Agriculture Committee on April 17th, 2023

[Pierre Riel]

As you know, we're a private company. We report our numbers globally with the U.S. company, so I cannot disclose that. I can tell you that overall, our profit from selling merchandise, before tax is paid, has been at 1.43% for the last two years.

We're about sales, so when you ask a question about profit and margins, it's about sales. The more we sell, the better it is for the customer who is going to pay for goods and the better the members will be satisfied with us. That's our mantra.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

I've heard from some folks that they do business with you and farmers, and sometimes your company has a habit of dropping or changing farmers and suppliers when they ask for price increases. With costs rising across the board, I'm just curious why you would want to find another supplier rather than stick with one with whom you've built a relationship and who is simply asking for a deal that reflects the current situation.

[Pierre Riel]

We've been in Canada for 30 years, and we want to be loyal to our vendors. Otherwise, we're not going to get goods to sell to our members. If there is something specific there, I suggest that person should contact me. We will look into it and do our best to solve the issue.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much.

For my final question for you, sir, I note I haven't seen you participating in the grocery code of conduct. I've asked all the other grocery stores if they will be participating in the grocery code of conduct. Do you have plans to participate in the grocery code of conduct?

[Pierre Riel]

We were not invited to the steering committee. We received the draft. We're looking right now at the draft. We believe that it's all about giving the best possible price to the consumer. If that happens, we will be more than pleased to participate in it.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much.

Your answers here today are in stark contrast to those of the other big grocery stores we've had before this committee in that you don't charge any of these extra fees. However, you're still a company that is in business, has good relationships with your vendors and continues to make profit and operate your store. Thank you for that testimony today.

It seems like you're leading the way as far as treating farmers, producers and vendors fairly goes. From speaking with farmers and from past experience, I can tell you that they do really value the relationships they have with your company and, overall, appreciate doing business with you. Thank you for supporting the agriculture industry.

I'm going to move on to 100km Foods.

I have a couple of questions for you, sir. I'm just curious. In your remarks, you were talking about farmers, and I understand that you want to support farmers. My question to you is, do you take a percentage off the sale price from vendors? In other words, do you take fees off for listing and handling their products?

[Paul Sawtell]

No. We have a cost-plus business model. We don't charge back any fees to our farm partners. In fact, they set their own prices.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Sir, is it inaccurate, then, that farmers have told me there is a cost-share charge on their invoices that is charged back to farmers to the tune of anywhere from 6% to 9%, if you do the math on the invoices? What would that chargeback be for, then?

[Paul Sawtell]

From a logistical pickup standpoint, we provide logistics services to our farm partners. For many years, that was a complete occurrence on our balance sheet. As a business, that was unsustainable. We looked at our numbers and realized that. In order to get the products from the farm to our distribution facility, we approached our farmers to ask if a nominal fee to share that cost was agreeable. They all agreed, and we have had great relationships ever since, so—

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

So you do charge a chargeback fee, and you're no better than the other grocery stores.

Thank you very much, sir.

[The Vice-Chair, Conservative, John Barlow]

Thanks, Ms. Rood.

We will now go to Mr. Drouin for six minutes.

I believe you're splitting your time.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Yes. Thank you.

I want to thank all the witnesses for being with us today.

My questions are for Mr. Riel.

Mr. Riel, you mentioned some statistics, and I believe some committee members are also Costco members. I want to thank you, because I know that your company treats employees with respect. You yourself are a positive example of the Costco business model, given your long history with the company.

Essentially, we're here to discuss public confidence in the food supply chain. People are wondering. Obviously, they see prices going up in markets across the country. I'm no expert on what your profit margin should be on food sales. However, the Competition Bureau in Canada has a mandate to study that issue.

Have you provided Costco's financial statements to the Competition Bureau?

[Pierre Riel]

The information that we were in a position to provide was sent to the Competition Bureau. It's done. We're willing to work with the bureau. We're waiting to hear from them.

Our approach to operating our business, and that's worldwide, is to cooperate as best we can, keeping in mind that we are a public and private company in Canada. Beyond that, we collaborate with all stakeholders and we think that's important.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

You provided information to the Competition Bureau and I do not need to know what that information may be. However, the Competition Bureau does have a role to play to do its job well. Costco sells a wide range of products, including food and pharmacy products. We heard from other companies that the profit margin has increased, but that those profits are from selling pharmacy products rather than from selling food.

Given the information that was provided, will the Competition Bureau be able to differentiate between various products so it can tell the Canadian public that Costco or the other companies have done their job well?

[Pierre Riel]

I truly believe that the Competition Bureau has the means to get the information it needs. If they need more information, they will request it from us.

In our view, the information we provided is what we can currently share. If the Competition Bureau needs additional information, we are willing to work with them. I cannot decide for the bureau whether the information we sent is sufficient or not. We're still awaiting feedback from the bureau on the information we provided.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Earlier, my colleague asked you about the code of conduct. Despite the fact that you aren't part of the initiative to develop a code of conduct for the grocery industry, you are not necessarily refusing to participate.

[Pierre Riel]

Costco operates all over the world. I have been at the helm of our international operations for a year. A code of conduct exists in England, but Costco wasn't asked to be involved. There, it was decided that the code of conduct would apply to grocers with annual revenues of more than a billion pounds sterling. As for the code of conduct in Australia, Costco is not required to participate either.

Our code of ethics is to take care of our employees and respect our suppliers. By respecting our suppliers, we have a formula that works for everyone, a win-win. As we see it, without suppliers, without people who are treated fairly, there is no merchandise to sell. The day I have nothing to sell, everything grinds to a halt. If the ultimate goal is to lower prices for consumers, Costco will participate.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you.

I'm going to give the rest of my time to Ms. Valdez.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you so much. I'm going to continue with the questions.

I listened to all your responses to Ms. Rood, so I'm curious how Costco balances its commitment to offering low prices with the need to ensure fair prices for suppliers.

[Pierre Riel]

It's a matter of volume. It's a matter of sales. We're looking at it by the total sales we're doing at the end. We're focusing mainly on ourselves. Obviously we also have revenue from our membership. Overall, when you have that, it's part of the equation.

Regarding the balance, you need to work with vendors. Costco is tough but fair. We're there to shop for you if you're a member. The first job that our buyer has is to be able to shop as best as possible to build confidence in our membership. That's what we do. Sales are a huge factor. Without velocity, it's tough to get a better price, so that's what we're aiming for.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you.

Costco is known to sell in bulk, of course, so how does Costco track and measure its food waste?

[Pierre Riel]

We are tracking more and more food waste. We have programs with food banks across Canada in our 107 locations where we do business. Every day, we're giving waste produce and meat. We're freezing the meat. We're doing a lot of things.

For us, we need to participate in the community we do business in. We're probably one of the biggest donors out there.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

I don't think I have much time. Thank you for everything you do.

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mrs. Valdez.

Over to you, Mr. Perron, for six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for being with us, especially Mr. Riel, who was very patient. Our apologies for the technical difficulties.

Mr. Riel, I'm going to be perfectly frank with you. Some of your answers so far have surprised me, especially in relation to fees and charges.

I just want to make sure I've understood properly. You don't charge late fees, you don't have penalties for unsold stock, and you don't make suppliers take back products or what have you. Is that correct?