By Rosa Saba, The Canadian Press
July 19, 2024
Simon Laroche, president of Kraft Heinz Canada, is photographed in the company's Toronto office on Thursday, July 18, 2024.
THE CANADIAN PRESS/Chris Young
TORONTO — A grocery code of conduct could stabilize food prices in the future and encourage more investment in the Canadian food industry, according to the president of Kraft Heinz Canada.
“It creates a better trade environment for both the supplier and the retailer, but I think at the end of the day, the consumer is winning,” said Simon Laroche in an interview with The Canadian Press.
Laroche thinks the code of conduct, which sets out guidelines for fair dealing between grocers and suppliers, could bring some stability to an industry emerging from a difficult four years marked by empty shelves, sticker shock and rising consumer frustration.
“(The code) helps big companies to have more confidence that they can do business long-term in a fair way.”
Progress on the nearly complete grocery code stalled last year as it became clear that some major grocers had reservations. Loblaw joined earlier this year after some changes to the proposed guidelines. This week, Walmart and Costco confirmed their support, which means all the country’s major grocers are now on board.
Laroche said he’s happy to hear the grocers are on board with the code, and believes it will be a positive thing for consumers and for the industry.
Canada might be still finalizing its code, but Laroche has already seen what it could do for a country with a concentrated grocery market. Before moving into his current role last year, Laroche spent several years leading Kraft Heinz’s business in Australia, New Zealand, Japan and Korea. Australia has had a code of conduct since 2015.
A code brings transparency and encourages fair negotiations between suppliers and retailers, said Laroche, adding that one of the most important benefits is a clear dispute resolution process.
The idea of an industry-led commitment to fair dealings predates the recent bout of food inflation, gaining traction in 2020 amid pandemic supply chain challenges. However, negotiations between grocers and suppliers, long hidden from public view, became hot-button issues as inflationary pressures rose.
Consumers caught wind of these tensions in 2022, when a spat between Loblaw and Frito-Lay Canada resulted in empty shelves across the country.
At its peak, grocery inflation in Canada was 11.4 per cent; since May 2020, food prices have risen by more than 22 per cent.
And as Canada’s largest grocers increasingly came under fire for rising profits amid inflation, some executives pointed fingers at large multinational suppliers, accusing them of asking for unreasonable price increases.
Laroche thinks a code of conduct will help the industry better navigate these kinds of disagreements in the future.
“A lot of people are trying to make a really simple story, ‘Oh, somebody’s taking advantage of a situation,’” he said.
“But it was a complex situation.”
For Kraft Heinz, inflationary pressures have stabilized to a much more manageable level, Laroche said.
The company has also learned a lot about how to mitigate supply chain disruptions after the empty shelves and shortages of the early months of the pandemic, and has made some changes as a result.
“I think one of the big things for the entire industry is about making sure you don’t rely on (a) single source of ingredients,” Laroche said.
“From a procurement standpoint, we did a lot of learning to make sure that if something happened, we have alternatives.”
Kraft Heinz also learned to have backup recipes in case certain ingredients, like the oil in mayonnaise, shot up in price or were difficult to procure, said Laroche.
The fact that Kraft Heinz produces a lot of its products domestically has helped avoid further supply chain disruptions, he added. Half of what the company sells in Canada comes from the Kraft Heinz factory in Montreal, and the company recently renewed its production contract in Leamington, Ont. until the end of 2027.
The company moved its ketchup production to the U.S. in 2015, which was “a mistake,” said Laroche.
Five years later, the company announced it would return to Canada thanks to a joint investment with the Quebec government’s business expansion program.
Today, the Montreal facility makes hundreds of products including Kraft Dinner, Kraft peanut butter and salad dressing, Philadelphia cream cheese and Heinz tomato ketchup. The Highbury Canco facility in Leamington also makes a variety of products, including Heinz tomato juice, Classico tomato sauces, and the tomato paste used in Heinz ketchup.
“The (consumers) were not happy, we brought everything back, and now our ketchup is fully Canadian. And we’re extremely proud of that.”
With files from The Associated Press
This report by The Canadian Press was first published July 19, 2024.
Canada’s major grocers sign on to code of conduct
TORONTO — A grocery code of conduct could stabilize food prices in the future and encourage more investment in the Canadian food industry, according to the president of Kraft Heinz Canada.
