Four years into its development, the proposed Grocery Code of Conduct remains unsupported by two of Canada’s five largest grocers.
Loblaw and Walmart continue to pledge to negotiate with the other industry participants that have created and endorsed the code. The best articulation of those grocers’ objections to the code come from testimony to the House of Commons Agri-Committee from December 7, 2023.
Walmart Canada CEO Gonzalo Gemara spoke in somewhat general terms, referencing his company’s commitment to keep prices low. “There are some provisions that provide an unlevel playing field in the conditions in which suppliers and retailers will have to operate and I don’t think that’s right. There are provisions that create bureaucracy and costs that will inevitably end up on shelf prices,” Gemara testified.
Loblaw Executive Chairman Galen Weston was much more specific in articulating his firm’s objections. He said simply that it would increase grocery prices by limiting his firm’s ability to push back on suppliers, many of which are large multi-national firms.
Weston pointed to three specific sections of the Code as being problematic. Section 2.5 holds retailers to higher standards than it does manufacturers, by requiring the former to enter into written agreements, but not the latter. “As a result those manufacturers can come and change the cost or refuse to accept changes in business terms, and we are unable to do the same thing,” he testified.
Weston identified sections 3.4 – which covers stocking fees and other charges from retailers to suppliers – and section 4.4 as other sections troubling his firm. The latter section covers one of the key elements of the Code – it would prevent retailers from imposing penalties on suppliers “solely as a result of the supplier failing to deliver the quantities in the non-accepted order.” Those relationships were identified as one of the key reasons for the code in the first place. When supplies were constricted, suppliers gave priority to larger retailers because of contractual costs for failing to fulfill orders.
Asked why his firm “has a problem with the section of the code that deals with the need to get reliable food to our independent grocers and people who live in rural and remote communities in particular,” Weston said the code’s principles are fine, but “the way it’s drafted we have concerns about.”
He explained that Loblaw charges “compliance fees” to manufacturers that fail to deliver agreed products, because supply shortages on advertised specials lead to disappointed customers.
“If we take away the ability to hold that vendor accountable, then what we’re concerned about is that the manufacturer will not give us 100% of the committed order,” Weston testified. “As a result, we will disappoint the customers, because we won’t have enough product for them in the store in that given week at that price, and the next time we won’t be able to put on at such an aggressive price because we will be afraid of running out.”