Key Takeaways
- The voluntary grocery code of conduct is set to fully roll out on January 1st, promoting fair dealings between grocers and suppliers.
- The code aims to bring more transparency, fairness, and predictability to the industry, and includes trade rule provisions, a governance model, and an adjudication and dispute resolution process.
- The code is governed by the Office of the Grocery Sector Code of Conduct, and will allow members to submit formal complaints and collect annual membership dues.
- The office will release an annual report highlighting sector trends, systemic challenges, and proposed improvements.
- The code is intended to address issues such as contentious fees being charged to suppliers by large grocery retailers, but does not regulate pricing or control shelf placement.
Introduction to the Grocery Code of Conduct
The voluntary grocery code of conduct for grocers, suppliers, wholesalers, and primary producers is set to fully roll out on January 1st. This code is intended to promote fair dealings between grocers and their suppliers, including the application of penalties and fees. The code was established in an effort to bring more transparency, fairness, and predictability to the industry as a whole. The Office of the Grocery Sector Code of Conduct will govern the code, which includes trade rule provisions, a governance model, and an adjudication and dispute resolution process. This code is a significant development in the grocery industry, and its implementation is expected to have a positive impact on the relationships between grocers and suppliers.
Background and History
The industry committee tasked with creating the code was established in response to contentious fees being charged to suppliers by large grocery retailers, an issue that came to a head in 2020. Years of high food inflation in the wake of the COVID-19 pandemic stoked public frustration with the grocery sector, and though the code’s purpose is not to lower costs, its adoption nonetheless became a political issue. There was hesitation from some of the grocers about signing on, but the federal government warned it could make the code mandatory if all the major players didn’t get on board. Canada’s five largest grocers — Empire, Loblaw, Metro, Walmart Canada, and Costco Canada — have now formally registered. This registration is a significant step towards the implementation of the code, and it is expected to have a positive impact on the industry.
Key Provisions and Governance
The code is not intended to address retail food prices, as it does not regulate pricing, control shelf placement, or limit companies’ ability to negotiate commercial terms. However, the code is expected to lead to lower prices, shorter supply chains, and more choice for Canadians. The code is governed by the Office of the Grocery Sector Code of Conduct, which will be responsible for overseeing the implementation of the code and addressing any complaints or disputes that may arise. The office will also collect annual membership dues from members and release an annual report highlighting sector trends, systemic challenges, and proposed improvements. This report will provide valuable insights into the industry and will help to identify areas for improvement.
International Context and Comparison
The code is not a new concept, as other countries, notably the U.K. and Australia, have their own grocery codes. These codes have been successful in promoting fair dealings between grocers and suppliers, and have helped to address issues such as contentious fees and unfair trading practices. The implementation of the code in Canada is expected to have a similar impact, and it is expected to bring more transparency, fairness, and predictability to the industry. Former Empire CEO Michael Medline was the first major grocery executive to call for a grocery code of conduct to level the playing field for Canadian grocers and suppliers. He had cautioned that the code won’t be a silver bullet for solving problems in the industry, but that it could lead to positive changes.
Implementation and Next Steps
Starting January 1st, the code will be fully operational, including the dispute resolution mechanism governing how complaints are addressed by the office and consequences for violations of the code. Grocers, suppliers, and other members will now be able to submit formal complaints, and the office will begin collecting annual membership dues. The implementation of the code is a significant step towards promoting fair dealings between grocers and suppliers, and it is expected to have a positive impact on the industry. As the code becomes fully operational, it is expected that there will be a period of adjustment, and it may take some time for the industry to adapt to the new regulations. However, the long-term benefits of the code are expected to outweigh any short-term challenges, and it is expected to bring more transparency, fairness, and predictability to the industry.