Its dispute resolution management process took effect on Jan. 1 — the final component of the framework to roll out.

The code has been in the works since 2021, sparked by friction between grocery companies and their suppliers, which was exacerbated by challenges related to the COVID-19 pandemic.

Provisions in industry-developed code include guidelines around fair and ethical dealing; commercial agreements and would should be contained in them; rules around payments and charges between retailers and suppliers; and dispute resolution.

The Office of the Grocery Sector Code of Conduct oversees the application of the code. On Nov. 28, the office announced it had finalized its governance framework and would formally begin recruiting companies to sign on to the voluntary code.

More than 100 grocers and suppliers had signed on as of Nov. 28. These include Canada’s major grocers like Loblaw, Metro, Sobeys, Walmart and Costco, which joined after significant negotiation.

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The history of bread goes back to the beginning of time. But in the last 12,000 years, we liken the narrative to the paste originally made from water and crushed wild barley or wheat grass seeds that were harvested in the Fertile Crescent. At some point, wild yeast was added and bread rose. That practice took off commercially after 1860, when yeast was formally implemented into the baking process.

Bread was — and still is — the holy grail of the table. And it is big business, with sales in Canada expected to value $10 billion in 2025. The price per loaf has always been under scrutiny, especially in terms of the value of retail compared to the income of the farmer. Farmers typically receive about 22 cents per loaf but they are not the only ones holding the short end of the straw. Consumers have been gouged as furiously as farmers have been underpaid.

We have the Competition Act in Canada under which the maximum penalty is 14 years imprisonment if competitors are proven to agree, conspire or arrange to fix, maintain, increase or control the price of any product.

Starting in 2016, a class action suit spurred the Competition Bureau into investigating the price of bread. Loblaws Companies Ltd. and parent company George Weston Ltd. admitted to being part of a price-fixing scheme and will pay out $404 million with the remaining $96 million of the judgement accounted for in the gift card program that Loblaws announced in 2017.

Canada Bread has pleaded guilty to four counts of price fixing. Though Canada Bread has had the ovens on since 1911, and the name sounds home-baked, the company has been owned by Grupo Bimbo out of Mexico since 2014. Grupo Bimbo is the largest baking company in the world and distributes over 1,000 products under 18 brands in Canada. Their admittance to wrongdoing resulted in the cancellation of federal contracts and some widespread anxiety about conspiracy, which they continue to deny, as do the other defendants in the suit, namely Sobeys, Walmart Canada, Giant Tiger and Metro.

What is interesting in this decision and in the class action suit is that there is no directive to reduce bread prices. In 2014, the average price of 675 grams of ordinary bread in Canada was $2.83. In 2024 it was $3.45, and by 2028, the price is forecast to be $6.82 — all for the same loaf. A $10 billion industry does not even stumble with a couple hundred million in fines. But we as the consumer do. We stumble and fall under the pressure of increased food prices.

In the same time period of 2014 to date, the cost of groceries for a Canadian family of four has doubled. In 2014, Canadians spent $8,109 on groceries, and this year that same family will need $16,833 just to eat. This puts single parents, seniors and the vulnerable at risk. The numbers don’t lie. Food insecurity in Canada is at 22.9 per cent which is nearly twice the rate of 12 per cent in 2014.

We have more than enough. We have the food and the water in Canada. What we do not have is a system that is focused on local and national infrastructure, innovation, technology, knowledge, value adding, flexible logistics and delivery, food equality, human rights and locally-driven solutions. None of our leaders have been hungry. And as for farmers, diminishing returns do not build a nation, and there is little appreciation for agriculture as the foundation of a robust economy. As an overarching concern, the grossly under-regulated retail sector keeps average consumers hungry all the time.

It is in poor taste to insult a society by shorting them of a very basic need — food. It is criminal that while defendants were found guilty, the price of bread kept going up, and the fines represented mere crumbs on the corporate bakery floor.

For every kitchen table, little bistro, breakfast bar, hamburger joint, white table restaurant, school café, hospital, diner or soup kitchen, the bread price fix was damaging and extraordinarily intrusive. It was a violation of a basic universal right to access affordable food.

A competitive environment ensures that there is choice and that there are checks and balances. Without it, we will be socially and economically trapped on the fringes of food insecurity for generations.

