The trade association representing Canada’s biggest supermarket chains is joining calls to establish a formal set of rules for grocers and their suppliers, a significant about-face that could accelerate the campaign to check the power of the most dominant players in the Canadian grocery business. Food producers have for months been pushing the government to legislate a code of conduct that would stop bully tactics in the grocery industry after some large grocers implemented new fees and heavy fines on suppliers during the pandemic.

Governments have been consulting with industry insiders and are expected to recommend a potential solution soon. But until now, it wasn’t clear whether a major change would happen without the support of some of the most important retailers in the industry.

The Retail Council of Canada (RCC), which speaks for the grocery chains, was initially opposed to a code of conduct and had publicly cautioned government officials against “putting their thumb on the scale in favour of behemoths in the food processing industry.” Walmart Canada, one of RCC’s members, has also come out publicly against a code of conduct, with chief executive Horacio Barbeito arguing that existing market competition is healthy.

However, RCC announced on May 27 that it has formed an alliance with several other interest groups in the food chain — among them the Canadian Federation of Independent Grocers (CFIG) and the Canadian Produce Marketing Association — and is now proposing a plan to implement a code of conduct in the sector by the end of next year. As it stands, the main point of contention is the government’s role in establishing a code. The alliance is proposing a code of practice that wouldn’t be enshrined in government regulation — a key difference compared to the regulated code of conduct requested by suppliers.

Last November, the federal, provincial and territorial agriculture ministers established a working group to investigate fees and fines being charged in the grocery industry. The group is expected to report on its findings in July. The alliance, which sent its proposal to the ministers’ working group earlier this month, called for mandatory participation in a code of conduct, as well as enforcement, but not regulation. Stopping shy of government regulation, the alliance said, would allow the code “flexibility for it to evolve.”

RCC’s proposal is not the first to reach the government working group. Sobeys’ parent company Empire Co. Ltd. made a proposal earlier this spring, breaking with other top grocery chains and teaming up instead with the main food manufacturing lobby group to draft a code of conduct.

RCC chief executive Diane Brisebois said the alliance wanted to find a solution that “reflects the key principles” in Empire’s proposal, without adding an unnecessary regulatory burden. She said RCC, which in previous comments has pushed back on a code, is only concerned about government regulation, not a code of conduct itself.

The federal government has decided that imposing a code of conduct is outside its jurisdiction, though Agriculture Minister Marie-Claude Bibeau has suggested Ottawa could help harmonize provincial and territorial regulations into one coherent set of national food supply chain rules. Brisebois said the alliance is concerned about the costs, complications and red tape that could come with a patchwork of different regional regulations on grocers and their suppliers across the country. Brisebois said RCC’s smaller, regional food retailer members have their own issues when negotiating with major food manufacturers, so a code should address those power dynamics as well.

The alliance’s proposal doesn’t prescribe a code in detail, but instead lays out a roughly 18-month plan to consult industry representatives, then collectively draft a code, with help from the agriculture ministers. Some have criticized the plan for dragging out the issue, but Brisebois said the process would be shorter than orchestrating different provincial regulations.

Michael Graydon, the chief executive at FHCP who has sparred with the RCC in the past over a code, said he was “absolutely delighted” on  May 27. “If there’s anything that we’ve tried to undertake in the last 10 years of this journey, it’s to try to get recognition from the retailers that this is a necessary step forward,” he said. “From my perspective, mission accomplished.” But FHCP is still adamant that a code needs to be regulated in order to be effective.

Source: Financial Post