We all remember the early days of the pandemic, when Canadian consumers witnessed the fragility of the nation’s food supply as panic buying led to shortages on store shelves.
We have weathered this storm thanks mainly to the extraordinary efforts of dairy producers, food manufacturers and retailers across the country, who have responded quickly to address the immediate issues posed by the pandemic.
But returning to some form of normalcy does not mean that everything is settled. The historically acrimonious relationship between Canadian manufacturers and retailers continues to threaten the resilience and long-term stability of the national food supply, which is once again strained – this time by the pressures extremely inflationists that drive up the price of food.
In Canada, five major retailers represent 80% of the grocery market. This concentration created a relational imbalance between them and the food manufacturers. Some retailers will earn income outside of the usual supplier-seller relationship – something consumers rarely see, such as obscure listing fees, arbitrary requests for price reductions, or payments for them. retailer’s infrastructure. If this situation remains unchanged and unchecked, food manufacturers will continue to be at a disadvantage, resulting in lower infrastructure investment, fewer full-time jobs and limited innovation. Ultimately, current conditions threaten sustainability and competitiveness within an already weakened agri-food sector.
This is why it is so important that food manufacturers and grocers come together now to develop a code of good practice, with the goal of achieving a more balanced relationship that will ultimately better meet the needs of consumers. .
Having spent most of my career in the dairy industry in the UK, before coming to Canada to lead Lactalis Canada, I have seen for myself how much a code of practice can reduce, if not eliminate, many of the problems that have weakened Canada’s food supply chain over the past two decades.
The development of such a code in the United Kingdom was not without difficulty. Grocery retailers had the same concerns that their Canadian counterparts have today, including the ability to adapt business models and balance sheets that have historically relied on practices that have disadvantaged manufacturers.
But today, every UK retailer I speak with is witnessing the positive effects of this code and saying their initial fears were unfounded. They noticed that food manufacturers are now more likely to make investments because much of the uncertainty that existed in their relationship with retailers has dissipated.
The data shows that overall investment in the grocery sector increased, and that consumer prices fell after the code was passed. Collaboration within supply chains has also improved, increasing the resources available to work on adding value and tackling larger challenges like climate change.
There are, in my opinion, three main principles stemming from the experience in the United Kingdom from which we should be inspired for the Canadian code:
Choose a uniform approach across the country, with centralized arbitration overseen by experts. It remains to be seen whether this can be done through a voluntary code, or whether government regulation is required. In this regard, the UK’s initial attempt to create a voluntary code failed dramatically, requiring legislative support.
Focus on simplicity. Although it is listed in the statute books, the UK code is not written in incomprehensible legal jargon. Its accessible language promotes discussion and collaboration between retailers and manufacturers to resolve issues before having to resort to arbitration. A unanimously understandable code is essential.
Favor a “soft” approach, and only call for arbitration when it is absolutely necessary. The carrot, as opposed to the stick, works better.
It is certain that this will be a headache as grocers and food manufacturers learn to work better together under a code of practice, but as with so many things in life, we are stronger when we all work together.
The original version of this letter was published in the Financial Post.