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Canada's Grocery Price Surge: Analyzing the Possible Impact of a National Grocery Code of Conduct on Food Inflation

Preamble


Post-pandemic Canada has seen some of the most stringent increases in grocery prices that Canadians have faced in the past decades. On top of increasing housing costs, an average family’s weekly grocery trip cost has increased substantially from pre-2019 levels to now.


According to Canada’s Food Prices Report, commissioned by the University of Dalhousie, an average family will spend $16,228 per year on food, an increase of $1065 from the year prior. Compared to 2020, total grocery spending was $12,667, with a yearly increase of $487 from 2019. Even more frustrating, grocery spending in 2018 was pegged at $11,948, an increase of $348 from the year prior. Thus, from 2018 to 2023, Canadian families will spend over $4000 more on groceries per year from here on out. According to the same report, grocery spending will increase by another $700 next year, ballooning yearly spending on groceries by nearly $5000 compared to 2019 levels.


The Role of Government


Although it may be attractive to blame and/or rely on government to do something to reduce prices and provide much needed relief to Canadians. Unfortunately, there are limited solutions the federal government can undertake due to food prices being highly volatile because of their dependency on fragile supply chain units. 


But experts, governments, and industry generally see two major policies as significant to putting downward pressure on food prices. That is, either by increasing competition or introducing a national grocery code of conduct. Both of these policy proposals are being considered right now by the federal government, with the latter much more likely to come to fruition soon than the former. However, the voluntary industry-led code seems to be held up currently from being signed by two of Canada’s biggest grocers: Loblaws and Walmart. 


On the other hand, both federal and provincial governments of all political stripes are collabating to get this code done and signed by the industry. Federal and provincial governments have even threatened to legislate the code by law if the industry refuses to voluntarily sign it. Food prices are a cross-provincial issue that impacts all governments in power; there is likely to be some resolution.


Outcomes


But will the code really help with better pricing for consumers, or will it simply make the grocery supply chain more efficient? Data and findings from the UK and Australia can help us illustrate what kind of results the code will bring to the grocery sector. For starters, findings from the UK reveal that the UK’s grocery sector suppliers and retailers have grown in numbers, have become more innovative, and provide stronger communication between retailers and suppliers as a whole. For consumers, the code has shown that “overall investment in the grocery sector increased and consumer prices fell after the code was introduced” (Financial Post). Moreover, findings also showcase that consumers have benefited from an increase in innovative products as a growing number of specialty suppliers are being welcomed by retailers to increase differentiation. 


Overall, the grocery code of conduct in the UK has netted positive impacts for consumers, suppliers, and retailers. The code has resulted in more competition between retailers, a more innovative supplier base, and a greater variety of products for consumers, all while ensuring that prices are lower and/or the same. 


Governments are likely aware of all these benefits, and thus there is general agreement among provinces and the federal government that a grocery code of conduct needs to be implemented. At this point in the conduct’s negotiation process, the federal Minister of Agriculture has not ruled out federal or provincial intervention if the industry doesn’t voluntarily sign the code. However, according to the government, it is best if the industry is left to its devices to follow it. 


As of late December, the status of the code being signed is in limbo as Loblaws and Walmart are not signing on. However, it is nonetheless likely that it will be signed eventually, as there is much pressure from the government, consumers, the media, and the rest of the industry to sign the code. After decades of dominance by Canada’s big five grocery retailers, perhaps some balance may shift towards small and medium retailers and suppliers.


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