Loblaw’s comments on the grocery code of conduct and risks for affordability
While Loblaw Companies Ltd. has raised affordability concerns about an incoming grocery code of conduct, an industry group said they don’t share the grocery giant’s view that it would increase prices.
In a Nov. 1 letter to members of the committees working on the industry code of conduct, Loblaw raised concerns that incoming guidelines could “raise food prices for Canadians by more than $1 billion.” BNNBloomberg.ca has reviewed the letter that was first reported by The Canadian Press.
Gary Sands, senior vice president at the Canadian Federation of Independent Grocers, told BNNBloomberg.ca Wednesday that he was surprised by Loblaw’s claims. Sands, who is part of the steering committee drafting the code, said he sees “no basis” for how Loblaw arrived at its conclusion.
“If there was anything in this code that was going to increase food prices by any amount, never mind a billion, we’d be all over that,” he said.
“We wouldn’t sign on to any document that was going to be responsible for those kinds of increases, especially when affordability and food prices are top of mind for consumers and there's so much sensitivity around it.”
The committee is working to create the code in response to industry calls to address fees that larger grocery retailers were charging suppliers, an issue that rose to public prominence in 2020. The code is expected to in place by the end of the first quarter of 2024.
Sands said the committee has publicly committed to reviewing the code after 18 months to evaluate what is and isn’t working. He said the process has been ongoing for the past two and a half years and all parties, including Loblaw, have had “opportunity to provide input all along.”
The code of conduct, Sands said, is about “setting out principals of good behaviour” and will benefit independent grocers, as well as smaller producers and processors. He said transparency and accountability, spurred by the code, will benefit consumers and the larger industry.
“Reciprocity is a pillar of the code. So whatever principles are in there, they apply to everybody. There's, this isn't a retailer code of conduct, this is a grocery code of conduct,” Sands said.
Sylvain Charlebois, the director of the Agri-Food Analytics Lab at Dalhousie University, said in an interview with BNN Bloomberg Wednesday, that the code could work to discipline supply chains.
He said there are typically “lots of fights within the supply chain,” where grocers raise fees and suppliers raise prices to offset higher fees.
“They go back and forth and at the end of the day, consumers tend to pay for that,” Charlebois said.
“I would disagree with grocers on the fact that it (the code) would raise prices, it may, retail prices are affected by a bunch of things. But right now, when you actually look at conflicts within the supply chain, one could see how those conflicts may lead to higher food prices.”
WHERE GROCERS STAND
In a statement to BNN Bloomberg, Catherine Thomas, vice president of communications at Loblaw Companies Limited, said Wednesday that the company remains actively engaged in ongoing efforts to “improve the code” to benefit all parties, including customers.
“We have ongoing concerns that the code, as currently drafted, will increase food prices for Canadians and impact grocers’ ability to have the right products on store shelves to meet customers’ demands,” Thomas said.
In the letter, Loblaw specifically mentioned sections of the draft code would hinder the ability of retailers to hold suppliers accountable, creating risks to pricing, availability and discount programs.
Despite Loblaw’s opposition to the code, Metro Inc. told BNN Bloomberg on Wednesday that it “remains firmly committed to adopting the grocery code of conduct” once it has been completed.
“Metro has played an active leadership role in developing the code and we will continue to support industry-led initiatives that enhance transparency, predictability, and fair dealing throughout the supply chain,” Marie-Claude Bacon, vice president of public affairs and communications at Metro, said in an emailed statement.
According to Sands, other jurisdictions have enacted similar grocery codes that resulted in lower prices for consumers.
“In jurisdictions such as the U.K., Australia (and) Ireland, that have enacted grocery codes of conduct, prices went down,” he said.
“I don't want to be simplistic about that, because there could be a number of factors that go into whether prices go up or down in every country, obviously. But the point there is that the code had no impact on increasing food prices whatsoever in those other jurisdictions, none.”
COMPETITION IS ‘THE BIG ISSUE’: PROF
University of Toronto marketing professor David Soberman said when it comes to food affordability, the competition landscape matters more than industry codes or government regulations.
“The major issue that we actually have in Canada is not whether our supermarkets adopt a code to provide better prices, or a better deal for Canadians, or whether the government regulates. The big issue is that we just don't have enough competition,” Soberman said in a Wednesday telephone interview with BNNBloomberg.ca.
Soberman said that having around 60 per cent of Canada’s retail grocery industry controlled by three chains “is not ideal for Canadians.”
“And the one thing that can improve things for Canadians is more competition, as opposed to codes and regulations,” he said.
With files from The Canadian Press.