Agriculture Committee on Dec. 7th, 2023

[Gonzalo Gebara]

First of all, let me just say that I think it's great that in the same industry we have participants who agree on certain things and others who don't. I think that's how healthy this industry is, so I celebrate that.

As I mentioned earlier today, I think that there are some provisions that provide an unlevel playing field in the conditions in which suppliers and retailers will have to operate, and I don't think that's right. There are provisions that create bureaucracy and costs that will inevitably end up on shelf prices.

I think that, as long as we can solve that, we would have a great code of conduct, and we will be able to continue to conduct transparent and arm's-length relationships with all of the participants of the industry.

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

There's nothing in particular. It's just a bunch of things that you're not agreeable to when other retailers are.

There's not one specific thing you can tell us that you don't agree with.

[Gonzalo Gebara]

It's a combination of things that puts us in a position to think that it's an unlevel playing field and that there's lots of bureaucracy that will create costs. No one wants unnecessary costs into the business.

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

Okay.

Mr. Gebara, I'm just wondering if you could tell us how much your company spends on the carbon tax across your company. We know that does contribute to increased costs at the retail level for consumers. You mentioned you have a network of stores across the country. You have your own trucks. I'm sure you pay a lot in the carbon tax. I'm wondering if you would like to comment on how much that increase has cost your company.

[Gonzalo Gebara]

Indeed, we have more than 400 stores across all of Canada. We have our fleet transporting products from coast to coast to coast. I don't have the number on the tax. I will have to come back to you on that one.

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

That's great.

Would you be able to table that statistic with the committee?

[Gonzalo Gebara]

Yes, provided that the information is not confidential, I think we will be in a position to do that. I will have to check, of course.

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

Thank you.

Mr. Gebara, I recently read an article where a spokesman from your company was talking about some of the things that your stores are doing to help consumers with inflation and the affordability of groceries. We know people are really struggling out there with record numbers of people using food banks. It struck me as odd that what was in this article was that your company has actually implemented something where customers can buy their groceries on a payment plan. You are offering four equal payments over six weeks to help customers afford their essentials every day.

While that might seem great in the first place, why can't your customers afford to buy food at your store if you're claiming that you have the lowest prices out there of any retailer? I find it fascinating that we would have to go to this.

I'm wondering if you could just comment on that.

[Gonzalo Gebara]

If I'm not mistaken, I think you're referring to our buy now, pay later program, which is tailored. The objective of this program is for our customers to have better access to durable goods. In no way would we like anyone to be in a position to finance their very highly needed essentials that they will consume in a couple of days and bear the burden of the financial costs for several months. The program is tailored for durable goods.

[The Chair, Liberal, Kody Blois]

Thank you very much, Ms. Rood.

We'll now go to our final participant, so to speak.

Mr. Louis, we go over to you for five minutes.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Chair.

I want to thank Mr. Gebara, CEO of Walmart Canada, for being here as well.

It's an important conversation, and Canadians are concerned by the behaviour of the major grocery chains given it's a highly consolidated sector here in Canada.

The reason we're here is that Canadians want transparency, accountability and a commitment to fair practices in the face of concerns about high food inflation and potential consumer gouging. That's what we're hearing.

You've already mentioned it a few times. We talked about strengthening the Competition Bureau here in Canada. It sounds like you agree with it, your quote—I think it was originally from Sam Walton—was, “If we work together, we'll lower the cost of living for everyone”. There exists that consideration of strengthening the Competition Act to give the bureau more power to take action, allowing the bureau to compel the production of information in order to conduct effective and complete market studies.

I just wanted to get you on record again saying that you're agreeing that competition is good, and you're agreeing to give more powers to the Competition Bureau.

[Gonzalo Gebara]

Yes, I think it's very important that I make a clarification again. I think it has to do with a moment ago. I think competition is great, not giving more power to any competition regulator. Competition is great for everyone, for everyone participating in the industry and for consumers, which is not to say that giving more power to any competition regulator is what I would support. I hope I am clear with that.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I do hear you. You're saying competition is good, but you want you to make sure it's voluntary. I think maybe an example of that would be the grocery code of conduct, which right now is voluntary and is a tangible way of bringing more fairness, transparency and stability to our grocery sector and our supply chain.

