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

A voluntary grocery code of conduct for grocers, suppliers, wholesalers and raw material producers in Canada is set to be fully implemented on Thursday.

The Food Code aims to promote fair dealings between grocers and their suppliers, including with regard to the application of fines and fees. It was created with the aim of bringing greater transparency, fairness and predictability to the industry as a whole.

The code, governed by the Food Sector Authority's Code of Conduct, includes trading regulations, the governance model, and the adjudication and dispute resolution process.

Canada's five largest grocers – Empire, Loblaw, Metro, Walmart Canada and Costco Canada – have already officially signed up.

From January 1, the code, which has been implemented in stages, will be fully operational, including a dispute resolution mechanism that outlines how the office will handle complaints and the consequences for violations of the code.

Grocers, suppliers and others will now be able to file formal complaints. According to the Canada Food Code website, the Canada Food Code office will also begin collecting annual membership dues and publishing annual reports highlighting industry trends, systemic issues and proposed improvements.

But experts who spoke to CBC News were divided on whether the code, which aims to improve relationships between industry players rather than lower food prices, will have a significant impact on consumers.

Public dissatisfaction with grocery stores

The industry committee tasked with developing the code was created in response to controversial fees charged to suppliers by major grocery retailers, an issue that came to a head in 2020.

Years of high food inflation following the COVID-19 pandemic have increased public dissatisfaction with the food industry. Although the purpose of the code was not to reduce costs, its adoption nevertheless became a political issue.

Some grocers were hesitant to sign the contract. Loblaw, for example, took the question with an early version of the code, which he claims will lead to higher prices for customers. But the federal government has warned it could make the code mandatory unless all major players sign up to it.

Code establishes specific rules and recommendations for grocers and suppliers. For example, it includes detailed rules about fees and under what circumstances retailers can charge them. Another section describes the dispute resolution process if the parties cannot reach an agreement on their own.

Although this code is a first for Canada, other countries, notably the UK and Australia, have their own product codes.

Will this affect prices? Depends on who you ask

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

He warned it would not be a panacea for the industry's problems, but could lead to lower prices, shorter supply chains and more choice for Canadians.

“It would be great if we had [silver bullet] this could correct food inflation. That's not really the purpose of the code,” Karen Proud, president and judge of the Food Authority's Code of Conduct, said in an interview with CBC Montreal earlier this month.

“The code aims to improve relationships between suppliers and retailers.”

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

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

“Other countries that have introduced food codes of conduct have seen prices come down,” he said at the time. (However, food inflation data from these countries doesn't paint a convincing picture and it is difficult to attribute changes to one factor.)

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

“It’s hard for an economist to imagine how taking money away from big grocers would lead to lower prices.”