Grocers need to be more accountable to themselves and the public
It all started in 2020 when Michael Medline, Sobeys’ big boss, told the Empire Club in Toronto that 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.
Medline’s announcement sent shock waves through the industry, upsetting the in-group among retailers 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 number one. Our food retailers are accused of abuse and trickery daily.
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Grocers have now begun to realize that there might be a problem. Major 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, 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 leadership of Lamontagne and MAPAQ clearly compensated for the bewildering inertia of the Ford government in Ontario. The food processing sector in Ontario is the largest part of the manufacturing sector in Canada’s largest province, which makes Ontario’s silence puzzling.
But consumers will also gain in the long run. Many Canadians are unaware that suppliers must pay grocers to do business. While the fee is justified by merchandising costs and shelf space, the types of costs you would expect, things of 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 co-ordination 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 exists 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 breaches 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 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. Now, we’re left to guess at just about everything. Consumers do not feel informed or protected.
The code will surely help in these respects. The code will also help independent grocers who deserve a chance to compete against the bigger retailers. Innovation, variety, and food congruity for all of us often go through the independents.
But it is a voluntary, government-coordinated and industry-led code. Compliance and consumer trust will be significant challenges, especially for 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 that they are facing a crisis of confidence, grocers themselves need the code, more than ever.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.
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