Empire and Canada’s largest CPG trade group join to propose code of best practices

Sobeys parent Empire Company Ltd. is partnering with Food, Health & Consumer Products of Canada (FHCP), the nation’s largest consumer packaged goods (CPG) manufacturer trade group, to create a code of best practices for retailer-supplier dealings.

Called the “Grocery Supply Code of Practice for Canada,” the proposed platform is designed to foster “fair and efficient handling” of all negotiations and commercial agreements and “stabilize relations” between retailers and suppliers, Empire and FHCP announced yesterday. They said the draft code, formally submitted to Federal, Provincial and Territorial (FPT) Working Group on Thursday, marks the first proposal of its kind in Canada.

A legislated grocery supply code of practice would require negotiated agreements in writing between retailers and suppliers; ensure open talks between retailers and suppliers; and promote a more stable forum for retailers and suppliers cooperation in bringing the best products, innovation and value to Canadians, according to Empire and FHCP. The measure also would introduce a government adjudication system to manage complaints of unfair practices under the code and require retailers to appoint a “code compliance officer.”

Empire and FHCP said the proposal stems from the Canadian food retail industry's 'long history of dealing with strained relationships between retailers and suppliers.' 

Related:NGA calls for crackdown on grocery retail ‘power buyers’

“The Canadian grocery industry made unprecedented strides in navigating the COVID-19 pandemic, as retailers and suppliers collaborated to protect the food supply chain and support customers like never before. This goodwill was a positive development during a difficult time. Let’s not go back to the old way of doing things,” Empire President and CEO Michael Medline said in a statement. “We began working in earnest with the FHCP on this values-based proposal in the fall of 2020. We hope our principled proposal will be a springboard to move our industry forward. This code is a win for consumer product companies and retailers, as well as all other players in the food supply chain, including farmers and customers.”

Overall, Empire’s food retail network, operated via its Sobeys subsidiary, includes more than 1,500 food and drug stores in all 10 provinces under banners such as Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, Farm Boy and Lawtons Drugs.

In the draft code proposal, Empire and FHCP said Canada’s food retail industry has a “long history of dealing with strained relationships between retailers and suppliers.” Issues have included complaints over unfair practices and negotiating tactics, arbitrary fees, cost hikes imposed without notice and late payments, which have “created confusion and frustration among industry players on both sides of the equation for decades,” they said.

Related:Sobeys parent Empire to acquire majority stake in Longo’s

Poor retailer-supplier relations, in turn, have created challenges for smaller, local suppliers, farmers and growers as well as trickled down to consumers by impacting pricing, product choice and job opportunities, resulting in “very challenging conditions for suppliers and manufacturers to thrive in Canada,” according to Empire and FHCP.

Among its objectives, the grocery supply code aims to bolster commercial relationships based on “good faith and fair dealing”; promote “transparency and certainty” via written supply agreements; require reasonable notice for changes to commercial terms; discourage the use of “unilateral, retroactive actions” and penalties; and establish “effective, efficient and fair” dispute resolution models. And on a broader scale, the proposal seeks to set of rules of engagement, foster collaboration in business planning and allocation of commercial risks, protect confidential information, and promote investment and participation in mutually beneficial programs.

FHCP, whose business sector employs more than 350,000 Canadians, noted that it has been advocating for a shared best practices code for the last two decades.

“As the early days of the pandemic proved and as FHCP and Empire demonstrate so clearly today, grocery retailers and suppliers are capable of tremendous achievements when we collaborate,” stated Michael Graydon, president and CEO of Food, Health & Consumer Products of Canada. “Retailers and suppliers are tough and savvy, and our businesses do not always see eye to eye. However, we believe we can build a supply chain on mutual trust, one that treats businesses of all sizes fairly and delivers for all Canadians who count on us every day. FHCP and Empire are proud to have translated this common vision into a set of shared principles and a positive framework for the industry.”

Similar issues have come into the spotlight south of the border. Last week, stakeholders in the U.S. independent grocery industry called for a crackdown on so-called grocery retail “power buyers.”

In a press conference, the National Grocers Association (NGA) urged federal lawmakers and regulators to clamp down on big-box and online grocery “giants,” claiming these and other large chain retailers engage in anticompetitive behavior that puts independent grocers at a marked disadvantage in supply and pricing. They noted that the disparity became more glaring during the COVID-19 pandemic, as independent grocers’ customers frequently found empty shelves and higher prices for staple products, whereas large competitors were able to procure sought-after items and sometimes even offer them at promotional discounts.