Agriculture Committee on Feb. 13th, 2024

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

On that same point, as cost increases for suppliers—and you've mentioned that suppliers are asking for cost increases—what do you think the effect of the carbon tax is on the cost increases that you're seeing at the retail level?

We know that the carbon tax is a significant cost to our farmers and our producers and it's going to increase again on April 1.

Have you seen an effect on your business with the rise of the carbon tax on the cost of doing business and the costs passed on to families?

[Pierre Riel]

Because we're low emission, at this point, we're not the ones paying it, but we're paying it in our utility bills. We're paying it in the propane we're selling. We're paying it in a different way.

Everything you expend at a point in time—you have to if you want to pay your salary or your expenses—is all part of the net cost.

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

Another complaint I hear from many businesses is how our regulations incur costs that must be passed on to consumers. You just mentioned the cost of your utility bills. Obviously, when you see an increase in heating your stores, you're going to have to pass that on to the consumer somehow, whether it's in cost increases on memberships in your case, or cost increases on the food that consumers are buying.

Again, with the potential plastic packaging ban, how do other regulations that are mandated by the federal government affect the costs that you pass on to Canadian consumers?

If you don't have that at your fingertips, is that something you can pass on to this committee at a later date?

[Pierre Riel]

We'll look into it and get back to you on this.

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

Have you seen an increase in your trucking costs in getting food to your warehouses since the carbon tax has been put on and we see it increasing?

[Pierre Riel]

There is a fuel surcharge in the market.

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

The carbon tax is a direct cost.

Thank you.

[Pierre Riel]

Yes. We're paying for gas for our own fleet.

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

Thank you very much.

[The Chair, Liberal, Kody Blois]

Thank you very much.

We'll now turn to Mr. MacDonald from Prince Edward Island.

I'll pass it over to you, my friend.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

Thank you, Mr. Riel.

Mr. Riel, we've brought grocery store chains before us.

I'm just wondering, in your point of view, why are we here? How did we get to this point? Why are we having to call grocery store chains before parliamentary committees to discuss pricing mechanisms?

[Pierre Riel]

I think the consumer out there is worried. I think you represent the consumer, so I think that's why we're sitting here.

We also represent our own members. For us, everything we can do to lower prices would be better for business out there. The more consumers who can afford to buy their food, the better it will be for Canadians. That's what it's all about.

For me, in my very honest opinion, let's work together on this.

[Heath MacDonald, Liberal, Malpeque, PE]

How will Costco ensure that its pricing mechanisms align with its own code of conduct?

You spoke relevant to that. I just want to know how you will interpret the new code of conduct to build it into the fairness and transparency that you discussed in your preamble.

[Pierre Riel]

In our practice and in our day-to-day business, we see the supplier as a partner. At the end of the day, we're just selling goods. That's what we do at Costco. If you don't have a partner, if you don't have procurement, and you don't have the supplier to supply you, what are you going to sell?

It's important for us that the supplier makes some money because at the end of the day, if they don't, they're not going to be able to supply the consumer.

We're basically in the middle of the two. We have to do a good job serving the member and we have to do a good job negotiating with our vendors to make sure we get the best fair price out there.

That's what I call respect. I think if we respect vendors, a code of conduct will not necessarily need to be a necessity because you can deal with it.

[Heath MacDonald, Liberal, Malpeque, PE]

Just on the supply chain, we talked about climate change, transportation and so many other things that are happening around the world. How is Costco affected? How are the pricing mechanisms affected if there is flooding in California, such as for romaine lettuce or something to that effect?

Can you give us any indication of some of the travesties we are seeing around the world that are having an effect on farming, on the farming community and then, obviously, on the supply chain to your stores?

[Pierre Riel]

It's getting tough out there because of all of this. You mentioned romaine hearts. That is an item that for probably the last five years we're out of stock for a couple of months of the year because of what's all happening. Obviously, when there are no offers out there and there's not enough product, the tendency is that it's a little bit more expensive. That's just a common practice.

Having said that, what we've been doing at Costco is searching across the world to try to get the fruits and vegetables to serve our customers. I'm in charge of international for Costco. I was in Australia last week with our buyers over there and communicating with the buyer in Canada to try to find some sources of product. I was in China three weeks ago. There are things that we can look to supply, even from Canada, and now we're shipping some products out of Canada to those countries.

I think that's the key. The key to the future is procurement. If we want to feed our kids, we're all going to have to work together again.

[Heath MacDonald, Liberal, Malpeque, PE]

Overall, the code of conduct promotes transparency and integrity. You talked a bit about that. It also talks about accountability. What do you see as important for regulations or policy in regard to the grocery store chains on ensuring accountability across the board for all retailers?

[Pierre Riel]

I think it's that each of the retailers be responsible and treat people well. I don't think you need a regulation to do that. I think the common practice is to treat people fairly, and you get something back.

Fairness is very important in this business. I've been at Costco for 37 years. Are we perfect? No, we're not, and I will never say we are, but I will say that if there's a problem, we want to do the right thing. If a vendor has a problem with us, he has to call us, and we'll sit down and we'll deal with the problem, and I think each of us should do the same.

[Heath MacDonald, Liberal, Malpeque, PE]

Yes. Okay.

Thank you, Chair.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. MacDonald.

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

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

Thank you, Mr. Chair.

Thank you, Mr. Riel, for joining us again today. We know that we often ask you to come and see us. We appreciate your availability and your clear answers that flow well.

I'll focus on the code of conduct. From the start, in your discussions with the other committee members, you've been saying that every grocer must treat people properly and that you basically don't need a code of conduct since you have stuck to your business model and you have a code of ethics, for example.

I understand all this. I can also see it when comparing your answers to questions with the responses from previous witnesses. However, the code of conduct may be necessary for other grocery chains. You're part of an ecosystem. Correct me if I'm wrong, but you said in a previous meeting that you agreed with the idea of a code, while adding that it didn't change much for you since you already had positive practices.

Are you still prepared to adhere to a code of conduct, should an agreement be reached?

[Pierre Riel]

If an agreement is reached, I would still be prepared to do so, because we apply the principles. If the principles are upheld, if a good protocol is established to ensure a clear understanding of how disputes will be resolved—if necessary—and if we know all the costs involved, I would be ready to adhere to it.

We weren't involved in the negotiations from the start, nor were we asked to be. However, the Retail Council of Canada, or RCC, keeps us informed of developments.

If the code of conduct is well defined and involves respecting suppliers, we can only support it, since we already apply the principles.

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

If neither Loblaws nor Walmart were to sign this agreement, for example, how would Costco react?

Would Costco agree to adhere to a code that isn't observed by all industry players?

[Pierre Riel]

It would be difficult to agree. In my opinion, the code is made for the industry. It doesn't matter which players participate. It matters that the industry participates.

Other countries where we do business have codes of conduct in place. For example, England has a code. We aren't required to adhere to it, even though people in England must abide by the code. Australia also has a code. We don't adhere to it, nor are we required to. We already offer savings of around 25% to 30% compared with our competitors.

I don't call it participation when not all players are around the table.

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

Don't you think that it could have a ripple effect?