“It creates a better trade environment for both the supplier and the retailer, but I think at the end of the day, the consumer is winning,” said Simon Laroche in an interview with The Canadian Press.
Laroche thinks the code of conduct, which sets out guidelines for fair dealing between grocers and suppliers, could bring some stability to an industry emerging from a difficult four years marked by empty shelves, sticker shock and rising consumer frustration.
“(The code) helps big companies to have more confidence that they can do business long-term in a fair way.”
Progress on the nearly complete grocery code stalled last year as it became clear that some major grocers had reservations. Loblaw joined earlier this year after some changes to the proposed guidelines. This week, Walmart and Costco confirmed their support, which means all the country’s major grocers are now on board.
Laroche said he’s happy to hear the grocers are on board with the code, and believes it will be a positive thing for consumers and for the industry.
Canada might be still finalizing its code, but Laroche has already seen what it could do for a country with a concentrated grocery market. Before moving into his current role last year, Laroche spent several years leading Kraft Heinz’s business in Australia, New Zealand, Japan and Korea. Australia has had a code of conduct since 2015.
A code brings transparency and encourages fair negotiations between suppliers and retailers, said Laroche, adding that one of the most important benefits is a clear dispute resolution process.
The idea of an industry-led commitment to fair dealings predates the recent bout of food inflation, gaining traction in 2020 amid pandemic supply chain challenges. However, negotiations between grocers and suppliers, long hidden from public view, became hot-button issues as inflationary pressures rose.
Consumers caught wind of these tensions in 2022, when a spat between Loblaw and Frito-Lay Canada resulted in empty shelves across the country.
At its peak, grocery inflation in Canada was 11.4 per cent; since May 2020, food prices have risen by more than 22 per cent.
And as Canada’s largest grocers increasingly came under fire for rising profits amid inflation, some executives pointed fingers at large multinational suppliers, accusing them of asking for unreasonable price increases.
Laroche thinks a code of conduct will help the industry better navigate these kinds of disagreements in the future.
“A lot of people are trying to make a really simple story, ‘Oh, somebody’s taking advantage of a situation,’” he said.
“But it was a complex situation.”
For Kraft Heinz, inflationary pressures have stabilized to a much more manageable level, Laroche said.
The company has also learned a lot about how to mitigate supply chain disruptions after the empty shelves and shortages of the early months of the pandemic, and has made some changes as a result.
“I think one of the big things for the entire industry is about making sure you don’t rely on (a) single source of ingredients,” Laroche said.
“From a procurement standpoint, we did a lot of learning to make sure that if something happened, we have alternatives.”
Kraft Heinz also learned to have backup recipes in case certain ingredients, like the oil in mayonnaise, shot up in price or were difficult to procure, said Laroche.
The fact that Kraft Heinz produces a lot of its products domestically has helped avoid further supply chain disruptions, he added. Half of what the company sells in Canada comes from the Kraft Heinz factory in Montreal, and the company recently renewed its production contract in Leamington, Ont. until the end of 2027.
The company moved its ketchup production to the U.S. in 2015, which was “a mistake,” said Laroche.
Five years later, the company announced it would return to Canada thanks to a joint investment with the Quebec government’s business expansion program.
Today, the Montreal facility makes hundreds of products including Kraft Dinner, Kraft peanut butter and salad dressing, Philadelphia cream cheese and Heinz tomato ketchup. The Highbury Canco facility in Leamington also makes a variety of products, including Heinz tomato juice, Classico tomato sauces, and the tomato paste used in Heinz ketchup.
“The (consumers) were not happy, we brought everything back, and now our ketchup is fully Canadian. And we’re extremely proud of that.”
With files from The Associated Press
This report by The Canadian Press was first published July 19, 2024.
Canada’s major grocers sign on to code of conduct
By Rosa Saba, The Canadian Press
July 18, 2024 at 2:12PM EDT
People leave a Walmart store in Mississauga, Ont., Thursday, Nov. 26, 2020. THE CANADIAN PRESS/Nathan Denette (Nathan Denette/THE CANADIAN PRESS)
All the major Canadian grocers are now on board for a grocery code of conduct, paving the way for industry guidelines that have been several years in the making.
Confirming the support of the five major retailers — Loblaw, Walmart, Costco, Metro and Empire — is an “important milestone,” said Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association.
“This is a positive step toward bringing more fairness, transparency, and predictability to Canada’s grocery supply chain and for consumers,” the ministers said in a statement.
