Canada’s major grocers, Costco Canada and Walmart Canada, have agreed to participate in a new self-regulatory scheme designed to smooth relations between retailers and their suppliers. This follows Loblaw Cos. Ltd. dropping its opposition to the code in May. The code is expected to be implemented by June next year, but before that can happen, the board needs to hire an adjudicator to manage any disputes arising under the code, establish an office to oversee it, and educate people across the industry about the code’s requirements.
Relations between grocers and their suppliers have been fractious for years, but in 2020, there were renewed calls for a code of conduct after Loblaw and Walmart both announced increases in the fees they charge to suppliers. These fees are common among all large retailers and cover various aspects of product placement, contributions to in-store promotions, and fines for products damaged in transit or deliveries that do not meet the quantities specified in an order.
The code is designed to set guardrails for issues such as the fair allocation of product supply to independent grocers, as they attempt to compete with larger players who have more market power, and reliable order forecasting. A third-party adjudicator will mediate disputes between parties. Industry discussions to establish the code have dragged on for roughly three years. In February, a House of Commons committee studying food prices sent a letter to the CEOs of Walmart and Loblaw, saying the committee would consider legislating the rules if the retailers did not comply.
Loblaw has been pushing for a voluntary code to regulate the way grocers charge their suppliers, arguing that the industry should run the process. Loblaw requested changes to the code, including allowing grocers to reject requests for cost increases without a third-party adjudicator forcing them. Walmart and Costco have agreed to support the updated version, but Walmart has not seen the need for a code due to its positive relationships with suppliers.
The code would not prevent retailers from charging fees that have caused conflicts with suppliers in the past. Sobeys, a Canadian grocery chain, has announced a 5% deduction for suppliers who deliver directly to its stores starting on September 2. The deduction will offset billing and invoice management expenses. The change aims to ensure consistent rates are charged to the subset of suppliers who deliver directly to stores, aligning with Empire’s support for the Grocery Code of Conduct, which emphasizes fair, transparent, and timely communication between retailers and suppliers.
Source: Globe and Mail
Source: The Star
Source: Financial Post