We're reviewing all the options. We had major grocers come to the table, and we're talking about getting along and working on a voluntary basis. That doesn't seem to be working now. The fairness, the transparency, the stability, do we have to enforce those things?

[Gonzalo Gebara]

As I've said many times since March, I've learned that in Canada, we have fairness, transparency, arm's-length negotiations, very robust planning capabilities and clarity in the communication cycle.

I have been meeting with several suppliers over these months. I don't think Canada is in a different situation from what I've seen in other markets. I've been exposed now to the industry, and I think we have great conditions for everyone to conduct their business.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

The grocery code of conduct is more than just the consumer. We're also talking about your relationship with the suppliers.

We did a previous study here in the agriculture committee and found that there are issues with the major grocers and suppliers. We want to make sure they're treated fairly too. I think that's something we need to continue to talk about as we move forward.

I did want to ask about some other solutions.

We're hearing from our communities that sales or discounts sometimes only happen if people buy in bulk, with two or more products. That's not reasonable for everyone. In order for everyone to get that reduced price, sometimes they have to buy more than they need. They may not be able to afford that expense outlay or the food could go bad before they get to use it. When there's a sale, the customers don't get the benefit of a reduced price unless they buy more than they need.

Is this a practice that you would consider? Would you offer the same price for a single product?

[Gonzalo Gebara]

Remember that we are fanatical about everyday low prices. We like to keep prices low across the board in a consistent way.

There's an interesting point in what you're saying. Our data says that if the average basket takes, let's say, three units of yogourt, then it would be perfectly fine to promote three units at a price. It would be bad to promote six units at a price. Three units at a price would be fine, because that's the average consumption per basket.

We are very careful to not push our customers to have to make out-of-pocket investments to reach a certain price. The essence of EDLP is to stay away from that. We wouldn't do what you just described.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I have a final question in the last 20 seconds.

In that same vein, would you consider harmonizing unit prices to address consumers' challenges when they're facing different items between different stores? It's basically about apples to apples.

Would you be in favour of that in the grocery sector in general?

[Gonzalo Gebara]

What do you mean by harmonizing unit prices?

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

It's the same price per unit and having that more on display. Other countries are doing that.

[Gonzalo Gebara]

We have the price per unit, price per litre and price per hundred ounces. All of that is displayed in our pricing.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Louis.

Thank you, Mr. Gebara.

I'm going to just take a couple of minutes here.

We had Mr. Medline before the committee on Monday. He was very transparent about the gross margins in the grocery sector, in relation to the amount of money that's being made above and beyond costs.

Could you provide for this committee what Walmart Canada's gross margin is in its grocery store explicitly? Do you have that number?

[Gonzalo Gebara]

No. Again, sometimes people talk about margins in different ways.

Can you help me and be a little bit more specific on what you mean when you say “margins”?

[The Chair, Liberal, Kody Blois]

It's the amount of money that you make above and beyond your cost in grocery stores specifically. I would appreciate that Walmart would have pharmaceuticals as well. I'm wondering if you could provide a number to this committee.

As the CEO of Walmart Canada, is it a 2% margin? There's a lot made of the amount of money that grocery companies make. It's a big target.

We're hearing from Mr. Weston next. I'm sure he'll remind us and he'll say that, even if you took all profit away from groceries, you're talking about one or two dollars on a $100 grocery bill.

What's your margin? Do you have it? How has it changed over time?

[Gonzalo Gebara]

As you know, I can't disclose the specific numbers.

I will echo what everybody has been saying: Grocery margins are very low margins. We can access public information from all the retailers around the world, and you will see what slim margins we have in this industry.

[The Chair, Liberal, Kody Blois]

I'm interested in your program where you talked about buy now and pay later.

I can appreciate that, in the given context right now where people are struggling to pay for some of those essentials, the program has merit. What interest do you charge people in terms of them paying? Is that something that Walmart will cover? Is there a marginal interest rate? How much interest...?

Let's say I went into Walmart, bought groceries today and it was $100. I didn't have the money to pay for it. You said that in two weeks or later I can pay it back.

Am I paying $100 back in two weeks? Am I paying $103 or $110? What's the interest rate on it?