Why Franchised Grocers Should Join the CFIG

Background

The Canadian Federation of Independent Grocers (“CFIG”) offers compelling benefits to Canadian grocery retailers. As designated “retailer” members of CFIG, grocery retail stores gain valuable access to resources and increased exposure to manufacturers, suppliers, and other industry players. Importantly, CFIG is not restricted to unaffiliated independent grocery retailers; franchised grocery retailers can reap the benefits too.

This article’s goal is to present a brief overview of the current dynamics of the grocery industry and why franchised grocery retailers stand to benefit from joining CFIG, despite operating within the franchise context.

The Dominance of Majors

Independent grocery retailers have steadily lost their footprint within the Canadian grocery sector to major grocery distributors. As of 2020, these “Majors” comprised roughly 80% of the market share in Canada’s grocery sector,[1] and have used their massive market influence to tilt in their favour the once-level playing field previously enjoyed across the sector.

The primary effects of the Majors’ influence have been felt by suppliers. Suppliers have reported instances where Majors have unilaterally reduced prices of supplier products, and increased contractual fees and penalties. The Federal Agriculture Minister found that the fees owed to Majors comprised 15-40% of a supplier’s sale revenue. During the COVID-19 pandemic, Majors netted record profits.

With relatively few alternatives in the marketplace, many suppliers have accepted unfavourable contractual terms they would not otherwise, lest their products be de-shelved from Major aisles.

The Grocery Code of Conduct

In part due to supplier/Major struggles, industry advocates promoted the creation and adoption of a Grocery Code of Conduct (“Code”). In July 2021, Federal, Provincial, and Territorial Ministers called for an industry-led process to develop a first proposal of a Code, and a steering committee of individuals from ten (10) stakeholder groups was formed to lead the effort.[2]

The Code is inspired by the United Kingdom’s Grocery Supply Code of Practice, which regulates the grocery sector to promote competitiveness and fair dealing. The United Kingdom has experienced a concentrated grocery retail environment similar to Canada’s, and offers a helpful precedent for the Code’s drafting.  The idea of the Code in Canada has found wide-spread support. Some Majors have also conveyed support, arguing that such oversight is a welcome development to the Canadian grocery sector, provided that the Code is fair to all parties.

The renewed deadline for the steering committee’s proposal is set for November, 2022.[3] If the proposal is not finalized by then, the committee may seek government intervention for assistance.[4]

For more information on the proposed Code of Conduct in Canada, see our article on the topic here.

The Canadian Federation of Independent Grocers

The CFIG is a non-profit trade association founded in 1962. CFIG’s stated aim is to equip and enable “independent, franchised and specialty grocers for sustainable success” and to continue to serve as a “strong and united voice for over 6,900 independent grocery retailers across Canada, providing programs for operational excellence and fostering solid relationships among retailers and suppliers.”

The retailer membership in CFIG is open to any independent or franchised grocery store operating in at least four (4) of the following departments: dry grocery, produce, meat, frozen, dairy, bakery, or deli. The benefits of joining CFIG are plentiful and include advocacy, news and industry updates, and opportunities for reputation and brand growth – all of which are essential at this critical juncture for the Canadian grocery sector.

Advocacy

CFIG is a zealous advocate for small and medium-sized business grocery retailers. In addition to advocating for the development of the Code, CFIG has advocated for many issues important to grocery retailers, including reducing credit card interchange payments, installing environmental tax rebates, and settling international supply chain concerns.

News and Industry Updates

CFIG provides regular updates on industry developments to members. Among periodic news publications, CFIG’s website includes an up-to-date recalls and food investigations section, along with nutritional information, and news related to technological development and other trends within the industry.

Reputation and Brand Growth

CFIG also provides ripe opportunities for networking and brand development. Retailer members gain access to numerous events to network with other suppliers, brands, competitors, and learn the skills of the trade.

For instance, CFIG hosted the Grocery Innovations Canada exhibition in Toronto in October, 2022, and is scheduled to host the Grocery & Speciality Food West exhibition in Vancouver in April, 2023. At these events and others, retailer members can gain important insights into the dynamics of the industry and help navigate its path forward.

Why Franchised Grocers Should Join CFIG

The primary benefit franchised grocers will gain by joining CFIG is access: Access to advocates who can make meaningful industrial change, while supporting them in doing so; Access to industry updates and developments, so that the franchised grocer is not caught by surprise by a recall or supply chain disruption; Access to sophisticated professional advice not otherwise available; and Access to networking opportunities, not only to strengthen their reputation and brand, but to build relationships with suppliers.

While franchised grocers operate in a different context than fully independent grocery retailers (due to the legislative requirements and terms of the governing franchise agreement), franchised grocers can leverage the access and benefit provided by a CFIG membership and share such information and best practices with colleagues, taking advantage of common representation as and when the need arises.

With membership fees as little as $310.00 per year, to a maximum of $620.00 (depending on the size of the grocery retail store), the benefits of a CFIG membership far outweigh its costs. While independent grocery retailers have long reaped CFIG’s benefits, franchised grocers should prioritize doing so too.

John Sotos, Sotos LLP

John Sotos is the founding partner of Sotos LLP and a dean of the franchising, licensing and distribution bar. John has been recognized by Chambers Canada, Canadian Legal LEXPERT Directory, Who’s Who Legal, and Best Lawyers in Canada as a leading Canadian franchise law practitioner. John can be reached directly at 416.977.9806 or jsotos@sotos.ca if you would like to discuss this or any other topic relating to the operation of your business.

Liisa Kaarid, Sotos LLP

Liisa is a partner with Sotos LLP. Liisa is a seasoned lawyer, having practised commercial law for over 30 years.  She brings unique perspective, having served as long-time senior legal leader to one of Canada’s foremost retail grocery organizations. Please contact Liisa at 416-572-7315 or lkaarid@sotos.ca if you would like to discuss this or any other topic relating to the operation of your business.

Ryan McCabe, Sotos LLP

Ryan is an associate with Sotos LLP. He carries on a commercial practice with a principal focus on franchising. Please contact Ryan at 416-571-7311 or rmccabe@sotos.ca if you would like to discuss this or any other topic relating to the operation of your business.

[1]      T. Ozbun, “Canada: leading food retailers 2020, by market share”, Statista, September 20, 2020 <online>.
[2]      “Grocery Industry Code of Conduct Progress Report”, Grocery Industry Code of Conduct Steering Committee,  July, 2022, p. 2 <online>.
[3]      D. Brown, “More work needed on grocery’s code of conduct: Committee”, Canadian Grocer, July 26, 2020 <online>.
[4]      Ibid.