Federal, Quebec ministers say major grocers need to sign code of conduct

At a House of Commons agriculture committee meeting in Ottawa on Thursday morning on stabilizing food prices, members of Parliament pressed Walmart Canada CEO Gonzalo Gebara and Loblaw chairman Galen Weston on why their companies have not yet signed the code.

Bloc Québécois MP Yves Perron accused both companies of “sabotaging” the development of the code.

Gebara said his company has participated in the development of the code, but is “not in a position at this time to commit” to it.

Weston said Loblaw will sign the code, but not in its current form. He urged the committee to look at the details of the code, which he said as drafted could raise prices and cause empty shelves.

“We’ve always said that we would sign the code. We just need to sign a code that doesn’t increase the risk of higher food prices to Canadians.”

In a joint statement, the ministers said the major grocers and all supply chain partners need to adopt and adhere to the code.

“In the coming days, we will be reviewing all possible options available to us. We encourage all industry partners to quickly commit to signing on to the Grocery Sector Code of Conduct for the benefit of consumers,” the ministers said.

Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association and chairman of the interim board of directors of the grocery code of conduct, said Thursday that the code is “fundamentally done.”

He praised the statement from the ministers, calling it “much overdue.”

In a Nov. 1 letter sent to members of both the steering committee developing the code and the industry sub-committee, Loblaw said it’s worried the code could “raise food prices for Canadians by more than $1 billion,” a figure Weston stood by on Thursday.

The letter outlined specific sections of the draft code that Loblaw said pose risks to prices and product availability.

Weston told MPs on Thursday he’s concerned the code will give too much power to large multinational manufacturers. Many manufacturers, he said, are already “signalling or submitting higher than expected cost increases for next year.”

“These are large multinational consumer manufacturers, and the code of conduct has a set of clauses in it that reduce the grocers’ ability to negotiate hard against those vendors,” he said.

“We were able to push back on 18 per cent of what we believed … to be unjustified cost increases across the industry last year. Based on the way the code is drafted today, we will be severely restricted in terms of our ability to do that.”

Graydon said the working group responded to Loblaw with what he believes are “very strong responses as to why the provisions they want changed fundamentally can’t be changed.”

He said Loblaw’s requested changes “would fundamentally neuter the code’s ability” to improve how business is done in the grocery industry.

“They want to continue to have unilateral decision power. Well, that is fundamentally why we need a code.”

Graydon, who was co-chair of the steering committee developing the code, said it’s not yet clear whether Loblaw, Walmart or Costco will sign the code.

Costco did not immediately respond to a request for comment.

In November, Graydon pushed back on claims that the code would raise prices for consumers: “We just don’t believe that that’s true.”

The grocers have also been under pressure from Ottawa to provide plans to stabilize food prices at their stores. The government summoned the heads of Loblaw, Metro, Empire, Walmart Canada and Costco to present their plans earlier this fall.

Federal Industry Minister François-Philippe Champagne has said those companies’ plans included discounts, price freezes and price-matching.

Weston said the meeting with Champagne resulted in “materially lower prices” for 35 often-purchased items and categories, like milk, butter, eggs and chicken.

“We’re delivering these savings through the pricing and promotional programs that customers understand and respond best to. They are making a difference,” he said.

Gebara said through periods of high inflation, Walmart continues to hold or lower prices where possible, sometimes absorbing or pushing back on cost increases from suppliers. He said the grocer has launched several programs that resulted in lower prices, such as offering Thanksgiving meals at lower prices than last year.

On Monday, Empire Co. Ltd. CEO Michael Medline said his company, which owns Sobeys, has expanded its annual November-to-January price freeze.

“We also have meaningful plans and development to help stabilize food prices past January, but will not discuss these publicly as they remained commercially and competitively sensitive until launched in our stores,” Medline told the agriculture committee.

— With files from Nojoud Al Mallees in Ottawa.

This report by The Canadian Press was first published Dec. 7, 2023.

Companies in this story: (TSX:L, TSX:EMP.A,TSX:MRU)

Rosa Saba, The Canadian Press

by Canadian Press

Federal, Quebec ministers say major grocers need to sign code of conduct

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