The term “our daily bread” speaks to the reverence of food in our lives. Threatening access to our food supply through price fixing is corruption in its lowest form. We need to stay vigilant within our own borders to ensure that all Canadians have access to the food they need at a price they can afford.

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The proposal is for a voluntary code of conduct that would invite transparency and some form of accountability from retail grocery to the suppliers, including primary producers who market direct to retail.

Will it work?

The U.K. had a voluntary code until 2010, when it changed the legislation to become mandatory. Only then did competition start to creep back into the market. In Australia, the code introduced in 2015 is not mandatory but legally binding once parties sign on. Both jurisdictions report an increase in competition once the code was binding by legislation or legal agreement.

Grocery is big business in Canada, netting $6 billion in 2022. Competition is almost non-existent, with market share during the same year owned by Loblaws (29 per cent), Safeway/Sobeys (21 per cent), Costco (11 per cent), Metro/Jean Coutu (10.8 per cent), Walmart (7.5 per cent) and the balance split between small independents.

Media reports often direct our focus away from dominance in the marketplace toward supply chain issues. But the supply chain is working, even as stores deal with high retail fees.

The industry-led objectives within the code are to enable a thriving industry and to promote trust, fair dealing and collaboration throughout the value chain. There is no relationship in these objectives to a robust agricultural community in Canada from which the domestic supply of food and agri products are derived. It’s a nice set of playground rules to promote, but not to enforce, fair dealing.

The other two objectives are to increase commercial certainty and to establish effective, equitable dispute resolution. As there is an assumption of a need for dispute resolution, it tells me the sector itself has never taken the time to establish values alignment beyond the balance sheet.

The “corporation”, as it will be called, will be governed by a board of directors. Primary producers, wholesalers and distributors selling directly to retail (Class A) are allotted two seats. I find this interesting as the primary ignition to the discussion on a code of conduct was complaints from processors, producers and independent growers (also known as the supply chain) regarding the stiff, unpredictable and ever-increasing retailer fees.

The other nine seats around the table go to grocer retail, and five of those seats will be held by companies with sales of $999 million or more.

The agreements made between retailers and suppliers after implementation of the code will be non-binding, in hopes that each stakeholder will play nice.

Hardly. Food retail margins have doubled since 2019. No investor or company board is going to encourage fair play at the cost of those kinds of profit margins.

At the same time, food prices from 2018-23 have increased by 21.8 per cent. The average retail price for 10 pounds of potatoes at retail in 2017 was $3.99 and as I write this, I see all varieties of potatoes starting at $8.99.

Consider as well that Canadians are spending less per week on groceries than they have in years, although they are visiting the store 32 per cent more times, scouring shelves for sale items and bonuses. In 2020, the per capita expenditure per month on food was $339 and so far in 2024 it is $248, with women spending 13 per cent less on themselves than do men.

Food insecurity has increased and the food bank reports that between March 2022 and March 2023, there was an increase in visits of 78.5 per cent.

This dollar store mentality shifts from a focus on nutrition to a scramble for price. Drifting away from domestic food supplies is terminal to the economic health of Canadian farmers. As consumers scratch for cash to feed themselves, lower-priced imports will hit shelves while our high-quality Canadian production rides the rails for export.

Profits in retail grocery will continue to increase and we can’t be led down the path of the “low margin” discussion. Low margin does not mean low profit. There is a modest capital requirement to build retail grocery. Deliveries are constant and shifting that system keeps suppliers in a constant state of flux.

There is no mechanism in Canada to protect the supply chain from producer through to retailer. Until the bread fixing scandal was made public, the collusion of retailers behind closed doors remained unknown.

We do not have a value chain in food. We have a supply system that is victim to the end seller. The principles of play introduced in the grocery code of conduct for Canada are dependent on the voluntary involvement of a self-governing system without any oversight that holds it responsible or accountable to Canadian farmers or consumers. It cannot work to its potential without a higher level of liability.

A knowledgeable, advanced, economically stable society is one in which the universal right to access food is upheld and honored. That includes full accountability at grocery retail.

Brenda Schoepp works as an international mentor and motivational speaker. She can be contacted through her website at www.brendaschoepp.com. All rights reserved.

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“This is a positive step towards bringing more fairness, transparency, and predictability to Canada’s grocery supply chain and for consumers,” the ministers said.

