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The Grocery Cart | A code of conduct to save face for retailers?



Last week, we learned of the creation of a code of conduct to protect consumers in the food sector. Good news for consumers, even if many do not understand why.

As Marie-Eve Fournier reported last weekend, the Consumer Protection Code of Conduct is coming to town. We seem to be witnessing a miracle!

To get there, a certain uprising began in 2020 with the announcement of Michael Medline, big boss of Sobeys / IGA, who said at the Empire Club in Toronto: “enough is enough”. In recent years, major retailers, including Walmart, Loblaw/Provigo/Maxi, Costco, Metro and Sobeys/IGA, have abused their power by imposing a variety of fees on their suppliers in a brutal and random way. Medline’s announcement sent shockwaves through the industry.

Eric La Flèche and his team at Metro then explained to Marie-Eve Fournier that relations with suppliers were “win-win”, in short that everything was going very well, Madame la Marquise. Now, only a few years later, many consumers believe that these brands are shamelessly profiting from an inflationary situation.

Our food retailers find themselves in the dock every day, rightly or wrongly.

Over time, retailers realize that there may have been a problem. Consumers might not have known it at the time, but these food giants had power, probably a little too much. The infamous dispute between Frito-Lay and Loblaw/Maxi/Provigo last year, which caused Lay’s potato chips to disappear from the retailer’s shelves for a while, exposed the problem in the open, and that dispute was petty and shameful.

Federal Minister Marie-Claude Bibeau, supported by Quebec Minister of Agriculture, André Lamontagne, took the lead by creating a working committee to establish a code of conduct for the sector, in order to give our food processors to be heard. Since then, it has really become the business of Mr. Lamontagne and Quebec, and the work project will finally make it possible to establish a code that will help the food sector, but above all, consumers. The leadership of Mr. Lamontagne and the Ministère de l’Agriculture, des Pêcheries et de l’Alimentation du Québec (MAPAQ) clearly compensated for the bewildering inertia of Ontario and the Ford government, where the food processing sector is the largest in the manufacturing sector in this province, it must be remembered.

But consumers will gain in the long run.

Many Canadians are unaware of the fact that in the food industry, suppliers have to pay grocers to do business.

The fees are justified by merchandising costs, shelf space, details that everyone expects. But in recent years, the situation has changed. Companies like Loblaw, Walmart and Metro go further by imposing certain fees unilaterally. It is now becoming more difficult for independent processors and grocers to compete in Canada.

A code of conduct for grocers will aim to change the culture of an industry where vertical coordination and collaboration barely exist.

It’s 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.

It must be understood that the code does not act as a police force or a means of nationalizing distribution. The spirit of the code is to establish greater discipline and eliminate abuse. The governance around the code will also allow greater transparency, which we sorely lack. A secretariat will be created to enable the industry to be accountable to itself and to the public. For some time now, with inflation reaching record levels, consumers have wanted to better understand the mechanics behind pricing. The current vagueness opens the door to the worst speculations.

Consumers do not feel informed or protected. The code will surely help in this chapter while supporting independent grocers who deserve a chance to compete on equal terms against the biggest in distribution.

Innovation, variety and food efficiency for all often go through the independents.

But it is indeed a voluntary code, coordinated by government and led by industry. Compliance and consumer trust are going to be significant challenges, especially right now. Time will tell if the code will be effective.

The irony in all of this is that in the beginning it was the processors who wanted such a code of conduct. Now that consumer confidence in them is wavering, it is the Metros, Loblaws/Maxi, IGAs and Walmarts of this world that need such a code, more than ever.

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