Canadians might be seeing their grocery bills inch higher with food suppliers warning grocers they will be imposing a fuel surcharge on their deliveries to grocery stores.
Global News has obtained notices sent by three of Canada’s largest food suppliers to their grocery clients — first reported on by CBC News — informing them of the surcharges.
Maple Leaf Foods sent a letter to clients on March 31, informing them that they will start charging a fuel surcharge starting April 6.
Citing “developments in the Middle East” and “a sharp increase in crude oil prices, resulting in a rapid and significant escalation in fuel costs,” the company said it would add a temporary fuel surcharge of $0.11 per kg to all prepared meats and fresh poultry shipments.
“This is not a permanent price increase, but rather a temporary adjustment tied directly to fuel cost movements,” the company said in its letter.
“We are not using this mechanism to recover other inflationary pressures such as raw materials, packaging, or ingredients,” it added.
Tree of Life, in a letter dated March 23, said they would add a fuel surcharge of $10 per shipment starting April 22.
Tree of Life said higher fuel prices “have resulted in a sustained increase in diesel fuel costs, directly impacting our logistics and distribution operations.”
However, the company said it would remove the surcharge if diesel costs returned to a rolling three-month average of $1.20 per litre or lower.
According to GasBuddy, the average diesel price in Canada was $1.78 per litre on Wednesday.
Some food suppliers are also increasing their minimum order requirements.
Ontario-based meat supplier Brandt Meats told clients they will be increasing their minimum order requirement to $1,000 for all deliveries starting May 4, according to one of the letters obtained by Global News.
“Rising fuel and labour costs have significantly increased transportation expenses across our industry. Until now, Brandt Meats has absorbed these additional costs in order to minimize the impact on our customers. Unfortunately, we are no longer able to fully offset these increases and must adjust our delivery requirements,” the company said.
Sobeys has received fuel surcharge requests from grocers and said they will refuse to pay it, according to an emailed statement.
“We have received a few requests from suppliers to date, which we have declined,” a Sobeys spokesperson said.
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“Similar to our approach to tariffs at this time last year, we believe the fuel market is too unpredictable to take any decisions that could adversely impact the value we provide to our customers,” they added.
Loblaw said they are “in regular dialogue with our suppliers and continue to review cost increase submissions,” including on any fuel surcharges.
The company said in a statement that they will “push back on unjustified cost increases, including on fuel surcharges where not justified,” but did not say in what situations they consider cost increases justified.
Metro said it “carefully reviews and negotiates supplier requests to ensure they are justified and to limit the impact on our customers, while continuing to offer competitive prices,” without adding any further detail on what would make those requests justified.
Smaller and independent grocers, however, are worried that they will not have the option of pushing back against any cost increases.
“It’s disconcerting for us to hear that these surcharges and the impact of rising fuel prices isn’t going to be shared equally with all retail sectors. A smaller independent grocer certainly does not have the leverage of some of the big chains,” said Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers.
Northern and rural communities, as well as urban food deserts, will be most significantly impacted by food price increases, which will be passed on to consumers, Sands said.
“In retail grocery, you have very narrow margins. Independents are, in a good year, operating on about a two per cent overall margin. If you’re getting fuel surcharges … and trucking costs are going up by 40 to 50 per cent, there’s just no way that you can avoid passing that on to your customers,” he added.
Adding fuel surcharges to the cost of deliveries is “perfectly legal,” said University of Guelph food economist Mike von Massow, with some suppliers even putting it into contracts with their clients.
“Even if it is not part of the contract, freight charges are going up and they are passing them along. It is actually better if they do temporary surcharges instead of permanent price increases,” he added.
In Canada, companies are generally free to set the price level at which they sell their products, the Competition Bureau said, so long as those prices do not amount to price gouging.
“Only the provinces and territories have rules related to price gouging in Canada,” the bureau said in a statement.
The Competition Bureau enforces the Competition Act, which includes provisions against “illegal practices such as price-fixing, competitor collaborations, misleading advertising, and abuse of dominant position.”
The bureau did not say whether this is being looked into, since it is required by law to conduct its work independently.
“The Bureau must conduct a thorough and complete examination of the facts of any matter before reaching a conclusion as to whether the Competition Act has been contravened,” it added.
The fuel surcharge is “no surprise,” said Conservative MP Sandra Cobena.
“It doesn’t take a genius to realize that that ultimately erases any savings that the suspension of the excise tax that the prime minister announced yesterday would have provided Canadians,” Cobena said.
“We are proposing that all federal taxes are removed for the remainder of the year. If we are able to approve that plan, then there will actually be a relief for Canadians,” she added.
The fuel surcharges will stretch Canadians thin as they struggle to afford groceries, the federal NDP said.
“Now food suppliers are threatening to charge grocery retailers fuel surcharges, which will be downloaded onto consumers. Small businesses are forced to raise their prices or eat into their profits while big oil corporations continue to rake in billions in excess profits,” NDP MP and the party’s critic for agriculture and small business Gord Johns.
