After multiple years of negotiations, multiple months of government threats and just a few days into a consumer-led boycott of its stores, Loblaws has reversed its position and agreed to support the proposed Grocery Code of Conduct.
The code has been in development for many years as a way to stabilize the relationship between suppliers and retailers. It makes no commitments to consumers, and no mention of prices, but Loblaw’s failure to accept the code was one of the reasons cited as the source of some expressions of public ire and recent social media campaigns to boycott the retailer – and a more extreme campaign that encouraged people to steal from it.
Loblaw representatives attributed the code acceptance to ongoing discussions that have reduced some of the ambiguities it found problematic, and not the political or public pressure.
Still, like the other major grocers, its acceptance is conditional on the participation of all industry participants. Walmart has rejected the code, also, and said it has not had time to review the most recent revisions that Loblaw found acceptable.
Loblaw president and CEO Per Bank told the Canadian Press Thursday that “We are ready to sign, if all our competitors will sign as well.” In another interview Bank said: “The code now is fair, and it will not lead to higher prices.”
The code’s origins were to establish a more consistent ‘rulebook’ between suppliers and retailers. Smaller retailers felt they were consistently disadvantaged because larger retailers could demand cost concessions from suppliers, and could also put penalties into contracts that effectively gave priority to larger retailers over smaller. More aggressive retailer demands about fees for shelf placement also irked suppliers.
Supply chain disruptions during the COVID pandemic added to the plight of smaller retailers.
In testimony before the House of Commons Agri-Committee in December, Loblaws chair Galen Weston said his firm supported the code in principle, but the language in the code at that time would have resulted in higher prices for consumers because of the restrictions it placed on retailers. He identified three specific areas of the code as problematic, including rules that allowed suppliers to change contract terms while preventing retailers from doing so, a section that prevented retailers from fining suppliers for unfulfilled contracts, and a section on payments for stocking programs.
“Based on the way the code is drafted today, we will be severely restricted in terms of our ability to do that [which] will lead to higher prices for consumers,” Weston testified.
Bank said recent code changes have clarified that retailers can reject suppliers’ requests for cost increases, and not have those rejections end up in third-party adjudication. That change means Loblaw is less concerned about the code leading to higher prices, Bank said.
“Having removed that, then our biggest concern is gone,” Bank told the Canadian Press. “So we are happy that we can continue to negotiate and trade fairly with suppliers, as we have done for the past 100 years.”
Federal Agriculture Minister Lawrence McAulay and Industry Minister Francois-Philippe Champagne have jointly threatened a variety of legislative measures, including tax reforms, if industry participants fail to properly engage in reforms to support price stabilization.