The grocery code of conduct will take effect Jan. 1. Here’s what this means for Canadian shoppers

A worker re-stocks shelves in the bakery and bread aisle at an Atlantic Superstore grocery in Halifax, Friday, Jan. 28, 2022. THE CANADIAN PRESS/Kelly Clark (Kelly Clark)

Canada’s long-debated grocery code of conduct, designed to make the food supply chain fairer and more transparent, is finally taking shape after years of development and industry negotiations.

The voluntary code, which applies to relationships between major grocery retailers and their suppliers, was first proposed amid mounting concerns about rising food prices, supplier fees and the growing imbalance within Canada’s highly concentrated grocery sector.

Federal and provincial agriculture ministers have long argued that clearer rules are needed to curb practices that can drive up costs throughout the supply chain, even if those costs aren’t always visible to consumers.

While the code does not regulate grocery prices or promise immediate relief at the checkout, supporters say it could help stabilize the food supply chain over time by reducing unexpected fees and conflicts that affect availability, competition and consumer choice.

The code is set to take effect Jan. 1. Here’s what it means, how will it work and how it might affect Canadians at the grocery store.

What is the grocery code of conduct?

The Canada grocery code of conduct is a set of standards meant to guide how grocery retailers and their suppliers interact.

According to Michael Graydon, CEO of Food, Health and Consumer Products of Canada and one of the developers of the code, the goal is to create a more stable and predictable grocery supply chain.

The Canada grocery code website outlined that the framework covers business relationships across the supply chain – from food producers to the shelves where Canadians buy their groceries – and aims to reduce what they consider unfair practices like retroactive fines, chargebacks for operational issues and unilateral contract changes that have dogged the industry for years.

Graydon told CTVNews.ca in an interview that the code is intended to reduce friction in the system particular around fees and penalties.

“Some of the money can be reinvested back into price and promotion,” he said.

The code includes principles like negotiating in “good faith,” discouraging unilateral changes to agreements, and creating mechanism for solving disputes.

Its goal is to clarify expectations and protect smaller suppliers from heavy penalties or fees imposed by larger retailers, according to its official website.

Why it matters now?

Canada’s grocery industry is highly concentrated with a handful of larger retailers controlling most of the market.

In 2022, five grocery retailers controlled almost 80 per cent of the market share in Canada, according to the Canadian Federation of Agriculture.

The latest Food Price Report produced by several Canadian universities is also projecting an average family of four will pay an estimated $994.63 more for food in 2026 than this year because of issues like trade and climate change. That’s an estimated bill of $17,500 annually.

Meanwhile, grocery prices remain the top financial concern across the country, according to a Nanos research survey conducted for CTV News. Forty-two per cent of respondents ranked it as their highest financial stress point and 37.5 per cent ranked it as their second.

Where the code stands today?

The code will be fully operational on Jan. 1, when the body that regulates disputes will be open for members to submit formal complaints and all parts of the code will be expected to be fully implemented by members.

Graydon said that to ensure accountability, the code established an independent adjudicator, Karen Proud, with the authority to publicly identify companies that fail to comply. Graydon said this oversight should give consumers confidence that the system isn’t operating in secrecy.

According to the Canada Grocery Code website, the Office of the Grocery Sector Code of Conduct (OGSCC) will monitor the execution of the code. An annual report will be issued starting in 2026.

If the voluntary framework proves insufficient, Graydon noted, the adjudicator can recommend strong government oversight.

Major grocery companies have already signed on.

Sobeys parent company Empire Co. Ltd. was the first retailer member to officially sign on to the code of conduct earlier this year, while dairy product-maker Lactalis Canada was the first supplier member of the code.

Metro Inc. said it officially signed the Canadian Grocery Industry Code of Conduct last week.

Other retailers on board are Loblaw, Walmart and Costco.

What this does and doesn’t mean for shoppers

Graydon said the code could mean consumers will have a greater variety of products to choose.

That said, Graydon was clear that shoppers should not expect immediate price relief.

“It’s not going to be overnight,” he said. “It’s also going to take some time for everyone to really understand how the code works.” He added that a year into implementation, the industry should be in a better position to assess whether the code is being applied effectively.

Graydon also stressed that the code was never designed as an affordability measure. “It was designed to address the relationship between suppliers and retailers.”

He cautioned consumers against expecting prices to drop simply because the code is in place.

As for how success will be measured, Graydon said early indicators will include fewer complaints and faster resolution of disputes.

“If, as the year progresses, the amount of complaints diminish, that’s an indication that all stakeholders are participating,” he said. “If issues are being resolved through discussion before they even reach resolution, that’s what the code is designed to do.”

With files from The Canadian Press and CTV News Assignment Editor Joanna Petropoulos