Canada is on the verge of implementing a grocery code of conduct. It comes when food prices are high, suppliers are frustrated with retailer fees and competition is dwindling in the sector.
The proposal is for a voluntary code of conduct that would invite transparency and some form of accountability from retail grocery to the suppliers, including primary producers who market direct to retail.
Will it work?
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Canadian grocery prices have risen considerably. Where is that profit going if not to Canadian farmers?
The U.K. had a voluntary code until 2010, when it changed the legislation to become mandatory. Only then did competition start to creep back into the market. In Australia, the code introduced in 2015 is not mandatory but legally binding once parties sign on. Both jurisdictions report an increase in competition once the code was binding by legislation or legal agreement.
Grocery is big business in Canada, netting $6 billion in 2022. Competition is almost non-existent, with market share during the same year owned by Loblaws (29 per cent), Safeway/Sobeys (21 per cent), Costco (11 per cent), Metro/Jean Coutu (10.8 per cent), Walmart (7.5 per cent) and the balance split between small independents.
Media reports often direct our focus away from dominance in the marketplace toward supply chain issues. But the supply chain is working, even as stores deal with high retail fees.
The industry-led objectives within the code are to enable a thriving industry and to promote trust, fair dealing and collaboration throughout the value chain. There is no relationship in these objectives to a robust agricultural community in Canada from which the domestic supply of food and agri products are derived. It’s a nice set of playground rules to promote, but not to enforce, fair dealing.
The other two objectives are to increase commercial certainty and to establish effective, equitable dispute resolution. As there is an assumption of a need for dispute resolution, it tells me the sector itself has never taken the time to establish values alignment beyond the balance sheet.
The “corporation”, as it will be called, will be governed by a board of directors. Primary producers, wholesalers and distributors selling directly to retail (Class A) are allotted two seats. I find this interesting as the primary ignition to the discussion on a code of conduct was complaints from processors, producers and independent growers (also known as the supply chain) regarding the stiff, unpredictable and ever-increasing retailer fees.
The other nine seats around the table go to grocer retail, and five of those seats will be held by companies with sales of $999 million or more.
The agreements made between retailers and suppliers after implementation of the code will be non-binding, in hopes that each stakeholder will play nice.
Hardly. Food retail margins have doubled since 2019. No investor or company board is going to encourage fair play at the cost of those kinds of profit margins.
At the same time, food prices from 2018-23 have increased by 21.8 per cent. The average retail price for 10 pounds of potatoes at retail in 2017 was $3.99 and as I write this, I see all varieties of potatoes starting at $8.99.
Consider as well that Canadians are spending less per week on groceries than they have in years, although they are visiting the store 32 per cent more times, scouring shelves for sale items and bonuses. In 2020, the per capita expenditure per month on food was $339 and so far in 2024 it is $248, with women spending 13 per cent less on themselves than do men.
Food insecurity has increased and the food bank reports that between March 2022 and March 2023, there was an increase in visits of 78.5 per cent.
This dollar store mentality shifts from a focus on nutrition to a scramble for price. Drifting away from domestic food supplies is terminal to the economic health of Canadian farmers. As consumers scratch for cash to feed themselves, lower-priced imports will hit shelves while our high-quality Canadian production rides the rails for export.
Profits in retail grocery will continue to increase and we can’t be led down the path of the “low margin” discussion. Low margin does not mean low profit. There is a modest capital requirement to build retail grocery. Deliveries are constant and shifting that system keeps suppliers in a constant state of flux.
There is no mechanism in Canada to protect the supply chain from producer through to retailer. Until the bread fixing scandal was made public, the collusion of retailers behind closed doors remained unknown.
We do not have a value chain in food. We have a supply system that is victim to the end seller. The principles of play introduced in the grocery code of conduct for Canada are dependent on the voluntary involvement of a self-governing system without any oversight that holds it responsible or accountable to Canadian farmers or consumers. It cannot work to its potential without a higher level of liability.
A knowledgeable, advanced, economically stable society is one in which the universal right to access food is upheld and honored. That includes full accountability at grocery retail.
Brenda Schoepp works as an international mentor and motivational speaker. She can be contacted through her website at www.brendaschoepp.com. All rights reserved.
