A Grocery Code of Conduct can address problems in Canada’s grocery supply chain
Canada’s grocery retail market is highly concentrated: just five large retailers control over 80% of it.
Without much competition, these large retailers can unilaterally dictate how they work with their suppliers, like Canada’s dairy processors. They don’t always adhere to the terms of contracts with suppliers and can arbitrarily charge fees and take deductions off payments.
This limits the ability of suppliers, like dairy processors, to invest in their own facilities and in the product innovations that Canadian consumers want. For consumers, this limits their choice and unnecessarily increases the prices they pay.
The shortsighted decisions made large retailers today make Canada unattractive place for food processors to invest. This undermines Canada’s ability have secure access to food is grown and processed at home in future, making country more reliant on imported products.
A Grocery Code that is mandatory, legislated and enforceable is the answer
The experiences of other countries like the United Kingdom, Ireland, and Australia have shown that Grocery Codes help to create a balanced and competitive grocery retail environment that benefits everyone in the food supply chain, from farm to consumer.
Dairy processors think that a Grocery Code could help Canada create a similarly balanced and competitive grocery retail environment. They are not alone in this thinking.
Canadians want Canadian-made products. The overwhelming majority of Canadians support the Canadian government playing at least some role in ensuring that grocery retailers are treating food suppliers and consumers fairly. Governments have started to listen and are taking steps to understand the imbalances in Canada’s food supply chain and identify solutions.
The Dairy Processors Association of Canada will continue to advocates development of Grocery Code to allows Canada’s dairy processors, farmers and the wider agri-food industry to thrive and Canadians have secure access to affordable, domestically made food.
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November 23, 2021 –
Today’s Speech from the Throne stated that Canada’s prosperity is dependent upon ensuring that our supply chains are strong and resilient.
As such, DPAC welcomed the government’s commitment to support for communities affected by recent flooding in British Columbia. We continue to keep in our thoughts the BC farmers who are facing significant challenges to their livelihoods. Support to help farmers rebuild and return to feeding Canadians should be a top priority in the coming months.
Ensuring that our supply chains are strong and resilient requires investments in the future. For DPAC and its members, a strong, resilient supply chain is one that is rooted in a business environment that allows strong domestic production.
Agriculture and agri-food sectors are important drivers of Canada’s economy. While the speech stated that “this is the moment to grow a more resilient economy”, it provided little detail as to the actions the government intends to take to strengthen Canada’s agriculture and agri-food supply chains. The omission of any agri-food priorities is an important and concerning oversight.
As such, DPAC will work with the Hon. Marie-Claude Bibeau, Minister of Agriculture and Agri-Food, her Cabinet colleagues and other Members of Parliament to ensure action is taken to create the kind of business environment needed to support Canada’s agri-food sector and create the resilient future that the government has promised Canadians.
November 8, 2021 –
The United Kingdom’s Groceries Code Adjudicator (GCA) provides an example of how a grocery code could work in Canada. With minimal costs and a lean administration, the GCA has provided an uncomplicated solution to complex issues within the United Kingdom’s grocery supply chain.
Retailers and suppliers are happy with the balanced, competitive and collaborative environment that the UK’s Grocery Code has created. A report by the Department for Business, Energy & Industrial Strategy (United Kingdom) concluded:
Large retailers, most suppliers and other parties in the grocery supply chain reported that the [Grocery Code] has created a more level playing field and it had not limited the ability of the UK’s groceries retailers to compete and provide a good consumer offer.
The UK Groceries Code Adjudicator (GCA) has reported that, since 2015, there has been a steady decline in supplier complaints related to unfair business practices from large grocery retailers, such as: delay in payments, claims against suppliers for historic invoicing errors and omissions, fees related to forecasting and promotions, delivery issues, and consumer complaints.
The United Kingdom’s GCA demonstrates that the introduction of a Canadian Grocery Code of Conduct does not have to be complicated. In fact, it could be a small investment with significant benefits.
The UK Groceries Supply Code of Practice
- Legislated code, introduced in 2009
- Applies to the largest retailers (annual turnover of more than £1 billion)
- Oversight provided by the Groceries Code Adjudicator
Groceries Code Adjudicator
- Established in 2013
- Power to investigate issues, arbitrate disputes, and impose sanctions and other remedies for breaches of the Code
- Annual budget is £2 million, wholly funded by a levy on large retailers
- Retailers and suppliers report that it has created a greater culture of collaboration and transparency rather than limited the ability to compete or offer more value to consumers
November 8, 2021 –
DPAC and other national agricultural and food groups have called on governments to create a Grocery Code of Conduct. We believe that this move will help to address the imbalance of power that currently exists between Canada’s largest grocery retailers and their suppliers.
This imbalance makes our grocery supply chain inefficient, creates waste and increases administrative costs. Money that could be invested in processors’ own operations ends up going to large grocers in the form of fees and deductions or to the administrative processes required to confirm or dispute these large retailers’ claims. Further, it creates a climate of uncertainty which makes it difficult to accurately forecast business operations.
The experiences of other countries, like the United Kingdom, Ireland and Australia, have demonstrated that a Grocery Code can address these inefficiencies.
The experiences of these countries show that implementing Grocery Codes can bring about balance to supplier-retailer relationships, improve competition in the grocery retail environment, and support greater collaboration along the supply chain.
For example, the United Kingdom’s Groceries Code Adjudicator (GCA) has reported that, since 2015, there has been a steady decline in supplier complaints related to unfair business practices from large grocery retailers, such as: delay in payments, claims against suppliers for historic invoicing errors and omissions, fees related to forecasting and promotions, delivery issues, and consumer complaints.
The improved relationships and predictability created by a Grocery Code can create a level of certainty that allows processors to more confidently invest in their operations and product innovations. It also can reduce the number of additional costs that get passed along the supply chain.
This ties into the recent discussions on food inflation that we have been having in Canada. By addressing inefficiencies that increase costs, a Grocery Code can play a role in food prices.
For example, food prices in Ireland and the United Kingdom decreased significantly between 2013-2020. Pre-Brexit, food prices decreased by almost 9% in the United Kingdom and by more than 12% in Ireland following the adoption of mandatory codes. For comparison, food prices in Canada have increased by 4.4% in the same period. A difference of 13-15% is significant.
The steps these countries took to level the playing field ended up limiting administrative costs, waste, and unnecessary fees. When the system is more efficient, it reduces the costs that need to be passed on through to the consumer.
But, beyond food prices, a Grocery Code can play an important role in ensuring that Canada has the ability to grow and process food here at home now and in the future. Grocery Codes are an investment in domestic agricultural and processing sectors that are thriving and resilient.
Want to know more about how Grocery Codes work in other countries? View our case study on the United Kingdom’s Groceries Code Adjudicator.