“We’ve just learned that a code of conduct to protect consumers in the food sector will be created. This is not a concept which can be easily understood, but it is indeed  good news for consumers. But, it is a voluntary, government-coordinated and industry-led code. Compliance and consumer trust are going to be significant challenges, especially right now. Time will tell effective the code will be.”

As reported in recent days, the grocer code of conduct is coming to Canada. Both the United Kingdom and Australia where grocer oligopolies exist have a similar code already. This is great news for consumers; in fact, it should be considered a minor miracle.

It all started a few years ago with the announcement of Michael Medline, Sobeys’ big boss, who said at the Empire Club in Toronto that enough is enough. It was 2020, when the major stores including Walmart, Loblaws, Costco, Metro and Sobeys were abusing their power by introducing all kinds of fees to their suppliers in a brutally random way. Medline’s announcement sent shock waves through the industry, upsetting the in-group  among retailers that were keen to continue intimidating the rest of the industry. At the time, Eric Laflèche and his team at Metro, for example, told some reporters to ignore this issue, and that the industry was fine. Total arrogance. Now, after just a few years of this, the public sees the major chains as public enemy number one. Our food retailers are accused of abuse and trickery on a daily basis.

Grocers have now begun to realize that there might be a problem. Major grocery chains have had a lot of power, maybe a little too much. The famous dispute between Frito-Lay and Loblaws last year exposed the problem to the public. It was ugly, very ugly.

Marie-Claude Bibeau, the federal Minister of Agriculture, supported by André Lamontagne, Quebec’s Minister of Agriculture, took the lead by creating a working committee to develop a code of conduct for the industry, to give Canada’s food processors a chance to be heard. Since then, the project has really become the responsibility of Lamontagne and Quebec. The project will establish a code that will help the industry, but above all, consumers. The leadership of Lamontagne and MAPAQ clearly compensated for the bewildering inertia of Ontario and the Ford government. The food processing sector in Ontario is the largest part of the manufacturing sector in Canada’s largest province. Ontario’s silence has been puzzling.

But consumers will also gain in the long run. Many Canadians are unaware of the fact that in the food industry, suppliers must pay grocers to do business. The fee is justified by merchandising costs and shelf space, the types of costs you would expect. But in recent years, things have changed. Companies like Loblaws, Walmart, and Metro abuse the system, and some levies have been imposed quickly, incidentally, and unilaterally. The reality is that it is now more difficult in Canada for food processors and independent grocers to compete.

A code of conduct for grocers should change the culture of an industry where vertical coordination and collaboration barely exist. It is also about tackling a broken business model. A code can neutralize power relations within the chain, stabilize retail prices, emphasize value and innovation for consumers, improve the security of the domestic food supply, and encourage investment in the agri-food sector. In the U.K., where a grocer code of practice exists since 2010, the country’s food inflation has historically been lower than Canada’s.

It must be understood that the code is not about endorsing a police-state or some attempt to nationalize our food distribution. The spirit of the code is to establish greater discipline and eliminate breach of trust, which is exactly what we have now. Many supply chain relationships are dysfunctional, while public trust is at an all-time low.

The governance around the code will also allow for greater transparency, something that we sorely lack at present. A secretariat will be created to enable industry to be accountable to itself and the public. For some time now, with an inflation rate that has reached record levels, consumers have been increasingly frustrated, fed up, and downright deprived at the grocery store. We want to better understand the mechanics behind pricing. For now, we’re left to guess at just about everything. Consumers do not feel informed or protected. The code will surely help in these aspects. The code will also help independent grocers who deserve a chance to compete against the bigger retailers. Innovation, variety, and food congruity for all of us often go through the independents.

But, it is a voluntary, government-coordinated and industry-led code. Compliance and consumer trust are going to be significant challenges, especially right now. Time will tell if the code will be effective.

The irony in all of this is that, in the beginning, it was food manufacturers who wanted a code. Now, knowing that they are facing a crisis of confidence, grocers themselves need the code, more than ever.

