Agriculture Committee on Dec. 4th, 2023

[Gary Sands]

Even though 59% of the grocery stores in Ontario are independents, the two biggest wholesalers in Ontario are Sobeys and Loblaw. Most independents are buying most of their products from those two companies if they're not getting them at the terminal. That's unfortunate, but that's the lay of the land that we have in Canada as a result of consolidation.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Let me put that in perspective for Canadians watching right now. As independent grocers, you are forced to buy your supplies to stock your shelves from your biggest competitors in Ontario.

[Gary Sands]

That's right. That's correct.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

You touched on this a little earlier in terms of getting food to rural and remote areas.

I'm wondering what your thoughts are on the ban on primary food plastic packaging and how that will affect your stakeholders, and also on transportation costs, because we've heard from independent grocers across the country that their fuel transportation cost to get the groceries to rural or remote communities in the north is astronomical because of the carbon tax.

Could you comment on the disadvantage independents are at because of those costs and the proposed plastics ban?

[Gary Sands]

Well, we have to remember that this is Canada and the transportation challenges we face in this big country, particularly at certain times of the year, are significant, but throughout the year for independent grocers in semi-rural, rural and remote communities—and we also serve a number of indigenous communities—those costs are significantly higher for transportation to those communities. That's already a concern.

I believe Mr. Medline spoke about the P2 initiative of the government. We have strongly urged the government to hit the pause button on that proposal, because we've heard from our partners with the Canadian Produce Marketing Association that costs for packaging will increase by about 30%. We can't take that. We can't absorb that. That will have to be passed on to Canadians in those communities. I hope the government is really looking seriously at the implications of that idea. How can you be moving forward with that proposal when you're at the same time advocating price stability?

As well, without the innovation in packaging that we need before you put something like that in place, the impact on getting fresh produce to those rural and remote communities is going to be huge. It's not going to be possible.

I'm sorry. I'm getting excited about that one, but it just gets us so dismayed that the government is still proceeding on this and that they haven't looked at the implications for all of the country. There's a big country out there. It's not just in the urban areas like Toronto, Montreal, Ottawa and Vancouver. There's a lot of rural Canada out there.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Mr. Sands.

Thanks, Ms. Rood.

Now we go to Mr. Drouin and the Liberals for six minutes, please.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

Mr. Sands, I just want to reassure you that government is not moving anywhere yet on the P2 stage. Obviously they're going through a process. The former process would have required the Government of Canada to go to the Canada Gazette, part I, and ask for comments, and the government is not even at that stage yet, so I just want to say before we....

I understand that there have been some comments. I'm really engaged with the industry on this, and I am advocating on your behalf, obviously. We are having this committee: Both Minister Champagne and Minister MacAulay have asked us to have these meetings. Obviously we are concerned with the rising price of food, so any measure that could potentially increase the price of food is something that the government is sensitive to.

I want to get into a conversation about the grocery code of conduct and the importance of it. From your perspective, when you have two major grocers, and I know you are not the target we are talking about, and I'm a capitalist and I believe in very little government intervention, and I can say that as a Liberal, but government needs to step in when a few grocers own 80% of the market.

Two major retailers are now saying, “We've participated in the process and we've helped draft potential regulations, but screw you; this will increase costs, and we don't want to participate any more.” What does that tell you?

[Gary Sands]

It should be a clear message to everyone about how much we need a code. What it also tells us, and what it will tell other stakeholders, is that I know there will be some people who are presently supporting the code who will not support being included in the code while their retail competitors are not. This is very concerning to us.

Personally, I think there will be a number of people in industry who will be going to provinces to say, “We've got the document. We've developed the code. You're going to have to regulate this and impose it.” That's going to be unfortunate, since industry has been able to do that itself, but the fact that they're opposing this and coming out with arguments that are just nonsensical.... Their communications on this just tell me very clearly that this code will make a difference and that they're worried about it. That should send a message to everyone in governments—and I mean governments plural—that we really need this code. I hope we don't have to regulate.

I just can't impress upon this committee enough how much independent grocers need this code.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you.

Mr. Fraeys, you addressed this issue in your remarks. If a voluntary code isn't adopted nationally, the danger is that some provinces may decide to forge ahead regardless.

Wouldn't it be risky to have a number of regulatory regimes that differ from province to province? If that happened, it wouldn't really help bring prices down. Businesses would have to spend more money to comply with all the different regulatory regimes. Quebec's Minister Lamontagne insisted on making sure all agriculture ministers across Canada address this issue.

