Evidence of meeting #56 for Agriculture and Agri-Food in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was costco.
A video is available from Parliament.
8 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
We don't make unilateral decisions regarding suppliers. We don't have a unilateral approach. We don't do that at Costco.
8 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
How do you set prices? We asked other grocery chain representatives that question, and their answers were not very clear.
8 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
What's clear to me is that prices have to be negotiated. As I said earlier, we demand a lot, but we're honest and fair. Costco negotiates with suppliers. Over the past two years, the cost of materials has gone up for everyone, so we understand that. However, we have a job to do when it comes to serving our members, and we do it.
It's important to understand the difference between Costco and other grocers. A regular grocery store in Canada sells between 25,000 and 60,000 products. Costco sells just 3,500, so we can be really targeted in the products we carry. It's the perfect time to shop at Costco. You can share the bulk quantities with your neighbour. The more you shop with us, the more you save because you can share what you buy with your neighbour. Our pack of toilet paper has 40 rolls. We work with economies of scale. Suppliers who get more orders can also sell at more competitive prices.
8 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
On that subject, Mr. Riel, people on low incomes come to mind. I'm not sure whether you have relevant statistics, but doesn't requiring people to pay a membership fee and buy in bulk deter those customers? People struggling to pay for groceries won't want to shop at Costco for that reason.
8 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
I think the numbers speak for themselves: 15 million people in Canada have a membership card. We charge $60 for a Gold Star membership, and we back it up with a guarantee. People can use their membership card to shop 364 days a year, and if on day 365, they aren't satisfied, we will refund their membership fee. We are confident that the money people save by shopping at Costco makes up for the cost of membership on every level.
8 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
Thank you very much.
Regarding the 2% reward that you mentioned, do your suppliers have to make a partial contribution to it, as is the case with loyalty points at other grocery chains?
8:05 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
Costco covers the full cost of the reward, which can be as high as 2% depending on the product. Executive membership cardholders are the ones entitled to it.
8:05 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
My next question is about your commitment to the code of conduct, because you haven't been as clear about that. I'm not criticizing you, I just want to make sure I understand.
You say that you opted out of participating in code development undertaken in the United Kingdom. In Australia—
8:05 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
We weren't asked to do it.
8:05 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
However, you have just received a draft. If all the other companies would commit to it, you would as well.
Am I right?
8:05 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
We will if the goal is to reduce costs for consumers.
8:05 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
If a review process is undertaken after a year, do you plan to participate in it to see how well everything is working, for example?
I guess you don't have much to lose if you don't charge for it.
8:05 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
That's why we advance that we're doing this already. In accordance with our code of ethics, we already treat our suppliers fairly.
8:05 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
All right. Thank you very much, Mr. Riel.
Ms. Hendricks, we've heard a lot about price-fixing. Since you have a lot of clients in the agri-food sector, I'm sure you've heard some stories that we may not have heard.
We've had some produce growers tell us that they have sold lettuce to a grocery store only to see it being sold in the same grocery store the following week at four times the price they got for it.
Some witnesses have suggested to us that there should be an investigation, or at least a study, on the price-fixing mechanism. Do you believe that's a good idea?
8:05 p.m.
President and Chief Executive Officer, Farm Credit Canada
Thank you for the question, Mr. Perron.
It's not Farm Credit Canada's role to provide an opinion on this. As you know, whether it's through government action or policy, our ultimate goal is to secure success for the industry.
Whatever new regulations or government policies are adopted, we will support producers so that they can be as successful as possible for the benefit of all Canadians.
8:05 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
I don't know if you can comment on this, I hope so. Do you think it would be appropriate to expand the Competition Bureau's powers?
Mr. Riel told us there was no problem with Costco and that it would provide all the information the Competition Bureau needed. Almost everyone told us that. However, that leaves some doubt, because the Competition Bureau is not authorized to demand certain things.
Do you feel it would be relevant to recommend that the government expand the powers of the Competition Bureau?
8:05 p.m.
President and Chief Executive Officer, Farm Credit Canada
Once again, Mr. Perron, it's not Farm Credit Canada's role to provide an opinion on that.
8:05 p.m.
