Mixed support for a new code of conduct for Canadian grocers focus on two key questions: Is it voluntary, and will it lower prices?
The code has been in development for years, sparked by pressures larger retailers placed on suppliers, using leverage unavailable to smaller grocers. Developed by a committee from the grocery industry, the code’s guiding principles are “transparency and certainty” as well as “fair dealing across the value chain.”
With anything related to grocers and food prices certain to catch the attention of policymakers, Federal Agriculture Minister Lawrence MacAulay said major grocers need to adopt the code and adhere to it, or face consequences.
The current code, however, is unacceptable to at least two of Canada’s largest grocery chains. While some chains are supportive, and have also said that they expect it to result in lower prices to consumers, Walmart Canada CEO Gonzalo Gebara and Loblaw chairman Galen Weston told the Parliamentary Standing Committee on Agriculture and Agri-Food December 7 why their companies oppose the code.
Weston said his firm endorses the concept of a code but takes issue with at least four specific elements of the current code. Further he noted the code is designed to stabilize the relationship between producers and retailers, and predates the current inflationary pressures.
“I must say I am perplexed as to why other industry leaders are making such confident claims about the Code’s ability to stabilize prices when it was never intended to do so,” Weston said.
On pricing, he said responsibility for lowered prices should not be the sole responsibility of retailers. He noted that large multi-national producers – much larger firms than Canadian grocers – are highlighting how higher prices to retailers have boosted their financial results and “already stand in the way of lower prices.”
“We cannot do this alone,” Weston said, citing reports from the Bank of Canada and the Competition Bureau that show grocery stores are not the reason for high food prices. “We are unable unilaterally to resolve the inflationary pressures.”
He noted that for every $25 of groceries sold in their stores, Loblaw earns “just $1 in profit”.
As currently structured, the code of conduct will limit the ability of retailers to push back on suppliers. While its principles are sound, he said, “when you get into the details, there is significant risk of higher prices and empty shelves.”
He cited four areas of the Code to which Loblaw objected, because they increase the likelihood of higher prices or supply shortages, and noted that in countries such as Australia and the United Kingdom, recently adopted codes have not stabilized prices.
Michael Graydon, chairman of the interim board of directors of the grocery code of conduct, said Loblaw’s proposed changes would allow them “to continue to have unilateral decision power” and “that is fundamentally why we need a code.”