May 25th, 2024

Loblaw agrees to sign grocery code of conduct after months of negotiations

By Rosa Saba, The Canadian Press on May 16, 2024.

Loblaws CEO Per Bank is photographed at a Suppliers Summit in Toronto, Thursday, May 16, 2024. THE CANADIAN PRESS/Chris Young

TORONTO – Loblaw Cos. Ltd. said Thursday it’s ready to sign on to the grocery code of conduct, paving the way for an agreement that’s been years in the making.

After six months of negotiations, Loblaw president and CEO Per Bank said the retailer is now ready to sign as long as other industry players do too.

“The code now is fair, and it will not lead to higher prices,” he said in an interview.

The code has been developed by a group of leaders in the food industry, with the intention of evening the playing field for suppliers and smaller retailers.

But it appeared to come to a halt last December when Loblaw and Walmart Canada said they wouldn’t sign the voluntary code because they were concerned it would raise prices for shoppers.

Nick Henn, Loblaw’s chief legal officer, said the underlying principles of the code haven’t changed.

“We felt that the words weren’t clear in lots of areas, and so we’ve spent some time with the working committee and the interim board, fixing those areas, improving the code and providing the clarity that we thought it lacked the last time around,” he said in the same interview alongside Bank.

One important example was regarding the dispute resolution process, Henn said. Loblaw wanted to make clear when it would be appropriate for issues to go to an adjudicator, and when it wouldn’t – such as in the case of price negotiations between suppliers and retailers.

“That was a big concern for us. And so with that no longer being an issue under the draft code, we’re much less concerned about the code leading to higher prices,” Henn said.

June 1, 2025, is the target date for the code to take effect, he said.

“We’ve worked very hard to get to where we are,” said Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association and chairman of the interim board for the code.

“We now have all the major grocers with the exception of one, and so some work needs to be done in regards to bringing them into the fold,” said Graydon, referring to Walmart. Costco has also had “some inquiries around certain aspects” of the code, he said, but he hopes they will also agree to participate.

Work can now continue on establishing the office of the grocery code, said Graydon, adding he hopes it can begin “sooner rather than later.”

Over the past several months, calls to make the code mandatory have grown. In February, the House of Commons committee studying food prices told Loblaw and Walmart that if they wouldn’t agree to a voluntary code, the committee would recommend it be made law.

Speaking on conference call on May 1 to discuss the company’s latest financial results,Bank had said he was “cautiously optimistic” that an agreement could be reached.

The call was on the same day some Canadians said they were going to start boycotting all Loblaw-owned stores as frustration mounts over higher food prices and concentration in the grocery sector.

The boycott, organized by a Reddit group, is currently underway. The organizers posted several demands for their movement and the one at the top of the list was for Loblaw to sign the grocery code of conduct.

The negotiations over the code predated the boycott, said Bank, so the announcement “has nothing to do with their demands.” But he recently had a meeting with boycott organizer Emily Johnson, and said he’s sure she will be happy to hear that Loblaw has agreed to the code.

Though food inflation has been an industry-wide phenomenon, sparked by global pressures like the war in Ukraine, for many, Loblaw has become the poster child for food inflation in Canada.

The day after the boycott began, Bank and Loblaw chairman Galen Weston pushed back on what they called “misguided criticism” of the company.

“As a well-known company and Canada’s largest grocer, it is natural that Loblaw would be singled out as a focal point for media and government and of course consumer frustrations,” said Weston at the grocer’s annual meeting May 2.

This report by The Canadian Press was first published May 16, 2024.

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