New grocer code rewrites rules in Canadian market

Major retailers like Loblaw and Walmart are committing to fairer practices through the Grocer Code of Conduct

By Sylvain Charlebois

Costco will be joining the Grocer Code of Conduct, alongside established Canadian players such as Loblaw, Sobeys, and Metro, marks a critical step forward in the evolution of Canada’s grocery sector.

This collective commitment by all major players is vital for the code’s effectiveness and represents a significant effort that has taken years to achieve.

The Grocer Code of Conduct is designed to improve competition in the Canadian market by ensuring accountability across the food industry. It targets previously hidden practices, such as the high fees retailers charge suppliers, subjecting them to scrutiny and regulation.

For instance, consider a Canadian jam producer who wants to distribute products through major retailers like Loblaw. Initially, the grocer might impose listing fees and other charges that could amount to over $100,000 annually. As the product gains popularity, these fees can escalate dramatically, compelling the supplier to increase prices to maintain profitability.

This cycle leads to market instability and higher costs for consumers. The Grocer Code of Conduct aims to regulate these fee escalations, promoting a more stable pricing environment and fairer practices.

Furthermore, the Grocer Code of Conduct promises a more equitable environment for independent grocers, allowing them to negotiate on more equal terms. While major players like Loblaw and Walmart will still hold significant market influence, the code is expected to curb their predatory practices.

The industry’s need for an image overhaul cannot be overstated, especially in the wake of scandals such as the bread price-fixing debacle and the controversy over ‘hero pay’ during the pandemic. These incidents have severely tarnished the public’s perception of the grocery sector.

Key figures such as Michael Medline, CEO of Sobeys, have played pivotal roles in advancing the code. Medline’s call for greater discipline and respect within the industry, alongside the tireless advocacy by Michael Graydon and Sylvie Cloutier on behalf of Canadian food manufacturers, has significantly shaped the discourse and mobilized support among policymakers. The efforts of Minister of Innovation, Science and Industry François-Philippe Champagne and the Parliamentary Agriculture Committee, chaired by MP Kody Blois, have also been instrumental in positioning the code as a strategic blueprint for fostering competition and enhancing supplier relations in Canada.

With the code’s implementation, food manufacturers and independent grocers will gain a stronger voice, leading to greater product diversity for consumers. This is a straightforward equation: more suppliers equate to more choices on the shelves.

While securing the commitment of all five major retailers is a commendable achievement, the real challenge lies ahead in ensuring compliance and tangible results. Canadians’ skepticism will likely persist until they witness the benefits of these reforms firsthand – a sentiment that is both understandable and justified.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

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