President and Chief Executive Officer, Farm Credit Canada
Yes, that was an excellent attempt. However, I believe you're talking about transparency and let me say that it's important to be transparent. That does apply to Farm Credit Canada as well.
8:05 p.m.
Conservative
The Vice-Chair Conservative John Barlow
Thank you.
We'll go to Mr. MacGregor for six minutes, please.
8:05 p.m.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Thank you very much, Mr. Chair.
Thank you to all our witnesses for helping guide our committee through this study.
Mr. Riel, I'd like to congratulate you, first of all, because when I asked the CEO of Walmart Canada what the average wage of his employees was, he couldn't give me an answer. I appreciated that in your opening statement. You knew not only the starting wage but also the average wage. I appreciate that you had that information on hand.
I think you've explained a business model that is fairly different from the testimony we've heard from some of your competitors. That being said, Costco is a large corporation. You do have a lot of sway in the market.
When you're shopping around for products to fill your stores, you have a code of ethics that guides your relationship with food manufacturers and producers. Do you generally put out a signal for a price at which you're looking to buy, or do you allow them to compete to try to provide the best option?
I'm just wondering how your decision-making factors into a variety of things, such as the locality where the food is produced, the kind of economic benefit your stores might be able to give to a local community and the miles that food products have to be transported. Could you give the committee an overview of how that factors into your decision-making?
8:05 p.m.
Executive Vice President and Chief Operating Officer, Costco Wholesale International and Canada, Costco Wholesale Canada Ltd.
The first thing I would mention is selling the best quality at the best possible price. Having said that, if we can buy most things closer to warehouses where we do business or to our depot, we will do it. Why? You will have the best possible price by having less freight and by having more fresh products, so you'll get more quality products.
It's very important for us in Canada to buy as much as we can from Canada. It's very important for us when we do business in other countries to do the same. Unfortunately, we cannot buy everything in Canada. However, we're working with farmers, distributors, manufacturers and producers in Canada to see how we can, in the future, with the projection we have for sales and those kinds of things, get those people to invest in infrastructure and do business with us. That's what we're aiming for. Why? We're in Canada to serve Canadians.
8:10 p.m.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Thank you for that.
Mr. Macdonald, I'd like to turn to you for my next question. You have produced some literature for our committee to examine looking particularly at the profitability of the oil and gas sector. Indeed, we had Mr. Stanford appear before this committee at an earlier meeting. He provided some background data showing that since 2019, that sector has seen a net profit increase of over 1000%. We've heard a lot at this committee about the effect of carbon pricing on the price of food, but I don't think we've heard a lot on the profitability side of the story.
You mentioned in your opening statement the example of the surtax for financial institutions and applying that to oil and gas. Are there are any points you want to expand upon on that point?
8:10 p.m.
Senior Economist, Canadian Centre for Policy Alternatives
Yes. Thanks so much for the question.
I know the committee is examining food price inflation, which is a specific part of the larger inflation picture. It's difficult to examine food price inflation without examining other sources outside of the direct food supply chain that might be driving up prices, looking beyond food manufacturing and farmers, for instance, to other big factors like the price of energy, which is playing a role throughout this.
In some of the work I've done on inflation more broadly, I've attempted to determine, within the Canadian context, how much of each inflation dollar is going to profits versus wages versus other financial costs and in which industries. I believe that's the study you're referring to—where has your inflation dollar gone?
Forty-seven cents of every inflation dollar we've spent—not on food but on everything in the Canadian economy—has ended up in profit in just four industries: oil and mining extraction; the manufacturing industry, particularly petroleum manufacturing or oil refining; the banking industry; and the real estate industry. Those four industries are capturing about half of every inflation dollar we're spending.
8:10 p.m.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
I'm sorry for interrupting. We have heard a lot about how carbon pricing affects the price of food at this committee. Certainly my friends in the Conservative Party make a big deal about that.
In your opinion, if we're addressing the issue of food price inflation, would parliamentarians be better served focusing our efforts a bit more on the profitability side of large corporations, particularly in oil and gas extraction, and also on the refining side, given the critical component those fuels play in transporting food from the farm to the factory to the fork?