Empire, industry group propose grocery code to address 'unfair practices' in market

A Sobeys grocery store is seen in Halifax on Thursday, Sept. 11, 2014. THE CANADIAN PRESS/Andrew Vaughan

Canada's second-largest grocery retailer and an industry group representing food manufacturers agreed on Thursday to a draft grocery code of practice they say takes aim at unfairness in the market.

Empire Company Ltd. and Food, Health & Consumer Products of Canada said the proposed code addresses long-standing issues like arbitrary fees, cost increases imposed without notice, and late payments.

Empire CEO Michael Medline said retailers and suppliers made "unprecedented strides" collaborating during the pandemic to protect the food supply chain.

"Let's not go back to the old way of doing things," he said in a statement. "We hope our principled proposal will be a springboard to move our industry forward."

The proposed code of conduct comes after Loblaw Companies Ltd. and Walmart Canada imposed higher fees on suppliers in recent months. In response, United Grocers Inc., a national buying group that represents companies including Metro Inc., issued a letter to suppliers saying it expected the same costs as its competitors.

The moves made the cost of getting goods on store shelves more expensive for food manufacturers.

Walmart Canada spokesman Adam Grachnik said the retailer supports many of the principles outlined in the proposal but disagrees that a "complex, legislated, bureaucratic code is necessary."

"These are routine confidential business discussions and negotiations between retailers and suppliers," he said in an email. "These discussions and negotiations happen every day and they reflect the dynamic competitiveness of the market."

The big-box store "has a great working relationship with our suppliers and we continue working with them to help nurture and support their businesses," Grachnik added, noting that the company will "make business decisions that are in the best interest of delivering value for our customers."

The code was also panned by the Canadian Federation of Independent Grocers for its failure to mention small, independent grocery operators.

"We're disappointed to see the association representing the big suppliers get together with a big retail chain to develop a code," said Gary Sands, senior vice-president of public policy for the independent grocers advocacy group.

"It's sort of a reflection of what we see in the industry," he said. "There's no reference to independents."

Empire, which operates numerous grocery chains including Sobeys, Safeway and FreshCo, and the consumer products group are encouraging other grocers, suppliers and industry stakeholders to support the proposed code of practice.

Poor retailer-supplier relations create a negative ripple effect in the market that affects consumers through pricing, product choices and jobs, they said.

The code would enshrine a set of good-faith industry business principles, such as requiring written agreements between large retailers and suppliers and ensuring changes to business terms are not imposed arbitrarily, they added.

"Retailers and suppliers are tough and savvy and our businesses do not always see eye to eye," said Michael Graydon, president and CEO of the industry group.

"However, we believe we can build a supply chain on mutual trust, one that treats businesses of all sizes fairly and delivers for all Canadians who count on us every day."

The code would be a first of its kind in Canada but pulls lessons from similar documents, most notably the U.K. Groceries Supply Code of Practice.

The code was formally submitted Thursday to a federal, provincial and territorial working group examining the issues plaguing the grocery industry, including the imposition of unilateral costs on suppliers, fining suppliers for shortages and offloading operating costs onto suppliers.

Sands, with the independent grocers group, said governments must give equal weight to all submissions it receives on the issue.

He said ignoring independent grocery retailers could put the country's food security at risk.

"Independents are in a lot of rural and remote communities in this country where there's no chain, and there never will be a chain," Sands said. "If we don't start dealing with the issue of fair supply and fair pricing for those stores, they're going to go under."

This report by The Canadian Press was first published March 25, 2021.