The first ever code of conduct for the Canadian grocery business is close to being finalized, according to internal documents submitted to the government.
Ten lobby groups representing food producers and retailers have been in talks with a government-appointed mediation for more than a year trying to come up with a set of new rules to govern dealings between grocers and their suppliers A code of conduct is the best way to stamp out years of power imbalances and bully tactics in the retail sector, in which five retail chains control 80% of sales.
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According to a progress report submitted to government officials this month and obtained by the Financial Post, the group is working on a draft of the rules.
The negotiations have hit a major milestone, with a finalized code of conduct now in sight for the first time, a somewhat surprising development considering the meandering process had blown past two government-imposed deadlines in the past year.
The recent progress has caused controversy within the negotiating team, with one group pulling out of talks last week. Kathleen Sullivan walked away from the negotiation table because the draft rules made clear the process was ignoring the little guys.
The Code of Conduct being developed will be insufficient to address the needs of Canada's small and mid-sized food manufacturers according to Sullivan. The system will place few limitations on specific retailer activities, but will not address the underlying imbalance of negotiating power.
The whole point of the process was to fix the power dynamics.
In the early days of the H1N1 flu, Walmart and Loblaw Companies retaliated against their suppliers by imposing new fees on them. The fees were an example of how much power a few grocery chains have over food manufacturers and farmers in Canada. They said that they were forced to pay huge penalties for late shipments at a time when there was a shortage of workers. Suppliers couldn't afford to fight against the fees out of fear that the chains would retaliate and remove their products from shelves.
The country's federal, provincial and territorial agriculture ministers ordered the industry to come up with a solution. The government would do it for them if not.
Food producers and retailers have been in talks with a government-appointed mediator for more than a year
The photo was taken by REUTERS.
Government intervention would likely force global food companies and national retail chains to wade through a mess of different provincial regulations, so industry advocates are hoping that doesn't happen. The federal government doesn't have the power to regulate the grocery industry, so it's up to the provinces and territories.
The code of conduct issue has been at the forefront of the minds of federal Agriculture Minister Marie-Claude Bibeau and her counterpart from the province of Quebec.
Bibeau and Lamontagne said in a statement that they have met with FBC to understand their concerns and will ensure that the interests of SMEs are well represented.
We have the essence of a code. It's a big deal.
The chief executive of food, health and consumer products of Canada is Michael Graydon.
The concerns about small and medium manufacturers were dismissed by Michael Graydon, who is co-chairing the negotiating group. He said that the draft rules give players rights that are 100 times better than what they currently have.
There won't be a "void of representation" going forward since several of the remaining lobby groups have members that represent smaller food manufacturers.
He said that they would move forward and get it over the line. We have the essence of a code. It's a big deal.
This summer, industry-led negotiations appeared to be at risk of not happening. Lobby groups told officials in July that if they couldn't reach a consensus by the end of the month, the government should write its own rules.
The lobby groups have made progress since the summer, according to documents submitted to the government.
Lobby groups have finished a draft of the code of conduct for Canada's federal, provincial and territorial agriculture ministers.
Metro Inc., Empire Co., and Lactalis Canada Inc. were engaged by the negotiators to draft rules of engagement. The rules are subject to change, but they include a ban against punishing or vexatious acts.
According to the progress report, the negotiators are in favor of establishing a Grocery Code Adjudication Office similar to the model used in the United Kingdom to enforce the code.
The idea is that a senior official with an eye on the entire system will be given the power to make a difference.
Gary Sands, vice-president of the Canadian Federation of Independent Grocers, said the "finish line is within sight" but the group still needs to reach consensus on some key sticking points.
He wouldn't say what is final and what isn't.
Between November and January, the industry consultation process on the draft rules will take place. A communication and educational strategy for the code is being worked on by the negotiation team.
The email address is jedmiston@nationalpost.com.
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