'Grocery Supply Code of Practice' to Improve Retailer-Supplier Relations

After two decades of complaints of unfair practices, Canadian grocery retailer Empire Co. Ltd. and Food, Health & Consumer Products of Canada (FHCP), the voice of Canada's food manufacturing sector, have agreed to a ground-breaking proposal for a "Grocery Supply Code of Practice for Canada."

“We began working in earnest with the FHCP on this values-based proposal in the fall of 2020,” said Michael Medline, president and CEO of Empire, which operates Sobeys, Safeway, IGA, Foodland, Farm Boy, FreshCo, Thrifty Foods and Voilà in Canada. “We hope our principled proposal will be a springboard to move our industry forward. This code is a win for consumer product companies and retailers, as well as all other players in the food supply chain, including farmers and customers."

The first proposal of its kind in Canada, the draft code aims to stabilize relations between retailers and suppliers by calling for fair and efficient handling of all negotiations and commercial agreements. FHCP has been advocating for a code for decades, citing complaints of unfair practices in the marketplace related to issues such as arbitrary fees, cost increases imposed without notice, and late payments. These poor retailer-supplier relations can also affect consumers, affecting pricing, product choice and job opportunities in Canada.

To help combat these issues, the principles within the code promote transparency, predictability and openness. By improving collaboration between business partners, the code will provide suppliers with certainty by setting out standard rules of engagement, helping create an environment where suppliers can confidently invest in products, facilities, manufacturing and job creation in Canada.

The basics of the code are as follows:

• Require negotiated agreements in writing between retailers and suppliers.
• Ensure open negotiations between retailers and suppliers.
• Create stability to encourage retailers and suppliers to work together to bring the best products, innovation and value to Canadians.
• Require retailers to designate code compliance officers to oversee code compliance.
• Introduce a government adjudication system to manage complaints of unfair practices under the code.

Similar codes have been implemented around the globe; most notably, lessons learned from the U.K. Groceries Supply Code of Practice were used to help create Empire and FHCP's version. 

The organizations formally submitted their code on March 25 to the Federal, Provincial and Territorial Working Group, encouraging other grocers, suppliers and industry stakeholders to come forward to support and provide input.

"The Canadian grocery industry made unprecedented strides in navigating the COVID-19 pandemic as retailers and suppliers collaborated to protect the food supply chain and support customers like never before," said Medline. "This goodwill was a positive development during a difficult time. Let's not go back to the old way of doing things.”

"As the early days of the pandemic proved, and as FHCP and Empire demonstrate so clearly today, grocery retailers and suppliers are capable of tremendous achievements when we collaborate," added Michael Graydon, president and CEO of Mississauga, Ontario-based FHCP. "Retailers and suppliers are tough and savvy, and our businesses do not always see eye to eye. 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. FHCP and Empire are proud to have translated this common vision into a set of shared principles and a positive framework for the industry."

The food, health and consumer product sector employs more than 350,000 Canadians across businesses of all sizes that manufacture and distribute products. 

Empire is a Canadian company based in Stellarton, Nova Scotia. Its key businesses are food retailing, through its wholly owned Sobeys chain, and related real estate. With approximately CAD $26.6 billion in annual sales and CAD $14.6 billion in assets, Empire and its subsidiaries, franchisees and affiliates employ about 127,000 people. Sobeys is No. 21 on The PG 100, Progressive Grocer's list of the top food retailers in North America.