As reported in recent days, the grocer code of conduct is coming to Canada. Both the United Kingdom and Australia, where grocer oligopolies exist, have a similar code already.
This is great news for consumers. In fact, it should be considered a minor miracle.
It all started a few years ago with the announcement of Michael Medline, Sobeys’ big boss, who said at the Empire Club in Toronto that enough is enough. It was 2020, when the major stores including Walmart, Loblaws, Costco, Metro and Sobeys were abusing their power by introducing all kinds of fees to their suppliers in a brutally random way.
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Medline’s announcement sent shock waves through the industry, upsetting the in-group among retailers that were keen to continue intimidating the rest of the industry.
At the time, Eric Laflèche and his team at Metro, for example, told some reporters to ignore this issue, and that the industry was fine. Total arrogance. Now, after just a few years of this, the public sees the major chains as public enemy No. 1. Our food retailers are accused of abuse and trickery on a daily basis.
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Grocers have begun to realize there might be a problem. Major grocery chains have had a lot of power, maybe a little too much. The famous dispute between Frito-Lay and Loblaws last year exposed the problem to the public. It was ugly, very ugly.
Marie-Claude Bibeau, the federal minister of agriculture, supported by André Lamontagne, Quebec’s minister of agriculture, took the lead by creating a working committee to develop a code of conduct for the industry, to give Canada’s food processors a chance to be heard.
Since then, the project has really become the responsibility of Lamontagne and Quebec. The project will establish a code that will help the industry, but above all, consumers.
The food processing sector in Ontario is the largest part of the manufacturing sector in Canada’s largest province. Ontario’s silence has been puzzling.
But consumers will also gain in the long run. Many Canadians are unaware that in the food industry, suppliers must pay grocers to do business. The fee is justified by merchandising costs and shelf space, the types of costs you would expect. But in recent years, things have changed. Companies like Loblaws, Walmart, and Metro abuse the system, and some levies have been imposed quickly, incidentally, and unilaterally. It is now more difficult in Canada for food processors and independent grocers to compete.
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A code of conduct for grocers should change the culture of an industry where vertical coordination and collaboration barely exist. It is also about tackling a broken business model. A code can neutralize power relations within the chain, stabilize retail prices, emphasize value and innovation for consumers, improve the security of the domestic food supply and encourage investment in the agri-food sector.
In the U.K., where a grocer code of practice has existed since 2010, the country’s food inflation has historically been lower than Canada’s.
It must be understood that the code is not about endorsing a police state or some attempt to nationalize our food distribution. The spirit of the code is to establish greater discipline and eliminate breach of trust, which is exactly what we have now. Many supply chain relationships are dysfunctional, while public trust is at an all-time low.
The governance around the code will also allow for greater transparency, something that we sorely lack at present. A secretariat will be created to enable industry to be accountable to itself and the public.
For some time now, with an inflation rate that has reached record levels, consumers have been increasingly frustrated, fed up and downright deprived at the grocery store. We want to better understand the mechanics behind pricing.
For now, we’re left to guess at just about everything. Consumers do not feel informed or protected. The code will surely help in these aspects. The code will also help independent grocers who deserve a chance to compete against the bigger retailers. Innovation, variety and food congruity often go through the independents.
But it is a voluntary, government-coordinated and industry-led code. Compliance and consumer trust are going to be significant challenges, especially now. Time will tell if the code will be effective.
The irony in all of this is that, in the beginning, it was food manufacturers who wanted a code.
Now, knowing they are facing a crisis of confidence, grocers themselves need the code, more than ever.