In the statement, Canada’s federal, provincial and territorial Ministers of Agriculture said “years of work and widespread industry participation” has been put into developing the Code of Conduct. Until recently, Walmart and Costco were the only two major grocery retailers to not join the Code of Conduct. Metro and Sobeys signed on last year, while Loblaw agreed this past May after months-long negotiations and a social media-driven campaign by angry consumers urging others to boycott Loblaw stores due to high prices.

Stemming from friction between retailers and suppliers, the code was developed by the industry to promote transparency and fairness, and to solve disputes. It’s been in the works since 2021.

“The goal of the Grocery Sector Code of Conduct is to bring fairness, transparency, and predictability to our grocery sector and supply chain,” a statement from AAFC said after Loblaw joined the Code of Conduct in May. “We believe that uniting all supply chain partners around these principles will produce the best outcomes for the sector and all Canadians.”

—with files from Janelle Rudolph

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For one thing, it’s a voluntary agreement. Only retailers and suppliers that sign on must adhere to the rules, said Melanie Boldt, co-owner of Pineview Farms north of Saskatoon.

“It doesn’t have teeth. Their arbitration process is not yet defined and there’s so many questions that need to be ironed out.”

Why it matters: The code formalizes standards for how participating grocers do business with processors, suppliers and food manufacturers, which affects the business environment for farmers.

Pineview Farms won’t be affected by the code. It closed earlier this year after 26 years as a fully integrated all-natural meat and poultry producer, processor and marketer. Its products appeared in health food stores, butcher shops and Saskatchewan Co-ops and were offered through direct sale.

A farm like theirs was lucky to get into co-ops, Boldt said. Grocery chains can offer a much bigger customer base and geographic range, but they’re tough to break into for small producers or food manufacturing companies.

“In my experience, most grocery chains, the larger ones, they all want local products. They all say that. But the protocols and processes they put in place to actually get listed (with them) prevent that for most small-scale processors because, in the meat business anyway … they basically require federal inspection.”

The cost of getting access to grocery chains and the hassle of staying there is one thing local manufacturers hoped the code would addres. Michael Mikulak, executive director of Food and Beverage Manitoba, pointed to issues such as shelving fees during a 2022 interview with the Manitoba Co-operator. His organization represents Manitoba’s agri-food manufacturers.

“Some of those barriers really do need to get reduced if we are to value a more local, resilient food system in the future,” he said.

Long road

At the time of that interview, the code development process had stalled in Ottawa. It had been in the works since 2021, after pandemic pressures on the supply chain brought grocer practices and centralization of ownership among big chains like Loblaw, Metro, Sobeys, Walmart and Costco into the limelight.

Spiking food inflation kept the issue top of mind.

By September 2022, however, code development had blown past two deadlines and faced another that November. It was still working to overcome stalemates over fines, contractual obligations in the case of unforeseen circumstances and cost indexing.

The 10-stakeholder steering committee spearheading the effort (which included such agricultural names as the Canadian Federation of Agriculture, Dairy Producers Association of Canada and Fruit and Vegetable Growers of Canada), moved to an interim board of directors in November 2023. In January, that board released the current wording of the code.

That version is voluntary, despite a previous position from the old steering committee that it be mandatory.

“The success of the Grocery Code of Conduct depends on the involvement and support of all major grocery retailers,” a statement on the code’s website reads. “There have been concerns about potential market imbalances if not all key players participate.”

On May 16, Loblaw Companies Limited announced its participation.

Knowledge is power

Boldt doesn’t disregard the code entirely, noting it could improve the situation for producers and processors.

It won’t shield them from all issues though. She suggests that businesses educate themselves on retailer practices, contracts and fees, including shelf-stocking, black box margin and potential clauses for orders and delisting.

“You need to know what you’re agreeing to, because this process only arbitrates the contract you already have in place. You have to negotiate and understand what you’re committing to, what your outs are and what they, the retailer, is committing to you.”

Boldt said she hopes that, with more work and wide acceptance by grocers, the code can be used as a dispute mechanism.

Only the beginning

Patrice Léger Bourgoin, Fruit and Vegetable Growers of Canada representative on the code’s interim board, agreed that more work is needed, but said the document is only the beginning of the precedent-setting arrangement throughout the value chain.

