As the completion of the long-anticipated grocery code of conduct draws near, Loblaw Companies Ltd., Canada's largest grocery player, is sounding the alarm, expressing concerns that the guidelines may exacerbate the ongoing food inflation crisis. In a letter dated November 1, addressed to members of both the steering committee and the industry sub-committee responsible for the code's development, Loblaw's Chief Financial Officer, Richard Dufresne, raised apprehensions about the potential impact on Canadians.
The letter, obtained by The Canadian Press, states that Loblaw cannot endorse the code in its current form and highlights the possibility of it causing food prices to surge by over $1 billion. Loblaw spokeswoman Catherine Thomas emphasized the challenges presented by the draft code, expressing worries about potential risks to product availability and the likelihood of increased food prices.
Loblaw is not alone in expressing reservations. Walmart Canada, in late October, communicated similar sentiments through spokeswoman Sarah Kennedy. While supporting initiatives beneficial to customers, Walmart is cautious about adding unnecessary burdens that could contribute to the rising cost of food, particularly during inflationary times.
Both Loblaw and Walmart Canada's concerns come at a time when the federal government is pressuring grocery retailers to stabilize food prices amid a period of high inflation and interest rate hikes impacting household budgets.
Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association and co-chair of the steering committee developing the code, urged Loblaw and Walmart Canada to give the code a chance, emphasizing their active participation for its effectiveness.
The code is nearing completion, with plans to launch it and the overseeing non-profit organization by the end of the first quarter of 2024. However, Loblaw's letter raises specific issues with the draft code, suggesting that it could hinder retailers' ability to hold suppliers accountable, create uncertainty in supplier-retailer relationships, and pose risks to prices, availability, and discount programs.
Graydon expressed the committee's desire to discuss Loblaw's concerns directly in an upcoming meeting, rather than negotiating them through the media. However, he and Gary Sands, senior vice-president at the Canadian Federation of Independent Grocers and a committee member, contested Loblaw's cited $1 billion figure, stating there is no evidence to suggest that the code would raise food prices or negatively impact retailers' ability to meet consumer needs.
The grocery code of conduct aims to address fees that large grocery retailers charge suppliers, an issue that gained public attention in 2020 when major players like Walmart Canada, Metro Inc., and Loblaw increased their fees.
Notably, Metro and Empire Co. Ltd. (Sobeys) affirmed their commitment to adopting the code, while Loblaw and Walmart Canada's stance could prompt the need for alternative measures, possibly involving government regulation.
Quebec's agriculture and food minister Andre Lamontagne, co-chair of a 2020 working group on fees charged to suppliers, emphasized the years of rigorous work invested in the code's development. While optimism remains, the potential for government intervention looms if grocers fail to agree on the code.
With the code's fate uncertain, observers suggest that declining to adopt it could lead to a public relations disaster for the grocers, given the current emphasis on stabilizing food prices and the heightened scrutiny on the industry's practices.
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