As fuel costs rise with the ongoing uncertainty in the Middle East, some food suppliers in Canada are adding fuel surcharges to deliveries to make up for their added costs.
CBC News has obtained documents showing at least four suppliers — Sunrise Farms, CTS Foods, Maple Leaf and Tree of Life — are adding fuel surcharges. The extra charges from Tree of Life and Maple Leaf were first reported by the Globe and Mail.
The surcharges have left some grocery store owners — particularly owners of smaller businesses — considering whether to pass on some of the increased costs to customers.
In a letter sent to buyers, Sunrise Farms said they would add a five-cent-per-kilogram fuel cost adjustment, as well as a $10 fuel surcharge, starting April 13. The per-kilogram rate — intended to be temporary — would be adjusted bi-weekly based on “fuel market conditions,” according to the letter.
Maple Leaf’s letter said they would add an 11-cent-per-kilogram fuel surcharge for shipments of all prepared meat and fresh poultry starting April 6. The meat supplier’s letter said their surcharge would also be reviewed weekly, and comes as a temporary response to the rapid rise in oil prices following the effective closure of the Strait of Hormuz.
Around a fifth of the world’s oil moves through the critical waterway, whose closure has become a focal point in the conflict in the Middle East that began in February, when the U.S. and Israel launched strikes on Iran.
CTS Foods and Tree of Life both said they would add a temporary $10 fuel surcharge per delivery, while the latter said their charge would be removed when diesel returns to a “rolling three-month average” of $1.20 a litre or lower.
Which groceries are getting more expensive due to the Iran war?
A spokesperson for CTS Foods confirmed the increase to CBC News in an email.
“As a distributor, transportation is a meaningful operating cost for us, and this temporary surcharge is intended only to help offset exceptional delivery expenses,” Jessica Hemmerich, marketing and regulatory compliance manager for CTS Foods, said in an email.
“It is not intended to be permanent, and we expect to remove it once fuel prices normalize.”
Maple Leaf, Sunrise Farms and Tree of Life did not respond to requests for comment.
Some suppliers have avoided adding charges so far. Agropur, a Canadian dairy co-operative, told CBC in an email they have decided not to add a fuel surcharge at this time.
Depending on the fee, surcharges can add about $100 to the price of a pallet of goods, according to Munther Zeid, owner and manager of Food Fare in Winnipeg.
He says while he doesn’t want to name which of his suppliers specifically raised prices in recent weeks, many of them have.
Whether the extra charges means prices in his store go up depends — for some items, the added cost is small and upping the price tag isn’t worth it.
However, for some perishable produce items that need to be delivered frequently, Zeid says he’s had to mark prices up by a few cents a pound.
“It’s going to go from $5.49 to $5.99 a pound, or $4 a pound to $4.49,” Zeid said. “We look at every order as it comes in, how the fuel surcharge affects it and adjust accordingly.”
At Vince’s Market, which has four grocery locations in southern Ontario, president Giancarlo Trimarchi has also received notices of fuel surcharges from suppliers who he wouldn’t name.
So far, he’s refrained from hiking prices in any of his stores. He says he knows customers are sensitive to increases and is hesitant to raise prices too soon.
Grocers warned of fuel surcharge on food in letters obtained by CBC News
“It takes a while for these things to kind of come into perspective,” Trimarchi said.
He says within a few weeks, as the growing season in Ontario gets underway, he’ll be able to tell how much the fuel expenses has increased the cost of doing business, and then his company will decide whether price increases are necessary.
As much as another cost increase isn’t fun, Trimarchi says, he understands suppliers have to make ends meet and he appreciates their transparency.
Zeid says fuel surcharges aren’t new — some suppliers had added them in the past, and he says many eventually lowered the amount but kept the surcharge in place.
“It seems in the grocery world, once there’s some sort of a fee, it stays on,” Zeid said.
He worries that could be the case with this latest round of fuel surcharges, too — though each letter from suppliers reviewed by CBC said the fuel charges were temporary.
Bigger grocers have also received similar letters — but some are simply refusing to pay the surcharge.
Empire — which owns a number of chains including Sobeys and Safeway — confirmed with CBC News that it has received “a few” fuel-related surcharge requests from suppliers, which they have declined.
Metro said in an email that it reviews and negotiates all supplier requests, but didn’t say whether they had received any recent fuel surcharge requests, or how they might be handling them.
Similarly, Loblaw told CBC News it could not discuss specific agreements, but it was “in regular dialogue with our suppliers and continu[ing] to review cost increase submissions due to changes in underlying market conditions,” including fuel surcharges.
High price of imports driving food costs in Canada
For smaller grocers like Vince’s Market, pushing back on new charges is not an option.
“I’m, you know, a small blip on their sales. If I said no, they would say, ‘Well, then we’re not shipping to you anymore’,” Trimarchi said of suppliers.
Fraser Johnson, a professor of operations management at Western University’s Ivey Business School, says he’s not surprised suppliers are pricing in the added cost of fuel, given transportation can represent anywhere from 10 to 20 per cent of the cost of groceries.
And if the fuel surcharges ever come off, Johnson says it will be a slower process.
“They rise like rockets and drop like feathers,” he said. “It’s really up to the [grocers] to be diligent in terms of negotiating these things back down when fuel prices return to normal.”
He said that power to negotiate rests mostly with bigger grocers, which have more sway with suppliers.
What’s more, he doesn’t expect the federal government’s tax holiday for fuel will help much.
“Depending upon where you’re located in the country, the prices [for fuel] have gone up by 50 per cent. Dropping the price of diesel by four or five cents a litre really isn’t going to be impactful,” Johnson said.
Trimarchi says shoppers looking to save a few bucks should look for locally grown produce as the growing season in Canada starts. Local items don’t have to travel as far to get to store shelves, so fuel factors less into the price tag.
“Those will be less impacted generally than those products that are being imported from overseas. Your French cheese, your Italian wine, your Australian lamb — these are gonna have big freight implications,” Trimarchi said.
