Major grocers push back on fuel surcharges as independents have 'no choice' but to accept
Grocery giants like Empire, Loblaw and Metro are disputing cost increase requests from suppliers stemming from surging fuel prices amid the U.S.-Israel-Iran conflict. But independents say their hands are tied.
“If you don’t (accept the fuel surcharges), you won’t be an independent grocer; you’ll be an out of business grocer,” says Gary Sands, senior vice-president, public policy and advocacy at the Canadian Federation of Independent Grocers.
In an email to Canadian Grocer, Caitlin Gray, external communications advisor at Sobeys said: “We have received a few requests from suppliers to date, which we have declined. Similar to our approach to tariffs at this time last year, we believe the fuel market is too unpredictable to make any decisions that could adversely impact the value we provide to our customers.”
A Loblaw spokesperson said the grocer is in “regular dialogue with suppliers.”
“We continue to push back on unjustified cost increases including on fuel surcharges where not justified to reduce inflationary pressures for Canadians,” the spokesperson said.
Geneviève Grégoire, communications manager at Metro, told Canadian Grocer: “[We] carefully review and, when possible, negotiate requests from our suppliers to ensure they are justified and limit their impact on our customers, while continuing to offer competitive prices.”
READ: Metro trying to delay impact of fuel cost increases on food prices
Michael Graydon, CEO of Food, Health & Consumer Products of Canada, said fuel surcharges are not new—they’re one of several tools companies may use to deal with short-term cost spikes.
“Food moves several times before it reaches store shelves, so when fuel prices shift, those costs show up quickly across the entire supply chain,” he said.
Sands said independent grocers are not pointing fingers at suppliers for imposing fuel surcharges: “We know why they’re having to increase their costs.”
But independent grocers have little power to negotiate.
“In a 1% or 2% margin business, there’s no choice, really,” says David LaMantia, owner of LaMantia’s Country Fresh Market in Lindsay, Ont.
Aside from surcharges, LaMantia notes that suppliers are taking other approaches to confront higher fuel costs, such as increasing minimum order sizes.
LaMantia warned that those who think the local produce season in summer will lead to lower fuel charges should think again.
“We buy directly from a lot of growers and they’re going to have struggles too,” he says, as they use diesel for trucks, tractors and even irrigation.
In a March 31 letter, Maple Leaf Foods told customers that due to global energy market disruptions it was introducing a temporary fuel surcharge on April 6, one week later, of $0.11 a kilogram on prepared meats and poultry shipments.
Other suppliers, including Tree of Life, CTS Foods and Sunrise Farms have followed suit.
In responses to questions by email, Maple Leaf Foods said it is focusing “on working collaboratively and transparently” with clients “as [it] navigates continued cost pressures across the supply chain.”
READ: Food prices are already high in Canada. Will the Iran war make them worse?
The recent temporary suspension of the federal excise tax on gasoline is a positive step, but “it represents only a small portion of overall energy costs,” said Victoria Berry, Maple Leaf Foods’ director of communications.
“As a result, we do not expect the measure to have a material effect on our current surcharge. Should we see a meaningful and sustained reduction in underlying fuel costs, we will adjust accordingly,” she told Canadian Grocer.
Sands suggested that suppliers that add a delivery surcharge with only one week notice are likely at odds with the Grocery Code of Conduct.
Several sections of the Grocery Sector Code of Conduct apply to supplier cost changes, including surcharges or other mechanisms used to address cost pressures, the Office says in the notice sent to members.
“Members should ensure that any cost change proposals—including temporary surcharges—are made in accordance with existing agreements,” the office said in a new notice. This includes respecting notice requirements for cost change proposals, and providing reasonable notices for added surcharges.
The Office said the reminder comes on the heel of “recent reporting regarding the introduction of fuel-related surcharges and other cost adjustments by certain suppliers in response to rising transportation and input costs.”
Maple Leaf is not a signatory to the Grocery Code of Conduct.
“We support the intent and underlying principles of the Grocery Code of Conduct. We are continuing to evaluate the Code and its implications for our business as it evolves,” Berry said.
Graydon said FHCP’s focus is on making sure the system continues to operate in a way that is predictable and transparent.
“The Grocery Code of Conduct reinforces that any cost changes should be clearly communicated and reflected in commercial agreements,” he said. “That helps maintain stable working relationships across the supply chain.”
