Grocer code of conduct needs buy-in from all players: Metro CEO

All major industry players need to sign on to the grocery code of conduct in order for it to be successful, said Metro Inc. president and CEO Eric La Fleche.

La Fleche told MPs at a House of Commons agriculture committee meeting on stabilizing food prices that Metro is willing to sign the code as it’s currently drafted.

“Our team played a leading role in the development of the code. And we are convinced that the participation of all grocers and suppliers is essential to its success,” he said in French on Dec. 11.

Last week, executives from Walmart Canada and Loblaw Cos. Ltd. told the committee that they can’t sign the code in its current form because they’re concerned it will raise prices for consumers.

On Dec. 7, federal Agriculture Minister Lawrence MacAulay and Quebec Agriculture Minister Andre Lamontagne called on all the major grocers to sign the code.

New research by the Centre for Future Work suggests profits in the Canadian grocery sector will likely exceed $6 billion this year, setting a new record.

The report by the progressive research institute, released and presented to the committee on Dec. 11, found food retailers are now earning more than twice as much profit as they did pre-pandemic.

Citing Statistics Canada data, the report said the net income margin on food and beverage retailing has consistently exceeded three per cent of total revenues since mid-2021, more than double the average margin between 2015 and 2019.

The data shows retailers took advantage of the pandemic and its aftermath to increase their profits, Jim Stanford, economist and director of the Centre for Future Work, argued in a news release.

“An industry can’t double its profits, if it is merely passing on higher expenses,” he said.

The major grocers have been under pressure from the government to help stabilize food prices. Earlier this fall, the heads of the five biggest grocery companies were summoned by the government to present their plans.

La Fleche told MPs that food inflation has been driven by global market forces, and while prices are stabilizing, he said that can’t be achieved overnight, and nor can it be the responsibility of grocers.

“Metro stands at the end of a very long supply chain, which continues to experience instability. And we are already facing pressure for cost increases in the new year,” he said.

The company is in a blackout period between Nov. 1 and Feb. 1, meaning it won’t accept any supplier cost increases, said La Fleche. This is a long-standing practice, he added.

La Fleche said he met with federal Industry Minister Francois-Philippe Champagne three months ago, and committed to two things: to “continue to work to deliver the best value possible,” and to sign the grocery code.

“We have a commitment to delivering value to our customers and offering the best prices. We’ve always done it and we will keep doing it. And we are doing it even more now in a context of inflation.”

Executives from Loblaw, Empire and Walmart shared some details of their plans to stabilize prices with the committee last week.

Loblaw chairman Galen Weston said a meeting with Champagne resulted in “materially lower prices” for 35 often-purchased items and categories, such as milk, butter, eggs and chicken.

In previous appearances before the committee, the grocers pushed back against the idea they have unduly profited from inflation.

Weston told MPs last week that the company is concerned certain provisions in the code will raise grocery prices for Canadians as it gives too much negotiating power to large multinational manufacturers.

He said the grocer will sign the code, but not in its current form.

Walmart Canada CEO Gonzalo Gebara told MPs the company is “not in a position at this time to commit” to the code. He said the current version includes provisions that “create bureaucracy and cost, cost that will inevitably end up on shelf prices.”