Agriculture Committee on Dec. 7th, 2023

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

You think 431 times the compensation of your average employee is reasonable?

[The Chair, Liberal, Kody Blois]

Mr. MacGregor, you're at time. I appreciate it. In fact, I gave you a few extra seconds.

We'll go to Mr. Epp for five minutes.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you, Mr. Weston, for being here.

I'm going to parse a bit your statement around support for the code or the effect of the code. If I understand you correctly, you're saying the existence of a code does not lower grocery prices. Would you agree that the existence of a code would lower relative prices in the absence of a code, as has been experienced in the U.K., Ireland and Australia?

[Galen G. Weston]

Could you maybe clarify what you mean by “relative prices”?

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Prices are lower than they would have been otherwise, given other external factors.

[Galen G. Weston]

No, I don't believe that's the case. There is no evidence that I have seen or that we have been able to get hold of from the U.K., Australia or Ireland that suggests there's a relationship between the codes of conduct that were implemented in those countries and materially lower prices.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

You've been on the record as saying that the implementation of a code, as you now understand it, would add a billion dollars to the cost of food.

[Galen G. Weston]

I think there is a risk that it could add.... I gave you a specific example of how it could add $750 million to the cost of food, and that's inside our enterprise alone, so a billion dollars is a broad and meaningful number but it's certainly not too high.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

I've been in business myself, and I have no issue with profit. The concern is your relationship with some of the big manufacturers and your profit margins. Again, I have no issue with profit. The discussion might be around how much—32.3% versus 30.7%—of a gross margin increase there was over the pandemic. So be it. If the goal here is to stabilize grocery prices, doing that must come from making a relative adjustment in profits or addressing the costs in the system.

What are the costs in the system? I'm going to go back to that 32.3%. Are the fines and fees your suppliers have had to pay included in that gross margin, or is it accounted for elsewhere in the margins for your distribution centres?

[Galen G. Weston]

I don't know precisely where it's accounted for.

I can tell you this, though. As I've said before, when we have compliance charges built into the business, they're based on a very specific set of criteria. We make exceptions to those criteria more often than the other way around, and those compliance charges have decreased by nearly 50% over the last 24 months.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

You would not charge a compliance fee if you asked for a pre-order of 1,000 units and then upped it to 5,000 and then a short—

[Galen G. Weston]

No.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Okay, so categorically, there would be no compliance charges in that situation.

[Galen G. Weston]

Categorically there would be no compliance charges. At least that's the way it's been explained to me.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

As has been requested of other CEOs, would you table with this committee Loblaw's fines and fees collected during the past period?

[Galen G. Weston]

I don't know.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Others have committed to do so.

[Galen G. Weston]

Yes.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you. I appreciate that.

I'm going to go back to how we address prices. Relative profits are one matter. The costs are in the system is what I'm hearing you say. I think we're all looking for where we can do that. You operate distribution networks, and the carbon tax is obviously one of those areas.

Do you have an estimate of what your cost with respect to the carbon tax would be?

[Galen G. Weston]

No, we don't. Part of the reason for that is that we don't pay the carbon tax, based on where we are in the value chain in terms of any impact on food. I can't speak with any real knowledge about that subject, although I've no doubt that anything that increases the cost or puts cost pressures on the system is something we should be looking at.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Who does pay the carbon tax then?

[Galen G. Weston]

The carbon tax is paid by emitters, as I understand it, throughout the system. If you are an emitter, you have to pay a carbon tax.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

If that carbon tax were not in the system, would that not lower costs to consumers?

[Galen G. Weston]

I don't know how it would work, but certainly, we have a global challenge when it comes to carbon emissions, so we have to balance the present in terms of economic development and affordability and tackling this global challenge.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

The carbon tax is charged throughout the entire system right now, other than on the fuel used directly on the farm. Who eats that on the way up if we're supposed to not pass that along to consumers?