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The year 2014 was a watershed for the retail food industry in many respects. The 2013 acquisitions of Safeway by Sobeys, and Shoppers Drug Mart by Loblaw, took hold in 2014, and the increased consolidation brought renewed scrutiny of our industry.
It is no secret that some of the practices in the industry that have arisen from retail consolidation have raised concerns with suppliers, regulators and independent retail grocers. These practices have also found their way onto the pages of both the trade and mainstream media, and it is clear to most objective observers that the industry has a problem.
To address this problem, the Canadian Federation of Independent Grocers believes we need to bring forward a Code of Conduct similar to that in jurisdictions such as the United Kingdom and Australia. Concerns arising in the payments industry led to the development of a Code of Conduct for that sector that all retailers – large, small, independent and chain – welcomed. We now need to take the same approach to help us restore a more collaborative atmosphere in the food industry and provide more transparency with respect to some practices in our sector.
Economies of scale and leverage already afford competitive advantages to the large corporate retailer, presenting barriers to entry for many prospective independent retailers, and contributing to a decline in independent retail grocers across Canada. A Code of Conduct will not change the reality of scale, protect retailers from competition, or level the playing field, but it will help independents to at least stay on that playing field.
Last year, Eric La Flèche, CEO of Metro, said, “I was very outspoken with our suppliers when we had a meeting with them, that the procurement synergies that some people are claiming are not going to be at our expense.” Independent retail grocers are saying exactly the same thing. They do not want the synergies of consolidation to be at their expense.
The issue of fairness cannot be overstated. The CEO of any large corporate retailer can understandably have a conversation around synergies and trade spend with suppliers. Notwithstanding that independents account for about $13 billion in sales revenue in Canada (roughly on par with Metro), thousands of independent retailers, located in a myriad of communities across the country,
cannot have that same “one-off” conversation with the supplier community. However, a Code of Conduct becomes the tool by which that conversation can be held on their collective behalf.
Fairness, transparency and balance were beliefs the retail community unanimously called for with respect to the payments industry. We cannot cherry-pick when we want those principles to apply. If we believe as a retail community that they should apply to another industry, how can we argue to regulators that they should not apply to our own?
Enshrining those three tenets in a Code of Conduct is not about taking aim against any one company. Rather, it is about what we can do to support our industry and begin to focus on achieving culture change within it. In the long term, this will be good for the industry as a whole and, most importantly, for the consumers of Canada.
Thomas A. Barlow is president and CEO of the Canadian Federation of Independent Grocers.
This article originally appeared in March/April issue of Grocery Business magazine
