Sylvain Charlebois – Contributing Columnist
A code of conduct for grocers is coming to Canada. The United Kingdom and Australia, where there are grocer oligopolies, already have a similar code. This is great news for consumers. in fact, it should be considered a minor miracle.
It all started in 2020 when Michael Medline, the big boss of Sobeys, told the Empire Club in Toronto that department 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.
Now, after only a few years, the public sees the big chains as public enemy number one. Our food traders are daily accused of abuse and fraud.
Grocers have now begun to realize that there might be a problem. The big grocery chains have had a lot of power, maybe 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, Federal Minister of Agriculture, supported by André Lamontagne, Quebec Minister of Agriculture, took the lead in creating a working committee to develop a code of conduct for the industry in order to give food processors of Canada 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 industry, but especially consumers.
Consumers will gain in the long run. Many Canadians are unaware that suppliers have to pay grocers to do business. While the fees are justified by merchandising costs and shelf space, the kinds of costs you’d expect, things have changed in recent years. 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.
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 failing 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 national food supply and encourage investments in the agribusiness.
It should be understood that the code is not intended to endorse a police state or an attempt to nationalize our food distribution. The spirit of the code is to establish greater discipline and eliminate breaches of trust, which is exactly what we have now.
The governance around the code will also allow greater transparency, which we are sorely lacking at the moment. A secretariat will be created to hold the industry accountable to itself and to the public.
For some time now, with an inflation rate that has reached record levels, consumers are increasingly frustrated, satiated and downright deprived at the grocery store. We want to better understand pricing mechanisms. Now we are left to guess just about everything. Consumers do not feel informed or protected.
The code will surely help in these regards. The code will also help independent grocers who deserve a chance to compete with larger retailers. Innovation, variety and food congruence for all of us often go through the independents.
But it is a voluntary, government-coordinated, industry-led code. Compliance and consumer trust will be significant challenges, especially at this time. Time will tell if the code will be effective.
The irony in all of this is that initially, it was the food industry who wanted a code. Now, knowing they are facing a crisis of confidence, grocers themselves need the code more than ever.