Posted by & filed under Ethics.

Description: Dalhousie University professor Sylvain Charlebois argues its time that the big Canadian grocery chains sign-on to an industry code of conduct. He offers this opinion in the light of a move by all the big grocers except Sobeys to place new fees on their suppliers who want access to their store shelves. Charlebois goes so far as to call these fees “bully tactics,” and he sees them as weakening food manufacturers and pushing the independent grocery stores onto the survival list.

Date:  October 29, 2020

Source:  theglobeandmailcom

 Link: https://www.theglobeandmail.com/business/commentary/article-canadas-grocery-industry-needs-a-code-of-conduct/

Discussion points:

1) Were you aware about these fees charged to suppliers by the big grocery chains?

2) If you were an accountant at one of these suppliers, how would you advise your employer to respond to this latest move?

3) In chapter one of Wiley’s Financial Accounting: Tools for Business Decision-Making, we read about the importance of high standards of ethical behaviour for accountants. Do you think this decision to charge these fees is ethical?

4 Responses to “Time for a Code?”

  1. Tevin Lewis Jessie Lynn Legrand Andrew Bryden MacDonald

    1) No, we weren’t aware of these fees that big grocery chains charged to suppliers, but we are aware that these fees can hinder small independent grocery companies and there’s not much they can do because these big grocery chains are of the hierarchy.
    2) If we were an accountant to one of these suppliers, we would advise our employer to see a comparable type of return and find a more agreeable fee with these larger chains. Based on the article “According to the Canadian Federation of Independent Grocers, the net profit for each store in Canada before taxes was 1.5 per cent of sales. That percentage is close to what Loblaw is asking its suppliers to pay in addition to existing fees.” This could affect independent grocery stores that will see their profit fall even more and as a result this will only force these small stores to raise their prices higher which effects the economy, supplier and buyers.
    3) We do not think that these fees that are being charged are ethical. You don’t want to destroy the entire supply chain but the prices are not morally ethical and these big companies are big enough to control the whole market without competition so we don’t see why charge such high prices when in reality their products will be bought no matter what the price is. Based on the article, we see how these tactics are being done because of e-commerce and the fact that these big chain stores want to normalize digitizing food retailing but these hefty fees their charging will only affect suppliers and consumers negatively at the end of it all. “Grocers’ justifications have ranged from mitigating climate change and implementing new recycling systems to following new packaging rules. This time, the reasons cited largely revolve around e-commerce, given our pandemic-induced appetite for more food deliveries.”

    Reply
  2. Tevin Lewis, Jessie Lynn Legrand, Andrew Bryden MacDonald

    1) No, we weren’t aware of these fees that big grocery chains charged to suppliers, but we are aware that these fees can hinder small independent grocery companies and there’s not much they can do because these big grocery chains are of the hierarchy.
    2) If we were an accountant to one of these suppliers, we would advise our employer to see a comparable type of return and find a more agreeable fee with these larger chains. Based on the article “According to the Canadian Federation of Independent Grocers, the net profit for each store in Canada before taxes was 1.5 per cent of sales. That percentage is close to what Loblaw is asking its suppliers to pay in addition to existing fees.” This could affect independent grocery stores that will see their profit fall even more and as a result this will only force these small stores to raise their prices higher which effects the economy, supplier and buyers.
    3) We do not think that these fees that are being charged are ethical. You don’t want to destroy the entire supply chain but the prices are not morally ethical and these big companies are big enough to control the whole market without competition so we don’t see why charge such high prices when in reality their products will be bought no matter what the price is. Based on the article, we see how these tactics are being done because of e-commerce and the fact that these big chain stores want to normalize digitizing food retailing but these hefty fees their charging will only affect suppliers and consumers at the end of it all. “Grocers’ justifications have ranged from mitigating climate change and implementing new recycling systems to following new packaging rules. This time, the reasons cited largely revolve around e-commerce, given our pandemic-induced appetite for more food deliveries.”

    Reply
  3. Nicolas Alexandre Briere, Robert Frank Lloyd Loughery, Siyun Chae and Jonathan Desrochers

    1) We were not aware of these fees charged to suppliers by the big grocery chains. These fees make us question the ethics of larger grocery store chains.
    2) If we were an accountant at one of these suppliers, we would advise our employer to cut internal costs to maintain profit margins. They could also negotiate discounts on certain products that would be beneficial to the stores as opposed to paying the increased fees.
    3) We believe that the decision to charge these fees is unethical. The grocery stores make up what looks like oligopoly and abuse their power by increasing their fees on suppliers who do not have a choice but to sell to them.

    Reply
  4. Roland Harpe, Justin Vogels, Chloe Viola

    1) No, we were not aware of the extra fees before reading the article. As the grocery industry affects all of us as individual consumers, we were surprised that this issue has not gained more publicity.

    2) We would account for the extra fees as a current liability, in the form of accounts payable to our employer. Then, it would be a question of cutting costs from other sources and finding a way to minimise expenses in the short-run. For example, this could be done with the use of a discount on specific goods and equipment from suppliers. Assuming that the fees will be lifted once the grocery stores eventually recover from COVID, we would focus on our short term assets and liabilities in order to make sure that this change is not financially catastrophic.

    3) It seems that the large grocery store chains are exploiting smaller businesses in an effort to shift their current liabilities to the manufacturers account. This is not only unethical, but also exhibits monopolistic behaviour in a market that is necessary for social welfare. Unfortunately, average consumers will ultimately end up paying the burden for these extra fees.

    Reply

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