What are your thoughts on that?

[Gary Sands]

Is that question for me?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

It's for Mr. Fraeys.

[Gary Sands]

I'm sorry.

[Dimitri Fraeys]

Quebec is in favour of a code of conduct. Whether it will be mandatory or voluntary depends on whether all the parties sign on.

At this point, we're talking about a voluntary code, but the process would have to work properly. I believe the other countries we've mentioned, including the United Kingdom, have mandatory codes. In that case, every province would have to pass its own legislation, which is yet another hurdle, but we'd have to make sure all the provinces sign on. Canada is a big country, and prices should be the same for all consumers everywhere in Canada.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I'll ask the same question to Mr. Graydon.

You've also mentioned it, but the fact is that we have two major players openly questioning, despite the fact they've been engaged in the process, and they are now saying, “We don't want anything to do with the process anymore.” I don't understand, for the life of me, how you're potentially telling provinces, those that were very vocal about this, that this was the important issue. I would argue that the reason we are having this conversation nationally is that in a few provinces—and some were brought to the table kicking and screaming—the industry recognized that having regulatory frameworks in one province that are not necessarily the same in another province is bad for business.

I'd just love your opinion on that.

[Michael Graydon]

It will certainly add complexity to the situation. I have some confidence in the federal-provincial-territorial ministers process. If they feel strongly enough that a code is, in fact, a solution, they will come to agreement to try to have consistent regulations applied across the country.

We're also hopeful that if you get a large province or two that engage in the code and make it mandatory for participation, you would pretty much have to participate one way or the other anyway, especially if it happens to be the province of Quebec and/or, let's say, Ontario.

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mr Graydon. We appreciate that.

Mr. Perron, you have six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you very much, Mr. Chair.

I want to thank the witnesses for being here with us.

Mr. Graydon, you're not the only one saying that Loblaw and Walmart are reluctant.

What happens if some players don't sign on to the code of conduct?

[Michael Graydon]

I don't think it will move forward. I think you will find that the other retailers that have been very engaged in the program—Metro, Sobeys, and Save-On-Foods in western Canada—will likely see it as yielding competitive advantage to Loblaw and Walmart and likely won't sign on.

You also have an issue with some of the large manufacturers that look at it and say, “When 40%-plus of the industry is outside the code, we get very concerned about being too aggressively involved in it, in regard to the potential of retribution.”

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

What can the federal government do to encourage them to sign on?

As others have said, it's not straightforward. There's also the issue of jurisdiction.

[Michael Graydon]

I think the federal government can help in two areas. One is your voice in regard to encouraging the federal-provincial-territorial ministers to come to a common conclusion in regard to how we might move forward.

The other area is that we are going through revisions to the Competition Act, and this is a competition issue. Though the regulations and the Constitution don't allow for it as we speak today, adjustments in the Competition Act may allow for some oversight of the Competition Bureau in regard to a code of conduct if governments felt they want to go down that avenue.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you.

Do you believe this code of conduct will have an impact on food prices?

If so, what would that impact be, exactly?

[Michael Graydon]

Yes, we're very convinced and we work on the basis of looking at experiences from the U.K., Ireland, and Australia. The U.K. code has been in place now for 14 years, and it has had a remarkable impact on food inflation. It's gone a little out of whack post-Brexit, but I think that was another economic situation that put pressure on the economy in the U.K.

It's worked very well, and it's created a win-win-win. Manufacturers' margins improved, and their capital investment in innovation increased. Retailers' margins improved, as well as their investments in retail competitiveness, and the consumer gained through better pricing and the variety of products. New sustainable packaging was also part of the mix as well.

I work on the basis that we should look at something that's worked for 14 years versus standing on the sidelines and speculating on why it might not work.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Same question to you, Mr. Fraeys.

What impact could the code have on food prices?

[Dimitri Fraeys]

The code of conduct will stabilize the situation and make negotiations a little more predictable, as was mentioned earlier. In the United Kingdom, the rules governing the supplier-buyer relationship are better defined, so the balance of power is more even. That also makes things more predictable for small and medium-sized businesses when they're putting their products on the market.

Quebec is very much in favour of implementing this kind of code to stabilize prices and improve predictability.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Let's say there's no code. How else can the government help manufacturers deal with rising prices?

What can the federal government do to help you lower food inflation?