Canada's New Grocery Code of Conduct Takes Effect Amid Price Concerns
Canada's Grocery Code of Conduct has officially come into full force as of January 1, 2026, governed by an independent organisation. The code establishes comprehensive guidelines for dealings between food retailers and their suppliers, with the primary aim of fostering transparency and predictability within the grocery industry's value chain.
Major Retailers Register Amid Initial Hesitation
All five of Canada's largest grocery chains—Empire, Loblaw, Metro, Walmart Canada, and Costco Canada—have now registered with the code. This follows a period of notable reluctance from some major players. Walmart and Loblaws were originally hesitant to sign the new regulatory framework but eventually accepted after further negotiations.
Loblaws' new president, Per Bank, has stated the company is now content with the revised code and no longer believes it will lead to price increases. However, it is worth emphasising that no industry figure has claimed the code will actively reduce prices for consumers.
Objectives and Dispute Resolution Mechanisms
The code sets out several specific objectives: to contribute to a "thriving and competitive grocery industry," promote trust between stakeholders, allow for informed business decisions, and provide an effective dispute settlement mechanism.
This dispute resolution process, administered by the Office of the Grocery Sector Code of Conduct (OGSCC), is intended as a last resort. The possibility of formal mediation may encourage parties to resolve disagreements informally before escalation. The OGSCC will also publish an annual report highlighting key trends, challenges, and anonymised case studies.
Public Conflation with Food Price Inflation
Public discussion has often conflated the code with desires to reduce soaring food prices. While food price regulation is not part of the code's mandate, it has been raised repeatedly in wider debates about inflation.
Statistics Canada data shows food prices continued to rise across the country in 2025, increasing by 3.4 per cent between May 2024 and May 2025. Concerns have been longstanding, prompting a 2023 federal committee meeting where MPs questioned executives from Walmart Canada and Loblaws about their initial hesitation to sign the code.
Could the Code Actually Increase Prices?
Some industry leaders, including former Loblaws CEO Galen Weston, expressed fears that the code could inadvertently push prices higher. The mechanism is straightforward: the code discourages certain charges and mandates negotiated payment schedules. If grocers lose revenue streams due to these limitations, they may seek to recoup costs from consumers rather than absorb them.
While some observers suggest the code could lower prices in the long term by reducing supplier charges and encouraging investment in food processing, these benefits are not guaranteed and would take considerable time to materialise.
Potential Indirect Consumer Benefits
There may be some indirect advantages for shoppers:
- A more predictable relationship between retailers and suppliers could increase consumer choice by reducing barriers to new product introductions.
- Price stability could help sustain Canadian food processors; a loss of domestic capacity would likely lead to higher prices.
- The code could help smaller retailers with less bargaining power by limiting concessions large chains can extract, making smaller grocers more viable—particularly important in under-served neighbourhoods.
The Real Drivers of Food Price Inflation
Food price increases are primarily driven by supply-side factors and, to a lesser extent, demand. Between January and December 2025, food prices rose by four per cent—faster than general inflation. Significant contributors included:
- Beef (16.8% increase): Affected by extreme weather and drought reducing herds to their lowest point in decades.
- Coffee (30.8% increase): Impacted by extreme weather and disease pressures in producing regions.
- Sugar and confectionery (12.5% increase): Largely driven by international tariffs and trade disputes.
Looking Ahead: Cautious Optimism
While Canada has experienced significant food price inflation, the drivers are largely external and outside the code's scope. The Grocery Code of Conduct is not a direct tool for controlling or lowering grocery prices, though it may enhance sector transparency and fairness.
There is room for cautious optimism. The rate of food price increases is expected to slow, with potential reductions in specific categories. Beef cow herds are anticipated to recover over time, easing prices, and supply issues for weather-affected commodities should improve barring new extreme events. However, any such improvements will stem from market and environmental factors, not the new code itself.