Related Retail Insider Articles

• Video Interview: The State of Canada’s Grocery Industry with Sylvain Charlebois
• Lessons from a Frivolous Picture of Overpriced Chicken Breasts at Loblaws [Op-Ed]

It all started with one reporter taking a simple, trivial picture of an overpriced pack of five boneless, skinless chicken breasts. It was $26.87 a kilo, a world-class sticker shocker. It’s at least double what one would expect to pay for chicken breasts. Within hours, the picture became the lightning rod for frustrated consumers on social media. Loblaw and Galen Weston—the company’s Chairman, President, and well-known public persona of the company’ brand—became public enemy number one. Attacks were instant, and mostly vicious.

On the surface, the collective uproar against Loblaw lacked any rational thinking. The chicken breasts in the picture were skinless, boneless, and free from hormones and antibiotics which would make them premium products. Albeit the untrained eye couldn’t see the “PC FF” on the label, which meant “Free From”, but it was there. Other retailers in the Greater Toronto Area were even selling similar products at similar price points. Furthermore, for months now the poultry industry, including egg producers, have been challenged by an avian flu outbreak, affecting almost 300 farms across the country. Many of them are in Ontario. Almost 5 million birds were culled in the last year, preventing millions in inventory to reach the market. Supply-side pressures have been significant for a while. As such, prices for chicken, turkey, and eggs have all been impacted by the outbreak.

What also needs to be underscored is that chicken production is supply-managed in Canada. With our quota system, we essentially produce what we need and consume very little imported poultry products. The average net worth of a poultry and egg farmer in Canada is well over $6 million, according to Statistics Canada. Farmgate prices are set by boards which in turn are heavily influenced by production costs. Most years, farm prices will go up and the rest of the supply chain will cope with supply chain economics. That’s how supply management works. Poultry and egg prices have historically been more expensive in Canada than elsewhere in the Western world. Nonetheless, supply management has offered Canadians stable prices. In fact, chicken has been the more stable component of the meat trifecta, which also includes pork and beef. But since early 2020, the meat counter has increasingly become expensive, no matter what protein you are after. Many of these factors are far beyond Loblaw’s control.

Still, call it “chickengate” if you will, but instant public outcries like the one we witnessed with the picture of overpriced chicken breasts do happen for a reason. The last time Canada’s food inflation rate was below our nation’s general inflation rate was in October 2021. While everything in our lives got more expensive, it got significantly worse at the grocery store. Consumers are actively looking for a scapegoat, one they can relate to. Most consumers barely appreciate how farming, logistics, or even food processing works, but most of us have been to a grocery store several times in our lives. It’s a familiar environment for most of us. Grocery stores are portals to a very complex food system we can barely see and understand, so promptly blaming grocers for overpriced products is instinctive.

Like in many Western countries, higher food prices have been politicized in Canada leading to a parliamentary investigation in Ottawa, and broad-based inflationary support payments in provinces like Quebec and Prince Edward Island. These payments will likely make things worse, but it doesn’t matter.

Canada has one of the lowest food inflation rates in the Western world. Amongst G7 countries, only Japan has a lower food inflation rate right now. Higher food prices is a global phenomenon, full stop. Even if it makes little sense to blame one grocer, or even one man for our ills at the grocery store, Canadians have every right to be upset. Context is everything, and consumers are on edge and will second-guess anything and everything and have every reason to do so.

The bread price fixing scandal, which lasted fourteen years, the hero-pay debacle during the pandemic, almost forcing consumers to use self-checkout counters, all adds up to many Canadians feeling incredibly vulnerable and unprotected. In December, our Parliamentary Standing Committee in Agriculture and Agri-Food called top grocers to testify in Ottawa as part of an investigation of food inflation. None of the CEOs showed up, including Galen Weston himself. All of them opted to send their CFOs instead. They should have had the decency to show up and oblige our House of Commons, which represents the Canadian people.

The chicken breast incident points to how incredibly delicate things are right now. The food industry, and particularly grocers, are facing a crisis of confidence, no less. Consumers have become hyper-sensitive to any potential evidence suggesting abuse of market power and grocers will need to navigate the coming months with extreme caution. Showing more public empathy would be a good start.

In the meantime, consumers should know their prices even before they show up at the grocery store, stay calm, and read labels. If a price is beyond what was expected, just walk away. A more affordable substitute in the same exact store is likely within reach. Consumers have more power than they believe.