A
food retail industry-led
effort to improve relations between retailers and suppliers is set to take full effect on Thursday, but the
Canada Grocery Code
does not guarantee
lower food prices
.
The “biggest misperception out there right now is that somehow the grocery code is going to deal with food inflation or lower prices,” Karen Proud, president of the Office of the Grocery Sector Code of Conduct, said. “It is very important for us to keep getting the message out that the code is not meant to do that.”
If the code will not reduce prices, what is it expected to do? Why was it created? Will it
benefit consumers
at all? Here’s what you need to know:
Why was the Canada Grocery Code created?
The code was created to improve the relationship between the companies that
provide food and other products
and the
retailers that sell their products
.
The current relationship between the two groups “is not the best,” Proud said, since Canada has five very large retailers that hold the balance of power when it comes to dealing with suppliers.
There are various issues, but one of the problems Proud hears “quite a bit” is that suppliers don’t have the ability to negotiate agreements, which can change “unilaterally from one day to the next.”
The code should help “alleviate” some of those problems, she said. It tries to “push parties towards a mutually agreed upon agreement to begin with,” and then any changes that happen after that have to be “discussed and negotiated.”
Another common issue is related to the fines or penalties that suppliers have to pay to retailers, some of which Proud said “come out of left field.”
She said it’s OK if an agreement lays out certain fines that suppliers have to pay if they can’t deliver the amount of goods they promised, but the issue is when there are penalties that aren’t part of an agreement. These kinds of penalties won’t be allowed by those retailers that sign the code.
“A retailer can suddenly put in place a brand new policy and say, ‘This is our policy going forward,’” she said. “’If you don’t do the following things, you may be subject to a deduction (withheld payment),’ and suppliers right now feel that as long as they want to continue to do business with that retailer, they don’t really have an ability to challenge that.”
With the code, though, they now have an office to go to and make a complaint.
Another issue that often crops up is the unfair delisting of a product, Proud said.
A retailer has the right to remove any product that it doesn’t want to carry on its shelf and delist it, but the code won’t allow that to take place without notice. There needs to be “a reasonable notice,” she said, so that the parties can discuss why the product is being delisted and her office can then assess whether the delisting decision was correct.
Factors such as whether the product is perishable, made for that specific retailer or cannot be sold anywhere else would be considered when the office makes its decision.
How will consumers benefit?
Some analysts have said that if the
supplier-retail relationship
improves and suppliers aren’t penalized as much, that could potentially prevent prices from rising to a certain extent. But Proud said it was “a bit dangerous” to make these kinds of “leaps” without getting some more experience with the code.
“There’s certainly lots of positive things, and one would hope that pricing may be a kind of a happy part of the code,” she said. “But at this stage, I would caution about raising those expectations. If only we had a silver bullet like that, but we just don’t.”
The code isn’t specifically designed to reduce grocery prices, but Proud said it could benefit consumers in other ways.
For one, if suppliers and retailers have a better relationship, suppliers are more likely to make investments in Canada, which could mean bringing in “new and innovative” products onto grocery shelves.
Better planning could also mean fewer “gaps” on the shelves during supply chain disruptions and more opportunities for smaller suppliers to “make a go” of it in a tough sector.
The code also focuses on better allocating goods in different stores, which is important for remote areas or towns that rely solely on a single independent grocer for their needs.
“During COVID-19, for example, you couldn’t find toilet paper to save your life,” Proud said. “This code is supposed to address those allocation issues whereby consumers who depend on these smaller, independent stores are able to get the products that they need, and that the supply is fair between large and smaller grocers.”
In the past, most of the supply would go to large retailers, which would then lead to supply constraints in smaller towns or other areas that rely on independent grocers.
What companies have signed the code?
All five major grocery retailers —
Loblaw Cos. Ltd.
,
Empire Co. Ltd.
,
Metro Inc.
,
Costco Wholesale Canada Ltd.
, and
Wal-Mart Canada Corp.
— have signed the code. Empire was the first to
officially sign on
in July.
Several large suppliers have also signed on, Proud said, and there are a “handful” of others that are in the process and should join by January.
There are quite a few independent retailers and smaller suppliers that will sign on as well, she said.
“Over the course of 2026, our membership will continue to grow,” she said.
Those that sign the code have to adhere to the rules that have been set, but they are not legally obliged to follow them since it’s a voluntary initiative. Members that don’t follow the rules can be removed.
“At some point, any retailer or supplier could say, ‘We don’t like the decisions coming out of the office. We are no longer going to be a party under the code,’” Proud said. “We, of course, will report on things like that because that is really our one tool that the office has to sort of drive compliance: our ability to publicly report on these things.”
The code has already been in operation on a limited basis since June. As such, retailers and suppliers had time to lodge confidential complaints with Proud’s office about things they didn’t like.
From Jan. 1, however, groups can start launching formal complaints to the government-funded office and there will be a decision or a judgment at the end of that process, she said.
“It’s a very exciting time,” she said. “This is a first for Canada. It has been tested in other parts of the world, with various degrees of success. We really are hoping that this voluntary code is going to work.”
• Email: nkarim@postmedia.com
Canada’s Grocery Code won’t cut prices, but here's how it could still help consumers
2025-12-30 15:05:37
