Walmart Canada willing to participate in grocery code of conduct, CEO tells MPs

The head of Walmart Canada says the company is willing to participate with other major grocers in the creation of a grocery code of conduct that would level the playing field between suppliers and retailers, reversing an earlier position against the measure.

Gonzalo Gebara, who was named president and CEO of Walmart Canada in December, told the House of Commons agriculture committee Monday he had recently received a draft of the proposed code that is being reviewed by the company.

“I acknowledge that in the past we didn’t participate, but we are willing to participate now,” he said.

“We will support any initiative that would bring better conditions and the ability to have more transparency in the whole (supply) chain.”

Read more: Grocery CEOs defend ‘reasonable profitability’ in grilling over soaring food costs

Work on a grocery code of conduct began in earnest in 2020 during the COVID-19 pandemic, after Walmart Canada imposed new fees on suppliers to help offset a $3.5-billion investment in its stores and e-commerce business through 2025. Loblaw Companies, Canada’s largest grocery corporation, also imposed new supplier fees that year.

Gebara defended those fees, telling MPs at the committee that Walmart is “always transparent” about such moves.

The code of conduct would impose fair practice standards on retailers and suppliers and make those rules transparent, while potentially imposing financial penalties on companies that don’t comply.

Walmart Canada has previously said such a code was not necessary and defended its fee structure.

Gebara’s appearance at the committee comes as Canada continues to face double-digit food inflation that has outpaced overall price increases since late last year.

Grocery prices were up 10.6 per cent in February compared with a year ago, while overall inflation was 5.2 per cent.

Gebara insisted Walmart Canada is not trying to profit from food inflation, telling the committee the company’s operating profit and overall gross profit margins specifically for its food business were down last year compared to previous years.

Walmart’s overall profit margin — including U.S. and international operations — sat at 3.3 per cent for the 2023 fiscal year, down from 4.6 per cent in the year prior, according to its most recent earnings report in February.

However, the report also noted “Canada led the way” along with China, Mexico and Central America in helping Walmart International’s net sales grow 2.1 per cent to US$27.6 billion in the fourth quarter of 2023.

Read more: ‘Profits are profits’: As food prices soar, Liberal MP says Canada needs more competition

Gebara did not provide specific numbers on Walmart’s Canadian operations and revenues, but said relevant financial information has been provided to the Competition Bureau, which is probing whether grocery chains are benefiting from inflation.

Trending Now

Gebara said Walmart Canada strives to maintain a price gap between its products and those sold by its competitors, naming the other grocery giants.

He said Walmart is known for its “everyday low price” strategy: “This is not a stunt or our response to the challenging times we’re living in.”

The retailer is doing everything it can to fight inflation, said Gebara, such as taking measures to control operating costs, identifying improvements in its supply chain and working to keep prices down on private-label products.

“The past two years have presented a perfect storm of external factors that have driven up food prices,” he said. “These inflationary pressures are passed through the entire supply chain.”

The CEOs and presidents of Loblaw Cos. Ltd., Metro Inc. and Empire Co. Ltd. told the committee that food inflation is not being caused by profit-mongering, and insisted their margins on food have remained low.

A report last fall out of the Agri-Food Analytics Lab at Dalhousie University found that all three of the big grocery companies posted higher profits in the first half of 2022 compared with their average earnings over the past five years.

At the March 8 meeting, the heads of Metro and Empire both questioned why MPs seemed to be excluding American retail giants like Walmart and Costco from their research into food inflation. The committee agreed unanimously to invite the leaders of those two retailers’ Canadian arms to speak before them.

— with files from the Canadian Press