Industry Minister Says Grocery Code of Conduct Is Happening — Whether Walmart and Loblaw Like It or Not

In early December, the Canadian grocery code of conduct looked like it was going to die because Loblaw and Walmart were refusing to sign it. Galen Weston, Loblaw’s board chair, told the House of Commons agriculture committee that he believed his rivals in the food business were putting the industry on a bad course, one that would end up handing too much power to global food brands and, in the end, drive up prices rather than lower them.

But federal Industry Minister François-Philippe Champagne fired back urging Loblaw and Walmart to work with the rest of the industry to reach a deal, because the government is adamant that it’s happening whether the two chains like it or not. “We will have a grocery code of conduct in Canada one way or the other,” he told the Star. “Get back to the table and work with the industry to find a way forward.”

Proponents of the code say it will stamp out alleged bullying in the food business by laying out a set of rules of engagement for grocers and their suppliers. Food producers say the market is so concentrated that big grocers are able to charge unfair penalties for unavoidable infractions, like late or short shipments, on top of fees of more than $100,000 in some cases just to get a product on shelves, according to a 2021 government report.

Suppliers say they had no choice but to pay the fines and fees, even if they disagreed, because they couldn’t afford to stop doing business with one of the big chains in Canada, where five companies control roughly 80% of the market.

But Weston told MPs that that the code risked swinging the power balance too far the other way, which could give the upper hand to global food brands. “A one-sided code that removes a retailer’s ability to hold vendors accountable to their commitments would risk higher prices,” he told the agriculture committee.

Champagne said he didn’t understand Weston’s reasoning. “I don’t see that when I read the code,” he said.

In the same committee hearing, Walmart Canada CEO Gonzalo Gebara said the draft of the code, as written, wasn’t “in a position” for him to sign.

Until Walmart and Loblaw publicly criticized the code, negotiators believed it was going to be a done deal by early 2024. In fall 2023, the federal government was heralding the forthcoming code of conduct as one of the key pillars in its plan to strengthen the supply chain and combat inflation. But without support from Loblaw and Walmart, many in the industry feared the whole thing would unravel, wasting more than two years of negotiations.

The problem, at this point, is that the code is voluntary. Early on in the process, the federal government determined the issue fell under provincial jurisdiction, so Ottawa couldn’t step in with legislation to create a mandatory, national code of conduct. And few in the industry were keen on the prospect of navigating a bunch of different provincial codes. So in 2021, Ottawa, along with the provinces and territories, appointed a mediator to help a group of industry leaders from agriculture, retail and manufacturing write their own code.

The upside of an industry-led code was it would be quicker and simpler to implement. The downside was that for the rules to really work, all the major players in retail and food production needed to agree to follow them. With Walmart and Loblaw now on the fence, Empire CEO Michael Medline told the agriculture committee that the code is now “in dire straits.”

“Those who don’t like the code are stalling,” said Medline, an outspoken supporter of the code. “They’re saying things that aren’t true.”

Champagne recently met with a group of provincial and territorial cabinet ministers in charge of consumer affairs, along with the federal competition watchdog, to talk about ways to address the affordability crisis. Champagne said the ministers discussed the code of conduct, but he said he isn’t ready to start trying to make the code mandatory through some sort of joint effort with the provinces and territories. “We’re not there yet,” he said. “All the work that’s been done by the industry needs to be honoured.”

It’s not clear what happens next, or whether any of the negotiators are willing to budge enough to bring Loblaw and Walmart onside. Michael Graydon, a manufacturing lobbyist who is one of the lead negotiators on the code, said he believes the two companies are misinformed.

In a statement, Loblaw spokesperson Catherine Thomas said the chain is ready to negotiate with other industry leaders, but won’t sign a code “that is not in the best interest of our customers.” Meanwhile, Walmart Canada spokesperson Sarah Kennedy said the retailer will continue to give feedback to negotiators.

