Thank you, Michael.
The unfair practices of Canada’s largest grocery retailers are another major hurdle preventing not only dairy processing, but the entire food value chain from meeting its full potential.
There has been significant attention to recent announcements by large grocery retailers regarding new fees for suppliers, but this is part of a much larger and long-standing problem that has reduced investment and innovation and slowly erodes Canada’s food processing capacity.
It is estimated that the fees, deductions, and administrative costs required to simply get products onto shelves has grown at twice the rate of sales over the past five years. This is known as trade spend and it is significantly higher in Canada than in other countries. For example, in the United States, trade spend accounts for 18% of processors’ costs, while here it accounts for about 28%.
This stands as a major hurdle to expansion and growth, especially for small and medium-sized processors.
Money paid to large grocery retailers in the form of arbitrary fees and deductions is money that is not being reinvested in facilities, product innovations or new jobs. In the long run, this could have serious impacts on Canada’s domestic food production.
As others who have presented to the committee have noted, this is all possible because of the concentration in Canada’s grocery retail market. Five large retailers control over 80% of the grocery retail market. For comparison purposes, the largest food processor controls no more than 3% of any given retailer’s volume.
If we, as a country, are serious about improving local production and making our food system more resilient—and the pandemic has shown the extreme importance of having resilient systems—our food value chain needs to be rebalanced so that food suppliers are given a fighting chance. We believe this is where a Grocery Code of Conduct comes in.