Michael McCain, one of Canada’s most prominent food industry executives, characterized the effort to create a code of conduct for grocery business as a waste of time.
Advocates for a code of conduct, including federal and provincial politicians, say a formal set of rules for players in the food industry could help tamp down food inflation and stop a handful of dominant grocery chains from bullying manufacturers and farmers. But McCain, chief executive of meat-packing giant Maple Leaf Foods Inc., told a parliamentary committee on March 6 that he doesn’t buy it.
“Truth be told, I think it will have absolutely no impact on our business or anybody else’s business or the consumer outcome,” McCain said during testimony at the Commons agriculture committee, which is conducting an inquiry into whether Canada’s largest grocery chains took advantage of the inflation crisis to pad their profits.
“We are completely agnostic,” McCain, who is scheduled to step down as chief executive this spring, said of the code of conduct.
The remarks standout because food manufacturers have been some of the loudest, most passionate proponents for a grocery code of conduct in Canada. After nearly two years of negotiations, a group of industry leaders is close to finalizing the first-ever code of conduct.
But for those rules to mean something, major players in retail and manufacturing will need to voluntarily agree to follow them. So tepid comments from a heavyweight like McCain cast doubt on whether this whole process will actually work.
“I was taken aback that he said that,” said Gary Sands, senior-vice of the Canadian Federation of Independent Grocers, who is also one of the industry leaders drafting the code. “If I thought this wasn’t going to make a difference, I wouldn’t be at the table.”
Lobby groups representing some of the largest food brands in the world have complained for years that Canada’s grocery market is too concentrated, allowing a few big retail chains to bully their suppliers into paying unreasonable fees and fines just to get their products onto shelves.
‘Can’t change it’
Since the pandemic, those groups have managed to convince politicians that the best solution is to lay down new rules of engagement for grocers and their suppliers, and to set up a watchdog with the power to enforce those rules — similar to a model used in the United Kingdom.
McCain, who is the son of one of the co-founders of global french-fry maker McCain Foods Ltd., said he has sold products in places with codes, and places without them; dealing with large changes is just as challenging, regardless of where you are or what you’re selling.
“I’ve been selling to the retail market since 1979, just short of 45 years, in every major market in the world. I started my career as a retail salesman,” he said. “(Retailers) demand a lot. It’s just the reality of the business that we’re in and experienced people know how to deal with that,” he continued. “I would describe it as economic gravity. Can’t change it. It is what it is, been that way for 50 years, will probably be that way for another 50 years, and I’m totally fine with it.”
The main lobby group for food manufacturers, Food, Health and Consumer Products of Canada (FHCP), dismissed McCain as an outlier in the industry.
“That is not the opinion of the majority of manufacturers,” FHCP chief executive Michael Graydon said in an email.
‘Don’t want to go there’
FHCP has been railing against Canada’s big grocers since early in the pandemic, after Walmart Inc. and Loblaw Cos. Ltd. rolled out new fees on suppliers that they said were necessary to help cover investments in e-commerce — a move many food brands saw as a brazen cash grab in the middle of a supply crisis.
In 2021, legislators agreed something needed to be done to ease tensions in the industry. Canada’s agriculture ministers directed a group of representatives from retail, manufacturing and agriculture to find a solution. If the group failed, the ministers threatened to step in and write their own rules.
That, however, would be complicated. Regulating dealings between grocers and suppliers falls under provincial jurisdiction, so a government-imposed solution would involve a patchwork of different sets of rules across the country.
At this point, that doesn’t appear to be necessary. Late last year, the industry committee submitted a draft to government, leading Agriculture Minister Marie-Claude Bibeau to declare publicly that she expects the code to be live by the end of 2023.
In that scenario, the code would be voluntary. So, the only real question left is whether the largest and most influential companies will choose to submit to the new rules. In an interview in January, Bibeau refused to speculate about what would happen if big players opted out of the code.
“I don’t want to go there,” Bibeau said.