Self-regulated grocer code will be a hard sell

“Both Loblaw and Walmart now recognize something is wrong and that the food industry needs a code of practice to help farmers, manufacturers, and independent grocers. A step in the right direction, indeed, but there’s still no consensus on what the code will look like, and who will provide oversight.”

A new coalition led by the Retail Council of Canada (RCC) has presented a new roadmap to peace within the food industry. For years, grocers were unilaterally imposing fees on their suppliers, with questionable excuses. While grocers were maintaining a hardline to protect margins, food manufacturers and farmers, operations which are often family owned and operated, were squeezed financially. The RCC, which represents Canada’s major grocers had always been against any form of intervention, and felt no changes were required. That all changed this week.

What is suggested by the RCC and its alliance of stakeholders is an industry-led code of conduct, without public regulations. The model mirrors the Canadian Code of Practice for the Credit and Debit Card Industry, and the Fruit and Vegetable Dispute Resolution Corporation. These bodies operate without any government intervention. The alliance includes several other interest groups in the food supply chain, including farmers, processors, and independent retailers. Almost 40 trade groups are reportedly supporting this model, including 19 farming groups and 15 food processing groups. The approach is incredibly inclusive – a valiant effort indeed. The federal working group charged with the task of submitting a final report in July has now received the proposal.

Another code of practice was also presented to the working group by Food, Health & Consumer Products of Canada, with the support of Sobeys, the number two grocer in the country, only a few weeks ago. The principles were very much the same, except for one thing. This proposal did suggest the involvement of public authorities. Both the United Kingdom and Australia implemented similar codes years ago. It was argued at the time that compliance to a code in the industry can only be assured by getting governments involved. Since only provinces can provide oversight on these matters, a buy-in from all provinces is critical.  

Two different views are now being presented to achieve the same goal: to increase our country’s food autonomy by recognizing food manufacturing as the anchor to the entire food supply chain. Since many farmers produce a finished product, in a way, food manufacturing includes them as well. With the RCC’s move now, the question is no longer whether Canada will have a code of conduct to support farmers, food manufacturers, and independent grocers, it is more a matter of what it will look like, and who will be responsible for oversight.

This supply-chain issue could be seen as irrelevant to Canadians, but it is not. Au contraire. This is very much about realigning a power imbalance that has been prevalent in the industry for years, favoring grocers of course. More discipline and predictability with market conditions brought forward by different practices will give more authority to food manufacturers and farmers – all of them. Such measures will likely give space to more diversity, excitement, and innovation in food retailing. Loblaw or Walmart may very well think they know what consumers want and need, but with consumers seeking value, and ever-changing product attributes, an efficient code will ultimately give more power to consumers. Independent grocers could also get some needed oxygen and be given a chance to compete against the larger grocers.

For Canadians though, setting up the right model will not be easy. Many will agree that the system needs to be both transparent and effective at the same time. As much as the industry would want to self-regulate and provide some oversight on itself, the industry does have some embarrassing baggage it needs to consider.

Given what has happened in recent years with the bread pricing scheme scandal, it is unclear whether Canadians have any appetite for more self-regulatory arrangements. While industry needs an effective code, Canadians also need to trust it, so they do not feel cheated as they visit their favourite grocery store. Moving forward, we should not forget that the code of conduct is not just about helping the industry, but it is mostly about creating a moral contract between the public and the food industry. A new code should be about serving Canadians and our economy, not just the latter. The support of provinces, with some federal-level coordination, to a certain degree, would be needed. And given their sizeable markets and strong track-records for appreciating our food supply chain’s integrity, in addition to Ontario, both Quebec and British Columbia should be considered as influential voices. 

But more government involvement could come with some unwarranted headaches. With governance, we all need to move with extreme caution. Once we create more governance, the industry will need to live with it. Changes, if necessary and however small, will always be challenging. If governments are involved, implementing changes could be a nightmare if the model is ill-designed. 

Regardless of the outcome, the fact that a federal working group is looking at this issue and that many stakeholders are providing solutions is already a win for everyone.