Agriculture Committee on Dec. 11th, 2023

[The Chair, Liberal, Kody Blois]

I call this meeting to order.

Welcome to meeting No. 88 of the House of Commons Standing Committee on Agriculture and Agri-food.

I will start with a few reminders. Today’s meeting is taking place in a hybrid format. The proceedings will be made available via the House of Commons website. Just so you are aware, the webcast will always show the person speaking, rather than the entirety of the committee. Needless to say, dear colleagues,screenshots or taking photos of your screen is not permitted.

I'd like to begin by noting the presence today of Mr. Zuberi, who will be replacing Mr. Carr, and Mr. Boulerice, with whom Mr. MacGregor may perhaps be sharing his speaking time. Welcome to the committee.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday October 19, 2023, the committee resume its study of efforts to stabilize food prices.

I would now like to welcome the first witness with us today, Mr. Eric La Flèche, President and Chief Executive Officer of Metro Inc.

Thank you very much for being here in person,Mr. La Flèche. You have five minutes for your opening address.

[Eric La Flèche, President and Chief Executive Officer, Metro Inc.]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen.

At Metro, we are very concerned about the impact of rising food prices on our customers. Needless to say, we are very much mindful of this situation.

That's why we take steps every day to give our customers the best possible value, in response to their various and constantly changing needs. Our customers expect no less from us.

Across all our banners, our teams work tirelessly to deliver the best possible value to our customers with competitive pricing, our full range of private label products, efficient weekly promotions and our loyalty programs.

Every week, we offer promotions on more than 10,000 products across our food banners, generating significant savings for our customers on one-third of our inventory. This is not a new practice, but rather how we continue to earn and gain long-term customer loyalty.

As a publicly-traded company, Metro is in competition every day for customers, talent, and capital in an open and highly competitive market.

Customers are central to every decision our companies make under each of our banners, and in the 975 grocery stores in our network. That's why our business strategies have generated an increase in market share over the years, and particularly in recent months. It shows that we have earned the confidence of Canadians.

By now, I hope everyone in this room knows—and experts overwhelmingly agree—that global market forces far outside the control of grocers are driving food price inflation.

According to Statistics Canada, food prices have stabilized over the past few months while food price inflation has steadily declined over the past six months. Moreover, food inflation in Canada continues to be the second-lowest amongst G7 countries and has been since September 2022.

Metro's fourth quarter fiscal 2023 results show that our internal food basket inflation decelerated to 5.5%, which is approximately 2% lower than the food inflation reported by Statistics Canada. This is a key metric of customers' actual behaviour, which we have been monitoring for years.

In short, our efforts are having an impact and food prices have stabilized, but price stabilization is not simply achieved overnight nor is it the exclusive responsibility of grocers. Metro stands at the end of a very long supply chain that continues to experience instability. We are already facing pressure for cost increases in the new year, so all players must remain actively engaged.

The fact is that we work in an industry that has the lowest profit margin in Canada, at under 5%.

We have to deal with tens of thousands of price increases from our suppliers every year, but we do so as gradually as possible, absorbing some of the costs and working tirelessly every day to provide the best possible value.

In our highly competitive industry, Metro fights hard every day to earn our customers' business, trust and loyalty. That's why, when I met with Minister Champagne three months ago, I committed that our team would continue to work to deliver the best value possible to help our customers because that's what our customers demand of us.

Secondly, to continue to enhance consumer trust and ensure a more resilient supply chain, I committed that Metro would adopt the industry-led grocery code of conduct once it's finalized.

Our team played a leading role in developing the code of conduct, and we are convinced that the buy-in of all our grocers and suppliers is essential to its success.

We made these commitments to the minister and the government, but in particular to the Canadians who choose to shop with us, and we will continue to meet these commitments every day.

Thank you. I look forward to your questions.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. La Flèche.

We will now move on to the questions.

Ms. Rood, you have the floor for six minutes.

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

Thank you, Chair.

Thank you, Mr. La Flèche, for being with us today. You just mentioned in your opening statement that you are in favour of the grocery code of conduct. Thank you for being a part of that, because I know it will have a very good effect on the relationships between our suppliers and our grocers.

