Canada is a step closer to establishing its first-ever set of grocery industry rules in a bid to even out power imbalances for both food producers and grocers in a market dominated by five supermarket chains.

An industry group set up to hammer out a Canadian grocery code of conduct has reached a milestone with a proposed final version, that includes a process to resolve disputes and impose sanctions on systemic violators. The code stops short of imposing fines on companies that fail to adhere to its principles, but establishes an adjudicator office to settle disputes.

The code is about “good business practices” and creating balance in the supplier-retailer relationship, said Michael Graydon, CEO of supplier industry group Food, Health & Consumer Products of Canada and co-chair of the code’s 10-person steering committee. Many smaller food suppliers say they have endured years of unfair industry practices and supply-chain bullying under Canada’s highly consolidated food retail market, including high fees to access store shelves, unexplained “chargeback” fines that shave thousands off invoices, and months-long payment delays.

Loblaw Companies, Empire Company (which owns Sobeys), Metro and Walmart, command roughly 70% of the market according to a U.S. Department of Agriculture report and industry observers have cautioned that the trend of big grocers using their market weight to impose fees without negotiations could lead to less competition, higher food costs and fewer brands on store shelves for consumers. Canada’s leading food retailers counter that supplier fees and fines are a fair, long-standing industry practice that helps to ensure that shipments from suppliers are complete and arrive on time.

Loblaw, Sobeys, Metro and Walmart Canada did not respond to inquiries on whether they would adhere to the code and its rules, which stipulate that any charges “for programs such as stocking, listing, positioning, promotions, marketing costs, unsellables and shrinkage” must be contractual. Charges are expected to have “reasonable substantiation in sufficient detail and in an effective format for verification of the deduction or invoice,” the code says.

Despite criticism that the voluntary code has no teeth and is not government-led, some members of the code’s steering committee say they are optimistic. The code, they say, will be up for review in 18 months and can be amended at that time if needed.

“We’ve committed to trying this as an industry on a voluntary basis,” Graydon said. “There’s enough substance within the provisions that there will be this cultural transition that we are looking for.”

Gary Sands, a member of the committee and senior vice-president at the Canadian Federation of Independent Grocers, which represents more than 6,000 independently owned and operated grocery stores across the country, says the industry is “taking a leap of faith…The industry coming together to build this document is a recognition that things have to change,” Sands said “that we have to do better and we can do better.”

However, Diane Brisebois, president and CEO of the Retail Council of Canada, which represents the country’s largest grocers, says “there’s still lots of work that needs to get done.”

A consultation process on the proposed code is open to food industry members until May 30. Brisbois said in an interview that there needs to be a “very clear and simple process in place to manage disputes” so that “no one is mired in red tape.” The grocers’ aim is to ensure that the code will “ultimately benefit consumers,” she added.

Source: The Star