The Canadian government has been working to convince Loblaw and Walmart to sign a grocery code of conduct, which aims to set agreed-upon rules for negotiations between industry players, including retailers and suppliers. However, the grocers have been unable to sign the near-complete code, which was intended to set out agreed-upon rules for negotiations. The code of conduct is meant to be voluntary, but it needs all major players on board to work.

The government has been closely monitoring progress and engaging with stakeholders, including Loblaw and Walmart. However, by late October, it became evident that the hesitation from Loblaw and Walmart was such that it posed a risk to the successful implementation of a code with full industry participation.

On December 7, Loblaw and Walmart leaders told the House of Commons committee studying food prices that they couldn’t commit to signing the code in its current form, citing concerns it would raise prices. Loblaw chairman Galen Weston stood by a letter the company had sent a month earlier to the committee developing the code, which said it was worried the code could “raise food prices for Canadians by more than $1-billion.”

Documents obtained through access to information legislation reveal the federal government’s efforts to convince Walmart and Loblaw to sign a grocery code of conduct. The code, intended to set out rules for negotiations between industry players, including retailers and suppliers, would also include a dispute resolution process. The Dec. 7 committee meeting served as public confirmation of the two grocers’ unwillingness to sign on to the code as drafted. Work to hire an adjudicator is on hold, and a funding request for the office is in limbo.

The Canadian government is actively examining all federal options, including legislation, to force large retailers to commit to the grocery code of conduct. Loblaw and Walmart have not taken an active role in the industry-led process to develop a grocery code of conduct, and they have been reluctant to publicly confirm support for the code until the industry proposal is finalized. The federal, provincial, and territorial ministers held a call on November 27 to discuss the code and the possibility that the two major retailers might not adopt it.

The House of Commons committee urged Loblaw and Walmart to sign on, saying if they didn’t, it would “not hesitate to recommend that the federal and provincial governments adopt legislation to make it mandatory.” The Committee [BB1] is still hopeful that there is a desire to try to find a solution, and the group is looking at whether some of the language of the code could be changed to bring more clarity or prescriptiveness. Conversations with Loblaw have given the committee a chance to explain aspects of the code and see whether a solution can be reached.

Loblaw Cos. Ltd.’s new CEO, Per Bank, expressed cautious optimism about reaching an agreement on the grocery code of conduct and told analysts that the company has been working with the committee creating the code. The federal government is open to making the code law if major players don’t all agree. Annie Cullinan, a spokeswoman for agri-food minister Lawrence MacAulay[BB2] , said it’s “well past time” that Loblaw recognizes the benefits of the code. She hopes that Loblaw’s “cautious optimism” will translate into a prompt commitment to adopt and adhere to it.

Loblaw spokeswoman Catherine Thomas said the company is an “active participant in the ongoing industry process” and is optimistic a code can be finalized that everyone can support. Walmart Canada spokeswoman Sarah Kennedy directed The Canadian Press to previous public statements about the code by the retailer, including one from October in which the company said it’s “conscious of adding unnecessary burdens that could increase the cost of food for Canadians.”

Canada’s proposed code of conduct may have lessons to draw from the Australian and U.K. counterparts that influenced it, as public discourse about the Canadian code comes to a head. Some members of Parliament have claimed that the code could help with food prices, citing the positive impacts of the codes of conduct in Australia and the U.K.

The U.K. has had a mandatory grocery code for over a decade, prompted by concerns about grocers transferring excessive risk and unexpected costs to suppliers. The code applies to the U.K.’s 14 biggest retailers selling groceries and has been mandatory since 2010 after an earlier, voluntary code proved ineffective. Christine Tacon, a food chain expert and the code adjudicator until 2020, said that the code has a “pretty hefty stick” — the power to fine retailers by up to one per cent of their revenue.

Food inflation in the UK and Australia had been varying significantly before grocery codes were introduced, with some years experiencing more than 9%, others below 1%, or even negative numbers. After the British code was implemented, annual food inflation in the UK appeared to stabilize somewhat, remaining below 3% from 2014 until 2022.

After Australia’s code was introduced, food inflation remained below 1% until it began to accelerate in 2019. Regular surveys of suppliers show that the U.K. and Australian codes have led to improvements in retailer treatment, benefiting everyone involved, including consumers. Canada’s grocery code shares aspects of both the British and Australian models but is meant to cover suppliers and retailers, making it more complicated. It is not clear whether the Canadian code will be voluntary or mandatory, and without all major players on board, the voluntary Canadian code will not work.

The industry steering committee has requested $1.8 million in government funding to support the implementation of a not-for-profit grocery code adjudicator office. The request is for a non-repayable contribution from federal, territorial, and provincial governments for the first two years, until the office becomes self-sufficient. The majority of funding will come from large retailers and manufacturers, but the group plans for scenarios where not all major players sign on immediately. Officials are awaiting the outcome of industry discussions before taking further steps related to the funding request.

Source: Globe and Mail
Source: The Star
Source: CP24
Source: Financial Post
Source: The Star