Confirming the support of the five major retailers — Loblaw, Walmart, Costco, Metro and Empire — is an “important milestone,” said Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association.
“It was critical that all of the retailers got involved, because it’s a very competitive business,” said Graydon, who led the group that created the code and now chairs its interim board.
“It kind of was an all-or-none situation. And I think they all respected that and came to the table.”
The voluntary grocery code is meant to level the playing field for suppliers and smaller retailers by providing guidelines for fair negotiations, including for the application of penalties and fees.
In addition to the national, regional and local independent grocers signing on, key suppliers of all sizes have agreed to the code, the board told the ministers in a report Wednesday, adding their goal is to implement the code by next June.
Federal agriculture minister Lawrence MacAulay said he’s “elated.”
“Now we have the five major retailers signing on, that’s good news for the whole supply chain,” he said.
MacAulay said he believes the code will bring more transparency, fairness and predictability into the food industry, though he noted it’s not meant to lower grocery prices.
The industry committee tasked with creating the code was established in response to contentious fees being charged to suppliers by large grocery retailers, an issue that came to a head in 2020 when Walmart Canada and Loblaw each introduced new supplier fees to help pay for infrastructure investments.
Progress on the code appeared to be in jeopardy last fall as it neared completion, with leaders from Loblaw and Walmart telling MPs they were concerned the code would lead to higher retail prices.
As a result, calls to make the code mandatory grew, with the House of Commons committee studying food prices telling Loblaw and Walmart in February that if they wouldn’t sign on, it would recommend the code be made law — an option that MacAulay had said he was exploring.
In May, Loblaw said it would agree to the code as long as other industry players would do the same, saying its concerns had been alleviated by changes to the document.
“The code now is fair, and it will not lead to higher prices,” said president and CEO Per Bank at the time.
After Loblaw’s announcement, attention turned to Walmart and Costco.
Walmart Canada is willing to support the current version of the code, which is now more balanced, said spokeswoman Stephanie Fusco in an email — though there are still important discussions to have about governance and dispute resolution, she added.
Fusco said the company already has good relationships with its suppliers and hasn’t seen the need for a code of conduct.
Graydon said the board has always been adamant that the code should be voluntary and industry-led.
“It becomes an important caution to us all that if we’re not careful, we don’t adhere, that at some point government may step in, and we don’t want that.”
The milestone is “great news for the industry,” said Gary Sands, a member of the code’s interim board and senior vice-president at the Canadian Federation of Independent Grocers.
But he thinks the code is also good news for consumers.
“When you bring more stability, fairness and transparency to the industry, that’s bound to have a positive impact on just relationships, on how prices are set.”
The board is now turning its attention to setting up the office that will oversee the code and hiring an adjudicator, said Graydon. He’s also hoping a request for government funding to support that work will be approved.
MacAulay wouldn’t confirm whether the funding will be approved, but indicated the agriculture ministers will be discussing the request.
“We’ll do everything to make sure that this is a success.”
Canada’s five biggest grocers have been under intense public and political pressure as the price of groceries has risen by more than 22 per cent over four years, with accusations of profiteering and some consumers launching a boycott of Loblaw earlier this year.
The grocers have defended themselves against the accusations, telling MPs that their companies are not responsible for higher food prices.
“The truth is we are at the end of a very long food supply chain that has economic inputs at every step and stage,” Empire president and CEO Michael Medline told the committee in March 2023.
More recently, Bank and Loblaw chairman Galen Weston pushed back on what they called “misguided criticism” of the grocer as calls for a boycott gained steam online.
Amid the pressure on grocers to stabilize prices and agree to the grocery code, the Competition Bureau has also launched investigations into the parent companies of Loblaws and Sobeys for alleged anticompetitive behaviour.
The bureau is looking into the use of property controls in the sector, clauses in commercial leases designed to restrict other potential tenants and their activities. It argues that such clauses limit competition not only for smaller Canadian grocers, but for potential foreign entrants to the sector as well.
Industry Minister Francois-Philippe Champagne has said he’s seeking a foreign grocer to come to Canada and help strengthen competition.
This report by The Canadian Press was first published July 18, 2024.
All the major Canadian grocers are now on board for a grocery code of conduct, paving the way for industry guidelines that have been several years in the making.
