The downside to grey market
One sentiment that is often heard from consumers—and likely from a few retailers—is what is the harm in these products, especially if it is for products that consumers desire?
For one, having grey market products on shelves can bring reputational harm to one’s c-store operation. Brownlee says that c-stores are not just businesses, but are also members of the larger community they operate in. As such, c-stores have a corporate responsibility to provide goods to the community that are meant to be sold to Canadians.
And while products from other countries are not necessarily unsafe, Canada has specific rules and regulations that products such as chocolates, candies and drinks must follow to be sold here.
“Sometimes, retailers do not understand these products can hurt their sales,” Arcand says. “While the product might be less or it may be a new product for the market, they may unknowingly do harm to their customers. For example, if an energy drink has a milligram of caffeine too high compared to what is allowed in Canada. Maybe there are peanuts in a product and there are other ingredients in Canada that we call out in our ingredient declarations for allergy purposes—not just peanuts, but sesame, as just one example, which are not called out in the U.S.”
In Canada as well, there are strict manufacturing rules and regulations to prevent peanut contamination, and packaging must state clearly that the product was manufactured in a peanut-free and nut-free environment. That is not the case for grey market products, so a chocolate imported from the U.S., for example, that is like one sold in Canada may not necessarily have been made in the same way and may not have to declare on the packaging that it may have encountered nuts. That is a potential danger for someone who has a nut allergy.
“In order for vendors and manufacturers to offer a product legally in Canada, it has to be compliant, meaning it has to have the correct nutritional decks and follow correct Health Canada guidelines,” Arcand says. He continues adding that Core-Mark has very stringent processes in place when bringing on new vendors, such as explaining to them the regulations for Canadian-compliant packaging and assisting them in understanding all the regulations. “When a vendor works with Core-Mark, they know they are working with a company that has all its i’s dotted and t’s crossed when it comes to compliance in Canada.”
When the recall was issued for the grey market Monster Energy drinks, the Canadian Beverage Association sent out a statement outlining the regulation governing how much caffeine can be in an energy drink: “CBA members abide by an unwavering commitment to adhere to the regulations for CEDs by Health Canada and CFIA. All products manufactured and distributed by CBA members, including those that contain caffeine, are labelled in full compliance with Health Canada requirements, are formulated for the Canadian market, and are not impacted by this recall. Health Canada has capped the caffeine in energy drinks at 400 mg per litre and 180 mg per single-serving container. This means the typical energy drink (250 – 500 ml) contains 80 to 180 mg of caffeine. This is about half the caffeine in a similar-sized cup of coffeehouse coffee. All energy drinks sold in Canada must fall within these parameters.”
And there are financial risks for c-store operators. For instance, if a c-store retailer sells a product that is not approved for sale in Canada, the retailer will not be able to receive credit for the product from the Canadian manufacturer should that product be stale dated or damaged.
Another risk is that if a grey market product is pulled or recalled upon discovery, the retailer is likely not going to get their money back from the person from whom they purchased it from.
While many in the convenience industry in Canada express frustration with grey market products and all work diligently with their partners to keep them out of their supply and distribution chains—with many helping manufacturers to understand Canada’s regulatory and labeling requirements for bringing their products to Canada—they all said more could be done by government. All wished to see the Canadian Food Inspection Agency be given the resources needed to identify such products and keep them out.
As CICC’s Brownlee says, there is no ‘silver bullet’ that will stop the problem overnight. “We work with our membership to educate everybody. We are working with governments and decision makers, but there has to be more checks in the system right at the point of entry. That is why we have called for more resources—both financial and labour—for border checks. And we have called upon the federal government to do a study to see how prevalent it is.”