“The Grocery Code of Conduct is a significant step toward improving the resiliency and efficiency of the grocery supply chain. The primary objective is not to directly rebalance market power, regulate fair dealing, or set the level of retail fees, but rather to improve supply chain relationships through principles of predictability, transparency and fair dealing.” – DH Canada (January 17, 2023)
It wasn't that long ago that I wrote an article regarding the largest Canadian grocer – Loblaws, and their headline-grabbing stare-down price dispute with the global brand Frito-Lay. Here is the link to that post titled The Inflated Supply Chain: How To Navigate The Complexity Of Doing Business During A Period Of Rising Inflation.
The primary focus of the piece was – as the article’s title suggests, understanding the impact of inflation on supply chains. However, beyond the big picture story in which inflation takes center stage, there is an underlying theme. The theme I refer to is how buyer-supplier relationships affect inflation and other supply chain disruptions.
The buyer-supplier relationship's impact on inflation, not the other way around, is not a typo. As the age-old saying goes, it is not what happens to you but how you react to it that matters.
High-Level Overview
For the sake of expedience, the following high-level bullet points should provide a solid understanding of the Loblaws and Frito-Lay situation at the time and the government’s intervention to resolve the dispute. This overview will help you better understand why the government is introducing the grocery conduct code.
One of Canada's "biggest food manufacturers," Frito-Lay, is no longer shipping its products to its largest grocer. Citing it as "an extreme example of how inflation is impacting the food industry," manufacturers' efforts to "recoup higher costs" is driving a wedge between some retailers and suppliers.
The spat opened a rare window into the inner workings of the Canadian grocery business at a time when suppliers are constantly fighting to get retailers to take on more of the burden of inflation. PepsiCo said it has been facing "unprecedented pressures" from the surging cost of freight, packaging and ingredients.
But Loblaw framed the situation much differently, suggesting this was a case where its internal analysis of a supplier’s price increase led to a “difficult” conversation that ended in the supplier pulling its shipments.
At the government's behest, the industry has been drafting a code of conduct that would implement new rules of engagement for suppliers and grocers. As part of that process, PepsiCo and Loblaw will find themselves back at a negotiating table together.
Loblaw said shipments will resume on April 11, and the company expects to be "fully stocked" for Easter weekend.
Consumer Benefit?
“Providing clarity for business practices and establishing guiding principles will improve industry relationships, as the entire supply chain works together to find efficiencies that will ultimately benefit consumers as well.”– DH Canada (January 17, 2023)
The government’s intervention in settling the dispute between Loblaws and Frito-Lay was obviously necessary. However, besides seeing a favorite product returning to the grocery shelves, the impact or benefit on the consumer beyond availability is subject to debate.
For example, did the resolution impact consumers where it matters the most – in the pocketbook?
Some suggest that the absence of the big brand opened the door to boutique players offering a better-quality product at a lower cost. For some, the answer to this and other questions regarding consumer benefits remains to be seen.
Of course, savings in dollars and cents is important – provided products are on the shelves to buy. How much would someone be willing to pay for baby formula, Tylenol, butter and other products like toilet paper and hand sanitizer when these products’ availability was in short supply?
Like the famous credit card tagline, “strategic” government intervention leading to greater transparency, certainty, and predictability in our supply chains "is priceless."
Dawn Tiura, President and CEO, SIG
Dawn Tiura, CEO and President of SIG, SIG University and Future of Sourcing Digital Publication, has over 26 years leadership experience, with the past 22 years focused on the sourcing and outsourcing industry. In 2007, Dawn joined SIG as CEO, but has been active in SIG as a speaker and trusted advisor since 1999, bringing the latest developments in sourcing and outsourcing to SIG members. Prior to joining SIG, Dawn held leadership positions as CEO of Denali Group and before that as a partner in a CPA firm. Dawn is actively involved on a number of boards promoting civic, health and children's issues in the Jacksonville, Florida area. Dawn is a licensed CPA and has a BA from the University of Michigan and an MS in taxation from Golden Gate University. Dawn brings to SIG a culture of brainstorming and internal innovation.
“The Grocery Code of Conduct is a significant step toward improving the resiliency and efficiency of the grocery supply chain. The primary objective is not to directly rebalance market power, regulate fair dealing, or set the level of retail fees, but rather to improve supply chain relationships through principles of predictability, transparency and fair dealing.” – DH Canada (January 17, 2023)
It wasn't that long ago that I wrote an article regarding the largest Canadian grocer – Loblaws, and their headline-grabbing stare-down price dispute with the global brand Frito-Lay. Here is the link to that post titled The Inflated Supply Chain: How To Navigate The Complexity Of Doing Business During A Period Of Rising Inflation.
The primary focus of the piece was – as the article’s title suggests, understanding the impact of inflation on supply chains. However, beyond the big picture story in which inflation takes center stage, there is an underlying theme. The theme I refer to is how buyer-supplier relationships affect inflation and other supply chain disruptions.
The buyer-supplier relationship's impact on inflation, not the other way around, is not a typo. As the age-old saying goes, it is not what happens to you but how you react to it that matters.
High-Level Overview
For the sake of expedience, the following high-level bullet points should provide a solid understanding of the Loblaws and Frito-Lay situation at the time and the government’s intervention to resolve the dispute. This overview will help you better understand why the government is introducing the grocery conduct code.
Consumer Benefit?
“Providing clarity for business practices and establishing guiding principles will improve industry relationships, as the entire supply chain works together to find efficiencies that will ultimately benefit consumers as well.” – DH Canada (January 17, 2023)
The government’s intervention in settling the dispute between Loblaws and Frito-Lay was obviously necessary. However, besides seeing a favorite product returning to the grocery shelves, the impact or benefit on the consumer beyond availability is subject to debate.
For example, did the resolution impact consumers where it matters the most – in the pocketbook?
Some suggest that the absence of the big brand opened the door to boutique players offering a better-quality product at a lower cost. For some, the answer to this and other questions regarding consumer benefits remains to be seen.
Of course, savings in dollars and cents is important – provided products are on the shelves to buy. How much would someone be willing to pay for baby formula, Tylenol, butter and other products like toilet paper and hand sanitizer when these products’ availability was in short supply?
Like the famous credit card tagline, “strategic” government intervention leading to greater transparency, certainty, and predictability in our supply chains "is priceless."
Dawn Tiura, CEO and President of SIG, SIG University and Future of Sourcing Digital Publication, has over 26 years leadership experience, with the past 22 years focused on the sourcing and outsourcing industry. In 2007, Dawn joined SIG as CEO, but has been active in SIG as a speaker and trusted advisor since 1999, bringing the latest developments in sourcing and outsourcing to SIG members. Prior to joining SIG, Dawn held leadership positions as CEO of Denali Group and before that as a partner in a CPA firm. Dawn is actively involved on a number of boards promoting civic, health and children's issues in the Jacksonville, Florida area. Dawn is a licensed CPA and has a BA from the University of Michigan and an MS in taxation from Golden Gate University. Dawn brings to SIG a culture of brainstorming and internal innovation.