Agriculture Committee on March 8th, 2023

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair.

Thanks to our witnesses for being here today.

Thanks to the leader of the NDP for being present at the agriculture committee. I do find it interesting. Many of the recommendations that we've had from previous witnesses as part of this study have said that part of the reason for food inflation is inflationary spending, lack of fiscal discipline and uncompetitive tax regimes, like the carbon tax. Unfortunately, the leader of the NDP is completely complicit in those policies, which are helping to drive up the cost of food, so I'm finding it interesting that he's here today to try to fight this thing when he is part of the problem.

To the witnesses, you mentioned the grocery code of conduct. I find it interesting that we had Mr. McCain here yesterday, and his comments were that it's really not going to have a lot of teeth once it's in.

Without having Costco and Walmart—I didn't even think of Amazon—as participants in the grocery code of conduct, do you believe that it will have some validity or some pressure for the grocery stores to start to be more transparent?

Go ahead, Mr. Medline.

[Michael Medline]

Thank you, Mr. Barlow, for your questions and your interest.

I think, unless we get everyone signed up, it'll be a farce. I think we can get everyone signed up, but we need the help of the government to be able to do so.

[John Barlow, Conservative, Foothills, AB]

Mr. Weston.

[Galen G. Weston]

The code of conduct can be a very positive part of the industry, but it has to be developed in a fair and balanced way. We're actively contributing to the conversations that are hopefully going to get us there.

[John Barlow, Conservative, Foothills, AB]

Mr. La Flèche.

[Eric La Flèche]

The more participants, the better. We're confident that most industry players will participate in the code. I can't speak for other companies, but we all agree that the code will benefit from broader participation.

[John Barlow, Conservative, Foothills, AB]

Mr. Medline, you were quite forceful on this, and I appreciate your passion on the grocery code of conduct. You mentioned the transparency, and that this will allow more transparency on the fees and the fines, for example.

Why do you think a grocery code of conduct is needed to do that? Can't the grocery chains do that on their own and be transparent with the fines and fees that they charge the farmers, for example?

[Michael Medline]

It doesn't appear so. I wasn't in the grocery industry until just over six years ago. I was in the—

[John Barlow, Conservative, Foothills, AB]

Good decision; but you didn't think you'd have to be here, right?

[Michael Medline]

Yes. It's a great business. I get to see Parliament for the first time since I was a little kid, so I'm happy about that. But this is a serious matter.

You know, I came over from the hard goods and soft goods industry, where people would work together. They'd work together to have more innovative products to take costs out of the system to serve the customer. When I came over to grocery, I was shocked at how the interactions were, and at the friction between what people call the vendors, whom I call the supply partners, and the retailers. I think it's hurting the industry. It hurts the trust in the industry. I'm all for fair, tough bargaining in negotiations. I'm not for unfair negotiations.

Yes, I was outspoken on this issue. It was bothering me. That was two and a half years ago. I think we're headed in the right place. I think everyone's intentions are right. The supply partners are behind it. We're getting more and more retailers behind it. I'd just ask the government to help, please, and to keep boosting it.

Thank you.

[John Barlow, Conservative, Foothills, AB]

To all three of our witnesses here—I think, as Mr. Turnbull said, we should try to get or compel Costco and Walmart to be here—I would ask you if you would table with the committee the list or the schedule of fines and chargebacks and fees that you charge the suppliers. I believe that would help us in the work that we are trying to do.

Mr. Weston, you mentioned the information that you provided to the securities commission. We understood from the Competition Bureau on Monday that they are beginning a study on this issue specifically. When you provide your numbers to the securities commission and to the Competition Bureau, are they broken down? As you mentioned, you're seeing some growth in areas that are outside of the food business, such as pharmaceuticals, clothing, or whatever other products you've been making. Are those numbers broken down when you provide that confidentially to the securities commission and the Competition Bureau?

[Galen G. Weston]

No. Our financial results and our financial disclosures are public. The securities exchange can see them as they are published.

I think the point I was trying to make was simply that we are held to a standard of accuracy. They have to be accurate. They have to properly represent what's actually going on in the business. The comments and the colour we provide also need to be accurate. When we provide the colour and commentary that we do, in both written and verbal statements, they can be relied upon as accurate. That's all I'm emphasizing for the committee.

[John Barlow, Conservative, Foothills, AB]

So why are—

[The Chair, Liberal, Kody Blois]

Mr. Barlow, unfortunately we're at time.

[John Barlow, Conservative, Foothills, AB]

Thank you, Mr. Chair.

