(Toronto) A voluntary code of conduct, now endorsed by all major grocers, could stabilize food prices in the future and encourage more investment in the Canadian food industry, according to the president of Kraft Heinz Canada.
“It creates a better business environment for both the supplier and the retailer, but I think ultimately the consumer wins,” Simon Laroche said in an interview with The Canadian Press.
Mr. Laroche believes the code of conduct, which sets guidelines for fair relationships between grocers and suppliers, could bring some stability to an industry emerging from four difficult years marked by empty shelves, unusually high prices and growing consumer frustration.
PHOTO CHRIS YOUNG, THE CANADIAN PRESS
Kraft Heinz Canada President Simon Laroche
“(The code) helps large companies have more confidence in their ability to do business in the long term and fairly,” he argued.
Progress on the food code stalled last year when it became clear that some major grocers had reservations. Loblaw joined the program earlier this year after some tweaks to the proposed guidelines. This week, Walmart and Costco confirmed their support, meaning all of the country’s major grocers are now on board.
Mr. Laroche said he was pleased to learn that grocers are adhering to the code and believes it will be a positive thing for consumers and the industry.
An idea that predates the recent inflation crisis
Canada may still be finalizing its code, but Laroche has already seen what it can accomplish in a country with a high concentration of food markets. Before taking his current role last year, Laroche spent several years leading Kraft Heinz’s operations in Australia, New Zealand, Japan and Korea. Australia has had a code of conduct since 2015.
A code brings transparency and encourages fair negotiations between suppliers and retailers, Laroche said, adding that one of the most important benefits is a clear dispute resolution process.
The idea of an industry commitment to fair dealings predates the recent food inflation crisis and gained momentum in 2020 amid pandemic supply chain challenges. However, negotiations between grocers and suppliers, long out of the public eye, have become hot topics as inflationary pressures have mounted.
Consumers first learned of these tensions in 2022, when a dispute between Loblaw and Frito-Lay Canada left shelves empty across the country.
At its peak, food inflation in Canada was 11.4%; since May 2020, food prices have increased by more than 22%.
And as Canada’s major grocers have come under increasing criticism for rising profits amid high inflation, some executives have pointed the finger at large multinational suppliers, accusing them of demanding unreasonable price increases.
Mr. Laroche believes a code of conduct will help the industry better manage such disagreements in the future.
“A lot of people try to tell a very simple story: ‘Oh, somebody’s taking advantage of a situation,'” he said. “But this was a complex situation.”
For Kraft Heinz, inflationary pressures have stabilized at a much less manageable level, Laroche said.
The company has also learned a lot about how to mitigate supply chain disruptions after the empty shelves and shortages of the early months of the pandemic, and has made some changes as a result.
“I think one of the important things for the industry as a whole is to make sure we’re not tied to one source of ingredients,” Laroche said. “From a purchasing perspective, we’ve learned a lot to make sure that if something does happen, we have alternatives.”
Transfer to US in 2015 was ‘a mistake’
The fact that Kraft Heinz manufactures much of its products domestically has helped avoid further supply chain disruptions, he added. Half of what the company sells in Canada comes from Kraft Heinz’s Montreal plant, and the company recently renewed its production contract in Leamington, Ont., through the end of 2027.
The company moved its ketchup production to the United States in 2015, which was “a mistake,” Laroche said.
Five years later, the company announced the return of production to Canada thanks to a joint investment with the Quebec government’s business expansion program.
Today, the Montreal plant produces hundreds of products, including Kraft Dinner, Kraft peanut butter and salad dressing, Philadelphia cream cheese and Heinz tomato ketchup. The Highbury Canco plant in Leamington also produces a variety of products, including Heinz tomato juice, Classico tomato sauces and the tomato paste used in Heinz ketchup.
“(Consumers) were not happy, we brought everything back, and now our ketchup is entirely Canadian. And we are extremely proud of that,” he said.
With information from the Associated Press