Federal Agriculture Minister Lawrence MacAulay wouldn’t rule out the possibility of provincial or federal government intervention if the grocery code of conduct doesn’t have every major retailer on board.
In an interview, MacAulay said on December 7 that he will meet the following week with federal Industry Minister François-Philippe Champagne and provincial ministers to discuss options for both provincial and federal governments if the major grocers don’t sign the code. “Perhaps some changes have to be made,” he said.
MacAulay and Quebec Agriculture Minister André Lamontagne have expressed their disappointment to see the grocery code of conduct has still not been launched after years of work, with some “supply chain partners” hesitant to sign on.
In a statement December 7, the ministers said the major grocers need to adopt and adhere to the code, and said in the coming days, they will be “reviewing all possible options available to us.”
“Two years of evaluating the situation would seem to me to be long enough,” MacAulay said. “It’s time to move on. Let’s get the code signed.”
At a House of Commons agriculture committee meeting in Ottawa on stabilizing food prices, members of Parliament pressed Walmart Canada CEO Gonzalo Gebara and Loblaw chairman Galen Weston on why their companies have not yet signed the code. Bloc Québécois MP Yves Perron accused both companies of “sabotaging” the development of the code.
Gebara said his company has participated in the development of the code, but is “not in a position at this time to commit” to it. In the current version of the code, “there’s provisions that create bureaucracy and cost, cost that will inevitably end up on shelf prices,” he said.
Weston said Loblaw will sign the code, but not in its current form. In a Nov. 1 letter sent to members of both the steering committee developing the code and the industry subcommittee, Loblaw said it’s worried the code could “raise food prices for Canadians by more than $1 billion,” a figure Weston stood by on December 7.
Weston told MPs on that he’s concerned the code will give too much power in negotiations to large multinational manufacturers. Many manufacturers, he said, are already “signalling or submitting higher than expected cost increases for next year.”
“We were able to push back on 18% of what we believed … to be unjustified cost increases across the industry last year. Based on the way the code is drafted today, we will be severely restricted in terms of our ability to do that.”
Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association and chairman of the interim board of directors of the grocery code of conduct, said that the code is “fundamentally done.” He praised the statement from the ministers, calling it “much overdue.”
Graydon said the working group responded to Loblaw with what he believes are “very strong responses as to why the provisions they want changed fundamentally can’t be changed.” He said Loblaw’s requested changes “would fundamentally neuter the code’s ability” to improve how business is done in the grocery industry.
“They want to continue to have unilateral decision power. Well, that is fundamentally why we need a code.”
Graydon, who was co-chair of the steering committee developing the code, said it’s not yet clear whether Loblaw, Walmart or Costco will sign the code. Costco did not respond to a request for comment.
Metro Inc. president and CEO Eric La Flèche believes that all major industry players need to sign on to the grocery code of conduct in order for it to be successful. “Our team played a leading role in the development of the code. And we are convinced that the participation of all grocers and suppliers is essential to its success,” he said in French on December 11.
The major grocers have been under pressure from the government to help stabilize food prices. New research by the Centre for Future Work suggests profits in the Canadian grocery sector will likely exceed $6 billion this year, setting a new record. The report by the progressive research institute found food retailers are now earning more than twice as much profit as they did pre-pandemic.
Citing Statistics Canada data, the report said the net income margin on food and beverage retailing has consistently exceeded three per cent of total revenues since mid-2021, more than double the average margin between 2015 and 2019.
The data shows retailers took advantage of the pandemic and its aftermath to increase their profits, Jim Stanford, economist and director of the Centre for Future Work, argued in a news release. “An industry can’t double its profits, if it is merely passing on higher expenses,” he said.
Galen Weston defended his company, “[a]s any private enterprise, our goal is to grow our business. It’s to increase the number of customers. It’s to invest in communities to build more stores, to increase the amount of sales. And if we can increase the amount of sales, then the profit of the enterprise goes up,” Weston said. “So there should be record profits, in a way, with a successful company every year, year after year. That is not an indication of bad practice, it’s not an indication of some sort of profiteering. It’s just an indication of a business operating exactly the way it should.”
Michael Medline, the CEO of Sobeys’ parent company Empire and a long-time supporter of the code, told the agriculture committee that the recent opposition means the code is now “in dire straits… Please help us push this code through the finish line,” Medline told the committee. “Get it done. Get it in place. It’s taken way too long since we called for it three years ago.”