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Canadian grocery code reaches major milestone

Proposed code now highlights the process for resolving disputes and imposing sanctions for food suppliers and retailers.
vector of business code of conduct

Efforts to craft a Canadian grocery code of conduct have reached a major milestone with a proposed final version that includes a process to resolve disputes and impose sanctions on systemic violators of the code.

However, the language in a copy of the proposed code obtained by The Canadian Press appears to stop short of imposing fines on companies that fail to adhere to its principles.

Still, Michael Graydon, co-chair of the steering committee overseeing the industry-developed code, said the voluntary code has a number of potential deterrence measures to encourage compliance, such as potentially publicizing “consistent bad behaviour.”

“It has teeth. Are they as sharp as some may like? Maybe not,'' said Graydon, also the CEO of supplier industry group Food, Health & Consumer Products of Canada.

“But if we get alignment and co-operation, we may not need to have to resort to fines anyways.''

[Read more: "Draft of grocery code still lacks details on enforcement measures"]

The grocery code is about creating more balance in industry's supplier-retailer relationships, Graydon said.

“This is not rocket science,'' he said. “This is just good business practice.''

The industry committee working on the grocery code was established in response to contentious fees being charged to suppliers by large grocery retailers, which have significant bargaining power due to their scale.

The code is intended to address long-standing issues such as arbitrary fees, cost increases imposed without notice and late payments.

“Parties to the code have an obligation to negotiate with one another in good faith and conduct business in the spirit of fair and ethical dealing,'' the copy of the proposed code reads.

“Parties to the code may not alter contracts unilaterally.''

Gary Sands, senior vice-president of public policy for the Canadian Federation of Independent Grocers, said the code aims to treat all industry members equally.

“There's no distinction made as to whether you're a small player or a big player,'' he said. “Everyone's treated equally.''

A consultation process on the proposed code is open to food industry members until May 30.

[Read more: "Independent grocers defend chains against food inflation accusations"]

Diane J. Brisebois, president and CEO of the Retail Council of Canada, which represents the country's largest grocers, said it's important for the code to allow grocery retailers to continue to offer consumers “a wide assortment of products at competitive prices.''

Grocers want to ensure that the code will “ultimately benefit consumers,'' she said.

They want the code to be “easy to understand and comply with, favouring simplicity and fairness over detailed rules and unnecessary complexity,'' Brisebois said in an emailed statement.

She said this would safeguard against unnecessary red tape costs that would negatively impact stakeholders in the grocery supply chain and ultimately Canadian consumers.

The issue of supplier-grocer disputes came to a head in 2020 when Walmart Canada announced a fee hike that prompted United Grocers Inc., a national buying group that represents Metro Inc., to tell suppliers it expected the same.

[Read more: "Grocery's power imbalance has politicians, shoppers questioning rising prices"]

Within months, Loblaw Companies Ltd. moved in the same direction, telling suppliers the cost of getting products on shelves would rise to help fund improvements to the grocer's in-store and digital operations.

Industry observers at the time cautioned that the trend of big grocers using their market weight to impose fees without negotiations could lead to less competition, higher food costs and fewer brands on store shelves.

The industry-led grocery code of conduct was proposed as a way to address those issues and to ensure smaller, independent grocers have fair access to goods.


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