“It’s the opportunity to have a very honest and transparent conversation on what were the impacts of the decisions made by retailers, the opportunity to start a real and longstanding conversation,” he said.

His group represents vegetable producers across Canada who supply the five major chains that are the primary targets for the code. Bourgoin said growers are aligned to a single mandate for support of the code, allowing for strong negotiation with retailers.

There were high hopes in the code’s early days, he said, but negotiations are always a process of give and take.

“You have to leave (a) couple of things on the table and I said I’m willing to give up on many fundamental items. But, on the other hand, we’ll start the code because we need to start somewhere and to demonstrate to stakeholders that it works.”

The end result must be similar to the U.K. model, upon which Canada based its version, he added. There must be strong leadership for roll out, available reports and information for the public and reviews for improvement. Not everyone will be happy right away, but regulation is needed, Bourgoin said.

“On the supplier’s side, we had a discussion together and the mutual sense was we have nothing to lose to start a voluntary process and (re-evaluate) in two years.

“I’m proud of the code. Is it perfect? The answer is definitely no. Is it better than the actual situation? The answer is definitely yes.”

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The company’s top brass confirmed their commitment to the policy May 16 at the company’s supplier summit.
“We have worked intensively and collaboratively with industry groups so that the code is clearly drafted and fair for all industry participants,” said Per Bank, Loblaw President and chief executive officer.

Stemming from friction between retailers and suppliers, the code was developed by the industry to promote transparency and fairness, and to solve disputes. It’s been in the works since 2021. 

The announcement comes following six months of company interim board discussions and December statements from Loblaw executive chair Galen Weston that a grocery code would cause higher food prices or fewer food choices.

The company was also at the heart of a social-medial sparked national boycott effort, which was to start this month.
In September 2023, major grocery chains promised to take action to stabilize prices in the wake of continued concern over grocery costs.

Loblaw says the next steps for the code will be for other major grocers—i.e. Walmart—to sign on.

“We believe in the value of a code of conduct for the industry and are happy with the progress made,” Bank said. “The Code now requires the participation of all major retailers and suppliers to help bring in a new era for Canada’s grocery industry, enhancing the relationship between retailers and suppliers, who both exist to best serve customers.”

Lawrence MacAulay, federal minister of agriculture and agri-food, and Andre Lamontagne, Quebec minister of agriculture, fisheries, and food, issued a joint statement following Loblaw’s announcement.

The two echoed Bank’s call for other grocers to follow Loblaw’s lead.

“The goal of the Grocery Sector Code of Conduct is to bring fairness, transparency, and predictability to our grocery sector and supply chain,” the statement read. “We believe that uniting all supply chain partners around these principles will produce the best outcomes for the sector and all Canadians. With the news that Loblaw is signing on, we now call on the remaining large retailers to do what is in the best interests of Canadians and follow suit.”

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“We are ensuring a fair and equitable environment for our growers, which is fundamental for the prosperity of the entire supply chain,” said FVGC in a news release.

FVGC’s executive director, Rebecca Lee, is listed as a member of the steering committee in charge of developing the code.

The industry-developed code, which proposes rules for fairness and transparency in the grocery sector, is expected to stabilize growers’ incomes, the FVGC said.

“Canada’s Grocery Sector Code of Conduct acts as a protective measure for the entire supply chain,” it added. “It addresses longstanding issues such as payment terms and contract fairness, which are crucial for the viability and sustainability of Canadian growers.”

It isn’t expected to increase costs to consumers, the news release said.

The code has run into headwinds in recent days as two of Canada’s largest grocers expressed reluctance to sign on to it.

Last week, Loblaw executive chair Galen Weston told the standing agriculture committee the code as currently written would cause higher prices, and Walmart Canada chief executive officer Gonzalo Gebera expressed similar sentiments.

Weston said Loblaw takes issue with clauses that govern written contracts with suppliers, whether retailers can charge suppliers fees when orders aren’t fulfilled, and others.

Michael Medline, CEO of Empire Company Ltd., which owns Sobeys, supports the code.

“This code is not a document comprising overly prescriptive regulations, but simply a straightforward set of principles of good behaviour developed by industry itself. That’s it. It won’t increase food prices, as Loblaw has claimed,” said Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers.

–with files from Karen Briere. Geralyn Wichers is associate digital editor of AGCanada.com.

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