Good afternoon, Mr. Chair and members of the committee.
As the president of Lactalis Canada, a leading dairy processor in Canada’s food supply chain, I appreciate the invitation to share my perspective on the Canadian grocery code of conduct.
In 2018, I was asked for my insights on the U.K. code of conduct. These insights were based on my experience implementing and working in a code environment for a leading manufacturer in the U.K. Today, seven years later, I am here to continue that conversation.
I’ll begin by saying this. A grocery code of conduct, correctly used, is good for business—everyone’s business, suppliers and retailers—but, ultimately, it's good for Canadian consumers. Of course, the Canadian code, while drafted and final, is still not formally operational. We have made some positive inroads to arrive at this point, but I think that many of my industry peers would agree that we are certainly not at the finish line.
First, we must acknowledge that Canada’s grocery code of conduct is the product of compromise. It was drafted through extensive negotiation among various stakeholders with varying priorities. This process resulted in language, text, that, without enforcement tools, creates challenges in achieving the code’s objectives.
In the U.K., the code initially focused on the largest retailers and suppliers, around 85% of the market. This allowed for rapid adoption and best practice development that trickled down to all businesses. Canada’s approach involves many more parties, adding complexity to alignment and to implementation. Another significant difference is that, while Canada has incorporated elements of the U.K. code, the Canadian code is not enshrined in law; it is voluntary. The adjudicator has no enforcement tools. In the U.K., the possibility of fines was a powerful motivator for engagement, even though it was very rarely used.
As a result of the code not being mandatory, adoption will be highly variable. In this framework, the code’s uptake will depend on each respective supplier’s or retailer’s understanding of it and organizational leadership supports. Some will see the code as an obstacle to be circumvented and something that offers little resistance to normal business practices. Others will fully embrace the code's true intent, enabling business certainty and meaningful collaboration and creating win-win outcomes through continuous improvement across supply chains. At this stage, it is difficult to predict the proportionality of the various outcomes, but what is certain—and this was our experience in the U.K.—is that if we all focus on using the code to deliver positive outcomes for all, we will see support grow quickly.
It is important to note that commercial relationships built on fees, fines and euphemistically termed “asks” are not healthy. They undermine certainty and trust and drive short-term profit margin tactics that distract us from what really matters, which is delivering the best value for Canadians. These costs inevitably flow back into supplier and retailer pricing, ultimately hitting the consumer’s wallet.
As a manufacturer, our purpose is to make and supply high-quality, nutritious products for Canadians. I am fully motivated to do as much of this as possible. Anyone who thinks that a threat of compliance or fill rate penalties will somehow encourage me to prioritize one customer over another is misguided. These penalties are a drain on resources that would otherwise be invested in manufacturing capacity, capability, efficiency and innovation.
In conclusion, I am confident that the code’s principles and objectives remain critical to a strong grocery supply chain. We know from international experience that a code of conduct can deliver real value. In the U.K., where the code has been in place for over a decade, the U.K. groceries code adjudicator’s annual survey findings demonstrate that over 90% of suppliers report improved compliance and fair dealings. Retailers also universally acknowledge stronger relationships and greater efficiency as positive impacts resulting from the existence of a code. These outcomes demonstrate that when principles of fairness and transparency are embraced, the benefits extend across the entire value chain for all parties, including consumers.
Looking at our current reality in Canada, the time is now to unlock the Canadian grocery code’s full potential. I remain optimistic that we will achieve this goal together.
Thank you, and I look forward to the committee’s questions.
