A Canadian grocery code of conduct will be signed by every major player in the industry, but it’s unlikely to reduce the cost of groceries, an expert says.
Canada’s big five grocery retailers, including Loblaw, Metro, Sobeys, Walmart and Costco, have agreed to the terms of the national policy that aims to improve transparency, promote trust, collaboration and accountability, and provide a mechanism for resolving commercial disputes.
Minister of Innovation, Science and Industry François-Philippe Champagne announced the news on Thursday and said the move is “a big step forward for fairness and transparency,” in a post on X.
The code’s introduction marks a significant milestone in achieving a more equitable playing field for stakeholders in the grocery industry, Dr. Sylvain Charlebois, professor and director of agri-food analytics lab at Dalhousie University, told Now Toronto on Friday.
“The code of conduct will actually bring more stability to the marketplace and allow consumers to better manage market conditions at retail,” Charlebois explained.
Abiding by the code is voluntary, but a regulatory body will be established to oversee the implementation of the rules.
Charlebois said the code, which has been years in the making, was the “singular most significant mechanism we can provide to the industry to increase competition and help consumers.”
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HOW DOES THE CURRENT FOOD SUPPLY CHAIN WORK?
Currently, Canadian grocers can charge suppliers for the privilege of stocking their products without suppliers being able to contest the fees. This means, more often than not, suppliers have no choice but to cough-up and pay the fees they’re charged.
If a supplier were to go elsewhere in search of lower fees, they would likely be met with further price hikes from any of the country’s big five retailers.
Large companies like chip brand Lays can absorb the shock, Charlebois explained, but smaller independent suppliers often can’t afford to pay to sell their products in major stores and sometimes go under as a result.
“If you’re a mom and pop manufacturer you’re out of luck,” Charlebois said.
In turn, suppliers that can pay have to drive up the price of their goods to cover the cost of the premiums. Stores then hike their retail prices and charge consumers more.
As it stands, suppliers and grocers operate in “a low margin, high volume environment, so one move from a grocer can kill manufacturers,” Charlebois said.
For example, if a manufacturer is cash poor following the purchase of supplies and inputs and a grocer opts to increase its premiums it could put that supplier out of business.
HOW WILL THE CODE OF CONDUCT HELP?
The code of conduct will allow suppliers to challenge premium rates and fee increases, which should over time stabilize the cost of groceries, and create more favourable market conditions for smaller competitors.
While the code of conduct won’t necessarily lower the cost of groceries, it should “democratize” the food chain by giving more of a voice to suppliers and indirectly grant independent suppliers more options, Charlebois said.
The code of conduct will also give suppliers more negotiation power.
While grocers will continue to be allowed to de-list suppliers from their stores, the code of conduct will offer suppliers the option to negotiate the time between being delisted and it coming into effect so they can cycle through existing inventory and mitigate the risk of having to close.
Charlebois referenced two independently owned juice companies, that he said he’s not allowed to name, which recently went under because of a “cruel” six-week delisting window implemented by a big five grocer.
The companies in question had purchased six months worth of product supply but were not given the time to sell it and both went bankrupt as a result.
The grocery code of conduct is expected to come into effect in June 2025.
