Industry predictions split on how grocery code of conduct will affect prices

All five of Canada's major grocery chains, Loblaws, Metro, Sobeys, Costco, and Walmart, have endorsed implementing a code of conduct meant to level the playing field between retailers and food suppliers - the latter facing rising fees in recent years to keep products on store shelves.

"We know that retailers take advantage of their market power by saying, 'if you want access to our customers, you have to pay these fees, you have to meet these prices, these payment terms, additional charges' - all sorts of things," said Mike von Massow, a food economist with the University of Guelph.

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Von Massow says the relationship between retailers and suppliers has become openly antagonistic as a result, spurring the call for a code to be drafted.

"What the code of conduct does is set some limits on what [retailers] can do, and what they can ask for."

Big grocers have given their blessing, though Agri-Food Analytics Lab researcher Sylvain Charlebois says the efficacy of the code will come down to whether these stores follow its rules.

"If you actually fined Walmart or Loblaws, will they pay the fine? The key here really is compliance," he said.

What also remains in the air is the impact on food prices for consumers. Predictions across the industry are split.

"There's no doubt that this is going to have a positive impact on the supply chain and our costs in the supply chain," said Gary Sands, senior VP of the Canadian Federation of Independent Grocers. "In turn, that's bound to have some positive impact on prices."

"My guess is that the code will stabilize food inflation over time, anywhere between 1.5 to 2.5 per cent, instead of seeing it at 10 per cent, for example," said Charlebois.

But with a cap on fees imposed on suppliers, von Massow says he does not expect big grocers to reduce prices.

"Under no circumstances is a grocer going to say, 'Oh, we're making fewer concessions from our suppliers. Let's lower prices so that we squeeze ourselves even further in the other direction,'" he said. "It just doesn't make strategic sense."

The grocery code of conduct is set to be implemented in June 2025, but officials say consumers will not start seeing prices adjust until 2026 to 2027.