Mr. La Flèche, you mentioned that the Prime Minister summoned you to Ottawa. You've said publicly that you've given the government a list of recommendations. What specific recommendations did you ask the government to initiate? How many of these recommendations have been acted upon?

[Eric La Flèche]

As I said in my opening statement, the commitments I made to the minister at that meeting were to continue to deliver value as best we can to our customers every day. We did this before and we continue to do it today, and I think with some success. The second commitment we made was to sign this code of conduct, which is close to being finalized.

Those were my commitments. I think our company has delivered on them. Judging by our performance and our sales and our growing market share, I think it resonates with our customers.

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

We heard at the last committee meeting that some retailers have some issues with the code of conduct. Is there anything that's stopping you from signing the code of conduct right now?

[Eric La Flèche]

Well, we said publicly that we're willing to sign the version that's on the table today. We participated in it. One of my colleagues is on the working group along with several other people—retailers, suppliers and association representatives.

The code as it stands is something that we can sign. It reflects how we conduct our business with our suppliers. It's something that we can live with and are willing to sign. I've said that for a little while. Hopefully, we'll get there.

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

Thank you.

When your store was before this committee last spring, I brought to the attention of your company some of the unfair practices of your company and the penalties that it was charging farmers and suppliers. Has your company made any changes to the way it deals with farmers and small suppliers, to this point?

[Eric La Flèche]

We have good relations with our suppliers and farmers in general. The terms of our agreements are clear. If there are any penalties—and these are in a very small minority of cases—they are per the terms of the agreements. We have not changed the way we conduct our business. I think we have good relations with those vendors.

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

Earlier this year, the Minister of Environment and Climate Change proposed a P2 plastics ban. To those watching at home, it's a new plastics ban; it's not something from the old ban, but will prevent produce from having plastic packaging.

We heard in the last meeting that it could cost upwards of $6 billion down the supply chain, which would ultimately fall on consumers. The price of food would go up if this plastics ban were to go ahead.

Did your company participate in the consultations for the proposed plastics ban for fresh food? Do you believe consumers will see an increase to the price of food if this plastics ban is imposed? As well, do you think the timeline is achievable?

[Eric La Flèche]

In answer to your first question, we did participate through the Retail Council of Canada, which we are active members of. Representations have been made. Some concerns have been shared. Any regulation or tax that increases costs along the supply chain is a concern, especially in these inflationary times.

We have voiced those concerns, but it will be a government decision, at the end of the day.

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

Are you in favour of the proposed plastics ban or are you opposed to it?

[Eric La Flèche]

Well, we're all for the reduction of plastics. We have a lot of initiatives at Metro to reduce plastic and reduce food waste in our stores and throughout our supply chain. I think we're doing a good job. We've made a lot of progress. There's a lot of work to do.

I don't know all of the specific details and timelines of this particular initiative, but as we're all concerned about rising food prices and price stabilization, I think it would be wise to consider the timelines. I will let the policy-makers come up with those answers.

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

Thank you.

The government promised Canadians it would lower prices for consumers at the grocery store by Thanksgiving. They broke that promise.

We've heard in the media that stores like yours are going to put a pause on increasing the prices of goods right now. That's standard practice, as I understand, through the holiday season. I think you said publicly that you're going to keep that into the new year. Once that price freeze expires, what will consumers see at the grocery store? Can they count on there being higher prices, once the reductions or freezes are off? You mentioned in your opening remarks that suppliers have been asking for increases, because the cost of goods is going up on their side of things when they supply grocery stores.

Can we expect price increases in the new year, once the freeze is finished?

[Eric La Flèche]

We are in the middle of the cost freeze—the “blackout period”, as we call it in our industry. It will end at the beginning of February. We are receiving demands for cost increases from some consumer packaged goods companies. Our team in the new year will deal with those. We'll negotiate as best we can to mitigate the cost increases they are asking for from us. It's likely that increases will be accepted, if justified. Those increases will likely be reflected at the retail level over time; it doesn't all happen overnight. There are cost increases in the system that will likely be accepted.

The timing and exactly how much both remain to be seen. We can expect—and it is a concern—that there will be some normal inflationary pressure. In some cases, there will be more than normal inflationary pressure in certain products over the new year.