Source: The Star

Food Groups Accuse Loblaw Chairman Galen Weston of Misinformation over Grocery Code of Conduct

Loblaw Cos. Ltd. chairman Galen Weston made an inaccurate statement about Australian grocery rules to a House of Commons committee, according to groups representing independent grocers, food suppliers and farmers. The letter sent on December 19 to MP Kody Blois, who chairs the agriculture committee studying food prices, asked the committee to disregard this part of Weston’s testimony when they draft their final report.

Speaking before the committee on Dec. 7, Weston told MPs that Canada’s nearly complete grocery code of conduct would put too much power in the hands of large suppliers when it comes to price negotiations with retailers, which could raise prices for Canadians. Using Australia’s grocery code as an example, Weston said it has a third-party mechanism that has “supported increases in costs in essentially 100% of cases,” and that if this “had happened in Canada, since the beginning of last year, it would have resulted in $750 million in additional inflation pressure for consumers.”

Weston’s comments are “not correct,” Chris Leptos, the independent reviewer for the Australian code, told The Canadian Press. The Australian code does not have a mechanism for price negotiations, said Leptos in an email.

Weston was making a point about the potential costs of a “flawed dispute resolution process in Canada,” said Loblaw spokeswoman Catherine Thomas, adding that the focus seems to be on his comments regarding Australia “instead of the inadequacies of the draft Canadian code.”

“The code in Canada, as drafted, will make it harder for retailers to push back on cost increases from suppliers,” said Thomas, noting that multiple retailers have raised concerns about excessive price increase requests from large multinational suppliers. “This is a smoke screen from people who don’t want to focus on the words of the Canadian code, which don’t work. As we’ve said all along, we are open to being back at the table to develop a code that will work best for our customers, and would encourage these associations to do the same.”

Citing “Australian sources,” including Leptos, the letter to Blois urges caution when interpreting statements from witnesses about what a grocery code would or wouldn’t do in Canada. “While we have been very impressed by the level of knowledge showcased from members of the committee based on their lines of questioning, it is clear that some of the witnesses that recently appeared before the committee do not have the same depth of knowledge,” the letter reads.

Committee chair Blois did not respond to a request for comment.

The letter is signed by representatives from the Canadian Federation of Agriculture, the Canadian Federation of Independent Grocers, the Conseil de la transformation alimentaire du Québec, the Dairy Processors Association of Canada, Food, Health & Consumer Products of Canada, the Food Producers of Canada, and the Union des producteurs agricoles.

Weston “put false information in front of the members of Parliament,” said Michael Graydon, CEO of FHCP and chairman of the interim board for the code, in an interview. Graydon said he’s concerned Weston’s comments could have swayed opinions around whether the code will cause higher costs. “When somebody in his position puts false information to a standing committee, I personally think it needs to be retracted and corrected,” he said.

Graydon said Canada’s grocery code is currently at an “impasse” after two years of development, with both Loblaw and Walmart Canada not willing to sign it in its current form. The next steps for launching the code, such as hiring an independent adjudicator or recruiting memberships, are on pause as a result, Graydon said.

Loblaw has previously said it believes the code as written could raise costs for Canadians by more than a billion dollars. Walmart Canada has also expressed concern that the code would raise costs. There is no evidence to suggest that the Australian code, introduced in 2015, has had a negative or positive effect on grocery prices, Leptos said.

The Canadian code was meant to be voluntary and industry-led, but last week federal Agriculture Minister Lawrence MacAulay said legislation may be necessary to get the code off the ground. “What we’re faced with now is no consensus and a failure to achieve what industry has told us they would achieve without government intervention. To say this is disappointing would be an understatement,” he said in an emailed statement.

Gary Sands, a member of the interim board who signed the letter, said he hopes the agriculture committee will either demand an apology from Weston or call him back to speak before the committee again. He’s also still hopeful that Loblaw and Walmart will sign on to the code without legislation.

“We’re at a fork in the road here,” he said. The grocery code isn’t intended to affect prices, said Sands. “To me, it’s got everything to do with fairness and doing what’s right.”

Source: Globe and Mail
Source: The Star
Source: Financial Post