, communicate and discuss with our supplier partners. … We will take care of ourselves and we will take care of our shareholders, but we will do it the right way.
The battle between retailers and suppliers creates an inflationary environment for grocery prices, said Michael Graydon, CEO of the Food, Health and Consumer Products of Canada Industry Group, who welcomed Mr. Medline.
“A code must be fair and bilateral. Manufacturers and retailers need to tighten things up a bit, ”Graydon said. “… No code will take away bargaining power; it’s about establishing fair business practices. When you trade, you are also trying to create value; when you arbitrarily demand discounts, you don’t create any value. “
Walmart and Loblaw have reminded suppliers that they are investing heavily in modernizing their stores and improving e-commerce capabilities. Suppliers, on the other hand, argued that it was not their responsibility to offset the capital investments of these companies. And small independent retailers say fee increases put them at an unfair disadvantage because they don’t have the market power to demand the same terms.
“This is a big step forward,” said Gary Sands, senior vice president of public policy for the Canadian Federation of Independent Grocers, of Mr. Medline’s statement. “When all these different groups representing different sectors of the supply chain say we have a problem, now we have to solve it. There is no excuse for not moving forward in this area. ”
Mr Medline said the situation was bad for suppliers, for small retailers, for consumers who fear rising food prices and for farmers. Although the company didn’t support regulation a few years ago, he added, Empire is now open to it as long as it imposes fair use rules on retailers and sellers.
“I think it’s about time,” he said.
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