Mark Taylor: Canada’s food industry must take important lessons from the U.K.

Article content

We all remember the early days of the pandemic when consumers witnessed the fragility of Canada’s food supply as panic buying led to shortages of key items on store shelves. We withstood this unwelcome stress test thanks in large part to the extraordinary efforts of our country’s farmers, food manufacturers and grocery retailers, who quickly reacted to solve the immediate problems posed by the pandemic.

Article content

The return to some form of normalcy doesn’t mean that all is well. A historically fractious relationship between Canada’s food manufacturers and grocery retailers continues to threaten the long-term strength and stability of our country’s food supply, which is once again being tested, this time by an incredible inflationary strain that is raising the price of food.

In Canada, five retailers account for 80 per cent of the grocery market. This concentration has created an imbalance in the relationship between some grocery retailers and manufacturers. Some retailers are building income streams outside of the straightforward supplier-seller relationship that consumers rarely see, including opaque listing fees, arbitrary demands for price reductions, and payments for retailer infrastructure. Left unchecked, food manufacturers will continue to be disadvantaged, resulting in less investment in infrastructure, fewer full-time jobs, and limited innovation. Ultimately, current conditions threaten the sustainability and competitiveness of an already weakened food manufacturing sector.

Article content

That’s why it’s so important that the country’s food manufacturers and grocery retailers are now meeting to design a grocery code of practice, the goal of which is to create a more balanced relationship, ultimately to better serve the needs of consumers.

As someone who spent most of my career in the United Kingdom’s dairy industry before coming to this country to serve as head of Lactalis Canada, I have experienced firsthand how a code of conduct can reduce, if not eliminate, many of the issues that have weakened Canada’s food supply chain over the past couple of decades.

Development of the U.K. code did not come without challenges. Grocery retailers had some of the same concerns that their Canadian counterparts now have, including being able to adapt business models and balance sheets that historically relied on practices that disadvantaged manufacturers.

Article content

But today, every retailer I speak to in the U.K. says the code has had a positive impact, and that early fears were unfounded. They have noticed that food manufacturers are now more likely to make investments because much of the uncertainty that existed in the retailer-manufacturer relationship has been eliminated. Data show that overall investment in the grocery sector increased, and consumer prices fell, after the code was introduced. Collaboration across supply chains has also improved, increasing resources available to work on adding value and to confront bigger challenges such as climate change.

Article content

There are three overarching principles I believe the Canadian code should seek to replicate from the U.K. experience:

Have one uniform approach across Canada with centralized, expert adjudication. Whether this can be accomplished through a voluntary code or will rely on government regulation remains to be seen; however, the U.K.’s initial attempt to create a voluntary code failed spectacularly to gain any traction, eventually requiring legislation.

Keep it simple. Whilst written into statute books, the U.K. code is not set out in legalese. Its broad language provides for discussion and collaboration between retailers and manufacturers to resolve issues before requiring adjudication. A code that everyone can understand is critical.

Focus on a “light touch” and only seek adjudication when absolutely necessary. The carrot as opposed to the stick works best.

There will no doubt be growing pains as grocery retailers and food manufacturers learn to work better together within the framework of a code of practice, but like so many things in life, the sector is stronger when we all work together.

Mark Taylor is president and CEO of Lactalis Canada.