We'll do our best to mitigate that for our customers.

[The Chair, Liberal, Kody Blois]

Okay.

Thank you very much.

Ms. Taylor Roy, the floor is yours for six minutes.

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

Thank you, Mr. Chair.

Good afternoon, Mr.La Flèche. Thank you for being here in person.

I don't speak French very well, so I will switch to English.

I want to thank you for being here.

We have some concerns about Metro's level of enthusiasm for the efforts our government is making to try to stabilize food prices.

First, I want to correct something for the record: Our government never said that we were going to lower grocery prices by Thanksgiving. Rather, we were working to stabilize them.

However, you expressed some concerns then about whether or not this would work. You repeated that today. I must say that I was disappointed when I saw Metro's submission to the committee of your plan to try to take action on this—without your going into details, because we all know it's confidential. It was not very robust. Let's put it that way, again.

I feel that you question the government's role in meeting with the heads of grocery chains to try to address this problem, which is of great concern. We realize, as many do, that there are global supply chain factors causing this problem. When Canadians are suffering so acutely and grocery retail profits—not margins but absolute profits—are increasing, we feel that trying to work with the grocery chains to come up with some solutions is the best way forward, as opposed to imposing things.

I'm wondering why you feel there's nothing that can be done, when other CEOs have said that these efforts have resulted in some positive actions. They are doing things they weren't doing before. Why do you feel this is something that's perhaps not worth the time of Metro?

[Eric La Flèche]

Well, that's not exactly what I said.

What I said is that we take the process seriously. As we were before, and as we continue to be today, we're committed to delivering value to our customers. That's our job. That's what we're paid to do. If we don't do that, we lose customers. If we lose business, it's not good for us.

We made two commitments: delivering value and signing the code. We've lived by them.

Our merchandising efforts are in place in all of our stores, every week and every month. We have programs that need to resonate with customers. We have taken a lot of measures. We have—

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

I'm sorry to interrupt you, but I read the submission. I understand that you are committed to delivering the best value for customers. That's what all the chains say. Of course, you're competing. That's normal. It's business as usual, obviously, for a profit corporation like yours. We understand that.

However, these are extraordinary times. There's food inflation because of many factors: the post-COVID economy, the war, supply chain disruptions and other sorts of.... People are really suffering. Grocery prices have gone up by extraordinary amounts. We asked for something outside of the norm from the grocery companies.

All of you have to compete. What you gave us was the norm. What we were asking for was something outside of the norm—something that could help your customers and show Canadians the grocery chains care about the struggles people are having today.

[Eric La Flèche]

We do care. I do care. It's a reality that affects all Canadians—everyone—so we care. We have to care because otherwise we lose customers. Therefore, we have to come up with programs that resonate with and provide value to our customers. That's what our merchandisers do every week.

In special times you have to extra special effective merchandising if you're going to resonate with your customers, and I think that's what our teams have successfully done.

You have heard of certain price reductions. We have certain price reductions all the time.

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

Excuse me, are you saying that you have done things differently than you would have done otherwise during this time?

[Eric La Flèche]

We adjust our strategies. Our commercial strategies evolve constantly to meet customer needs.

It's never ordinary times in our business. It's very competitive, and you have to react and be agile on your feet to gain customers, and we do. We negotiate hard with our customers. We try to mitigate the impacts of increases that we suffer. We try to come up with effective programs. We have good loyalty programs. We advertise over 10,000 products a week. We have long-term EDLP programs, savings programs, in all of our banners.

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

Sorry, I don't have much time. I know the programs that you have. They were in your submission. I really appreciate it, Mr. La Flèche, but I'm just trying to understand.

Are you saying that you have had greater price reductions or have tried to address the huge run-up in food costs that Canadians are facing right now? Are you doing anything differently than you would have had this not occurred, had we not had this huge food inflation?

[Eric La Flèche]

We are delivering value to customers every day. That's what we do. That's what we committed to doing and that's what we keep on doing.

[The Chair, Liberal, Kody Blois]

Unfortunately, that puts us right at time.

Thank you, Ms. Taylor Roy and Mr. La Flèche.

Mr. Perron, you have the floor for six minutes.