Confirming the support of the five major retailers — Loblaw, Walmart, Costco, Metro and Empire — is an “important milestone,” said Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association.
“This is a positive step toward bringing more fairness, transparency, and predictability to Canada’s grocery supply chain and for consumers,” the ministers said in a statement.
Confirming the support of the five major retailers — Loblaw, Walmart, Costco, Metro and Empire — is an “important milestone,” said Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association.
“It was critical that all of the retailers got involved, because it’s a very competitive business,” said Graydon, who led the group that created the code and now chairs its interim board.
“It kind of was an all-or-none situation. And I think they all respected that and came to the table.”
The voluntary grocery code is meant to level the playing field for suppliers and smaller retailers by providing guidelines for fair negotiations, including for the application of penalties and fees.
In addition to the national, regional and local independent grocers signing on, key suppliers of all sizes have agreed to the code, the board told the ministers in a report Wednesday, adding their goal is to implement the code by next June.
Federal agriculture minister Lawrence MacAulay said he’s “elated.”
“Now we have the five major retailers signing on, that’s good news for the whole supply chain,” he said.
MacAulay said he believes the code will bring more transparency, fairness and predictability into the food industry, though he noted it’s not meant to lower grocery prices.
The industry committee tasked with creating the code was established in response to contentious fees being charged to suppliers by large grocery retailers, an issue that came to a head in 2020 when Walmart Canada and Loblaw each introduced new supplier fees to help pay for infrastructure investments.
Progress on the code appeared to be in jeopardy last fall as it neared completion, with leaders from Loblaw and Walmart telling MPs they were concerned the code would lead to higher retail prices.
As a result, calls to make the code mandatory grew, with the House of Commons committee studying food prices telling Loblaw and Walmart in February that if they wouldn’t sign on, it would recommend the code be made law — an option that MacAulay had said he was exploring.
In May, Loblaw said it would agree to the code as long as other industry players would do the same, saying its concerns had been alleviated by changes to the document.
“The code now is fair, and it will not lead to higher prices,” said president and CEO Per Bank at the time.
After Loblaw’s announcement, attention turned to Walmart and Costco.
Walmart Canada is willing to support the current version of the code, which is now more balanced, said spokeswoman Stephanie Fusco in an email — though there are still important discussions to have about governance and dispute resolution, she added.
Fusco said the company already has good relationships with its suppliers and hasn’t seen the need for a code of conduct.
Graydon said the board has always been adamant that the code should be voluntary and industry-led.
“It becomes an important caution to us all that if we’re not careful, we don’t adhere, that at some point government may step in, and we don’t want that.”
The milestone is “great news for the industry,” said Gary Sands, a member of the code’s interim board and senior vice-president at the Canadian Federation of Independent Grocers.
But he thinks the code is also good news for consumers.
“When you bring more stability, fairness and transparency to the industry, that’s bound to have a positive impact on just relationships, on how prices are set.”
The board is now turning its attention to setting up the office that will oversee the code and hiring an adjudicator, said Graydon. He’s also hoping a request for government funding to support that work will be approved.
MacAulay wouldn’t confirm whether the funding will be approved, but indicated the agriculture ministers will be discussing the request.
“We’ll do everything to make sure that this is a success.”
Canada’s five biggest grocers have been under intense public and political pressure as the price of groceries has risen by more than 22 per cent over four years, with accusations of profiteering and some consumers launching a boycott of Loblaw earlier this year.
The grocers have defended themselves against the accusations, telling MPs that their companies are not responsible for higher food prices.
“The truth is we are at the end of a very long food supply chain that has economic inputs at every step and stage,” Empire president and CEO Michael Medline told the committee in March 2023.
More recently, Bank and Loblaw chairman Galen Weston pushed back on what they called “misguided criticism” of the grocer as calls for a boycott gained steam online.
Amid the pressure on grocers to stabilize prices and agree to the grocery code, the Competition Bureau has also launched investigations into the parent companies of Loblaws and Sobeys for alleged anticompetitive behaviour.
The bureau is looking into the use of property controls in the sector, clauses in commercial leases designed to restrict other potential tenants and their activities. It argues that such clauses limit competition not only for smaller Canadian grocers, but for potential foreign entrants to the sector as well.
Industry Minister Francois-Philippe Champagne has said he’s seeking a foreign grocer to come to Canada and help strengthen competition.
This report by The Canadian Press was first published July 18, 2024.
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