[The Chair, Liberal, Kody Blois]

I'm trying to be generous because of the nature of this meeting and the fact that we're all trying to get the information, but we are at time.

I will now go to Ms. Taylor Roy for up to five minutes.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you to Mr. La Flèche, Mr. Medline and Mr. Weston for being here today.

I don't have all the emails printed out from the constituents with the concerns I've received, as I'm a bit of an environmentalist. My question will really be about the impact this has had on consumers and on your employees—or “team” members, as you like to call them, Mr. Medline.

Again, I won't go through all the facts and the data given on how your profits have risen, because I think you recognize that. It's also been pointed out many times. However, you talk about reinvesting those profits and you talk about building more stores. We've seen that there have been increases in dividends to shareholders.

While I don't fault corporations, having a business background, for maximizing shareholder value, I would think that at these times you could be reinvesting profits in different ways that might benefit Canadians who are struggling to make ends meet and to help those team members who work so hard on the front line. One thing we noticed was that the hero pay was reduced by basically all grocery stores at the same time, and the freeze on No Name products was removed. This was in the face of growing profits.

I'm wondering how these complaints or these concerns from our constituents, from Canadians, in the face of your growing profits can be reconciled with those facts, and what you can do to address those concerns.

Mr. Medline, perhaps you can start.

[Michael Medline]

Thank you very much for the question, Ms. Taylor Roy. I appreciate it.

I'm going to try to unpack this.

You talked about the team members, and it gets me a bit. They're on the front line, as they have been now for three years. They had to face the pandemic. They then faced inflation. Families are trying to feed themselves, and the ends are tight because mortgage payments are tighter, because interest rates are going up. Groceries are more expensive. They don't care about the food supply chain and all of the other niceties we all talk about. It's tough.

Our team members are on the front line and they're getting blamed. I don't blame the people blaming, but it's tough on our team members, so thank you for saying that.

I think that business is balance. Mr. Singh, you talked about how much profit is too much profit. You have to make profits, but you have to make profits with values. That might be different. We might have a difference of opinion on that and what that means, but I think that most companies are a kinder capitalism than they used to be. Maybe “capitalism” for some people is a dirty word. I think it's good, as long as it's kind and there are values.

Investing and balancing things, making sure people are treated fairly.... The capex we put in—we're putting over $800 million in this year—creates jobs constructing stores. More people have jobs. More people have better paying jobs.

Dividends are not a bad thing in my book, because a lot of people when they retire have pensions. A lot of people in this country do. We have to make some profits and pay some dividends so that they have something to retire on.

It's all balance. I can see some companies buy back shares. I think it's good. I think sometimes companies go too far and they don't balance it right. Our job as CEOs is balance—

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Yes, I understand that. I'm sorry to interject, but time is short, so I want to hear the other witnesses.

I'm not sure that balance is being met right now. As I mentioned, there's the $2 decrease in the hero pay and the removal of the freeze on No Name products in all of the stores when consumers are still struggling with food prices—

[Michael Medline]

Briefly....

I'm sorry to interrupt. You were still talking.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Yes.

Maybe now, because time is tight, Mr. Weston, you could comment on that and what more could be done to address these concerns.

[Galen G. Weston]

I can comment on the No Name price freeze. It was specific to our enterprise.

It was part of an ongoing effort. It was something we'd been doing for months before and that we continue to do today to deliver value to customers, exactly, I think, in the spirit of what you're asking. That program was real. It saved customers close to $45 million over three months.

If you look in our public disclosures from our fourth quarter, you can see the impact of that investment and other investments on our overall gross margins as an enterprise.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Why remove it, then? When profits are going up and inflation is still high, why remove that?

[Galen G. Weston]

We didn't remove it. What we did was announce we were going to do it for three months over the holidays. It was our belief at that time that for consumers, having price certainty over the holidays would be the most important thing for them. As we come out of the holidays, there are other things that are more important to customers. They want deals. They want to be able to go places and get the best possible prices.

We took part of that investment and we are reinvesting it in lower prices and new market lows. We're beginning to see key items actually go backward.

There are all kinds of things we do on a day-in and day-out basis. The price freeze was one of them. We're not finished. We continue on.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

No, I understand, but, respectfully, profits have been going up significantly, however you look at it. Whether you want to look at margin numbers or whether you want to look at whatever segment, they have been going up. It would seem to me there was room to keep the price freeze in place and not increase those prices, while having the promotions and the other things you're talking about.

I would also like to hear from Mr. La Flèche on this briefly as well.