The Canadian Food Struggle and What Other Grocery Codes Can Teach Us

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Progress on a Canadian grocery code of conduct has stalled as two major retailers refuse to sign it, claiming it will raise prices.

The code aims to establish rules for fair trade in negotiations between retailers and suppliers, thereby leveling the playing field in the food industry.

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Politicians and others have pushed back on claims that the code could raise prices, saying similar codes in the United Kingdom and Australia had a stabilizing effect.

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But what do those grocery rules look like and have they led to price changes?

While Canada’s proposed code of conduct differs from the Australian and British counterparts that influenced it, lessons can be learned from these frameworks as public debate over Canada’s code comes to a head.

Political pressure

Discussions about a supermarket code started here before food inflation started to rise. But in recent months, the rhetoric about the code and grocery prices have become increasingly intertwined as consumers felt the pressure of higher bills.

As the code’s planned 2024 launch approached, Loblaw Cos. Ltd. and Walmart Inc. that they would not sign the code in its current form, arguing that this could further increase prices.

Meanwhile, during hearings by a House of Commons committee studying food prices, some MPs said the code could help with food prices, claiming this is what has happened in Australia and Britain.

“When the codes of conduct were introduced in those countries, it actually had very positive effects on supermarket prices,” Bloc Quebec MP Yves Perron said in French during a committee meeting on December 7.

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Michael von Massow, a food economics professor at the University of Guelph, doesn’t think Canada’s supermarket code will lower prices.

He even thinks this could put upward pressure on prices, but that pressure is more likely to squeeze the big grocers’ margins rather than significantly increase costs for consumers.

‘I suspect everyone will be under a bit of pressure. We will see small price increases, but not to the extent that the big players will come under pressure,” said Von Massow.

The code was not created with affordability in mind, but rather economic stability for suppliers and manufacturers, said Michael Graydon, CEO of Food, Health & Consumer Products of Canada and chair of the code’s interim board.

However, he does believe this could help stabilize prices, saying countries with food codes have seen lower food inflation than others after these codes were implemented.

“It shouldn’t be the silver bullet to affordability,” he said.

Codes from other countries

Britain has had a mandatory shopping code for more than a decade, motivated by many of the same concerns that led to the creation of the Canadian version.

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“The code is designed to prevent retailers from transferring excessive risks and unexpected costs to suppliers,” said Mark White, Britain’s current code judge.

An investigation by the country’s Competition Commission concluded that grocers’ practices negatively affected quality, innovation, investment and consumer choice, he said.

The code applies to Britain’s 14 largest food retailers and has been mandatory since 2010 after an earlier voluntary code proved ineffective, says Christine Tacon, food chain expert and judge until 2020 the code. That role was introduced in 2013 and came with a “pretty hefty stick,” Tacon said – the power to fine retailers up to one percent of their sales.

Neither retail prices nor prices between suppliers and retailers are covered by the UK Code of Conduct. However, White recently published a set of ‘golden rules’ for retailers dealing with price increase requests from suppliers.

In Australia, the launch of a grocery code in 2015 was prompted by complaints about the way grocers treated suppliers, says Tanya Barden, chief executive of the Australian Food and Grocery Council.

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The code, which has an independent reviewer, is voluntary. But once signed, it will become legally binding – and all the major players in Australia’s highly concentrated industry have signed on.

“One of the cornerstones of the Australian code is the requirement that retailers negotiate in good faith,” Barden said.

The Australian and UK codes do not cover the behavior of suppliers or many smaller retailers, but Tacon believes changing behavior among the biggest players could have a trickle-down effect.

Mixed results

Comparing Canadian food inflation data with figures from other countries does not provide a conclusive picture. In the years before the COVID-19 pandemic, when Australia and Britain had shopping codes, each of the three countries outpaced the other on several counts.

A look at food inflation by country might indicate some stabilization after the codes were implemented, but it is difficult to link changes in food inflation to a single factor.

In both Britain and Australia, annual food inflation varied widely from year to year before the food codes were introduced – some years above nine percent, others less than one percent or even negative, according to data from the Organization for Economic Co-operation. and development.

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After the UK code was implemented, annual food inflation rates in Britain appeared to stabilize somewhat, remaining below three percent from 2014 to 2022 (and negative from 2014 to 2016).

After the Australian code was introduced, food inflation remained below one percent until it started to accelerate in 2019.

Regular supplier surveys show that the UK and Australian codes have led to better treatment by retailers.

The UK code benefits everyone involved, Tacon says, including consumers, who will gain access to more choice over time as smaller suppliers are less likely to be squeezed out of the market.

What’s next

The Canadian supermarket code shares aspects of both the British and Australian models, but differs in one key way: it is aimed at both suppliers and retailers, which Tacon says makes it much more complicated.

And at this point, it’s not clear whether it will ultimately be voluntary or mandatory.

Without all the major players on board, Canada’s voluntary code won’t work, advocates and politicians say. In February, the House of Commons committee told Loblaw and Walmart that if they did not sign, the committee would recommend that the federal and provincial governments enshrine the code into law.

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The Australian code may not be voluntary for much longer either. In April, a government report recommended making the code mandatory.

Barden said the Australian code has been effective, although there is room for improvement – ​​“and it is not a silver bullet for market concentration.”

“The (grocery) code is aimed at improving trust, transparency and certainty in negotiations between retailers and suppliers,” Barden said.

“They are different problems.”

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