Canada’s grocery code of conduct kicks in today, with buy-in from 5 major grocers

The voluntary grocery code of conduct for grocers, suppliers, wholesalers and primary producers in Canada is set to fully roll out on Thursday.

The grocery code is intended to promote fair dealings between grocers and their suppliers, including in the application of penalties and fees. It was set up in an effort to bring more transparency, fairness and predictability to the industry as a whole.

The code, governed by the Office of the Grocery Sector Code of Conduct, includes trade rule provisions, a governance model and an adjudication and dispute resolution process.

Canada’s five largest grocers — Empire, Loblaw, Metro, Walmart Canada and Costco Canada — have now formally registered.

Starting Jan. 1, the code — which was being rolled out in stages — will be fully operational, including the dispute resolution mechanism governing how complaints are addressed by the office and consequences for violations of the code.

Grocers, suppliers and other members will now be able to submit formal complaints. The office of the Canada Grocery Code will also start collecting annual membership dues and releasing annual reports highlighting industry trends, systemic challenges and proposed improvements, according to the Canada Grocery Code website.

However, experts who spoke to CBC News had mixed opinions on whether the code — which aims to improve relations between industry players, not bring down food prices — will have a meaningful impact on consumers.

Public frustration with grocers

The industry committee tasked with creating the code was established in response to contentious fees being charged to suppliers by large grocery retailers, an issue that came to a head in 2020.

Years of high food inflation in the wake of the COVID-19 pandemic stoked public frustration with the grocery industry. Although the code’s purpose wasn’t to lower costs, its adoption nonetheless became a political issue.

Some grocers were hesitant to sign on. Loblaw, for example, took issue with an early version of the code that it claimed would lead to higher prices for shoppers. But the federal government warned it could make the code mandatory if all major players didn’t get on board.

The code lays out specific rules and guidelines for grocers and suppliers. For example, it includes detailed rules about fees and under what circumstances retailers can charge them. Another section sets out a process for resolving disputes if parties can’t come to an agreement themselves.

While the code is a first for Canada, other countries, notably the U.K. and Australia, have their own grocery codes.

WATCH | Loblaws said it would sign code if competitors did, too:

Loblaw agrees to sign grocery code of conduct — if its competitors do, too

Loblaw Companies Ltd. says it’s agreed to sign onto a long-planned code of conduct for grocery retailers, as long as other industry players do, too. The code is intended to level the playing field for suppliers and smaller retailers.

Will it impact prices? Depends who you ask

Former Empire CEO Michael Medline was the first major grocery executive to call for a grocery code of conduct to level the playing field for Canadian grocers and suppliers.

He had cautioned it wouldn’t be a silver bullet for solving problems in the industry, but that it could lead to lower prices, shorter supply chains and more choice for Canadians.

“It would be great if we had a [silver bullet] that could fix food inflation. It’s really not the purpose of the code,” said Karen Proud, the president and adjudicator of the Office of the Grocery Sector Code of Conduct, in an interview with CBC Montreal earlier this month.

“The code is aimed at improving the relationships between suppliers and retailers.”

The code is not intended to address retail food prices as it does not regulate pricing, control shelf placement or limit companies’ ability to negotiate commercial terms. But consumers may notice more innovation and investment in the industry as a result of the agreement, as well as fewer supply chain gaps, Proud said.

Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers, told CBC News in July that he believed the code would ultimately have a “positive impact” on prices.

“In other countries that have brought in grocery codes of conduct, prices have come down,” he said at the time. (However, food inflation data from those countries doesn’t paint a conclusive picture and it’s difficult to peg changes to a single factor.)

Michael Von Massow, a food economist at the University of Guelph, thinks it could actually drive prices up, if it means limiting the concessions that grocers can demand from their suppliers. 

“It’s hard to see as an economist how taking money away from the big grocers will then also lead to lower prices.”