As the Grocery Code of Conduct nears completion, the largest player in the Canadian industry raises concerns that the guidelines may add fuel to the fire of food inflation.

Loblaw Companies Ltd said it is worried that the code could "raise food prices for Canadians by more than a billion dollars" in a letter sent to members of both the steering committee working on the code’s development and the industry's subcommittee on November 1, obtained by the Canadian Press.

Chief Financial Officer Richard Dufresne wrote in the letter that the grocer cannot approve the code in its current form and requested a special meeting of the industry subcommittee to address Loblaw’s concerns.

Also in a statement, Loblaw spokesperson Katherine Thomas said the bill faces "a number of challenges," which the grocer believes could threaten product availability and increase food prices. The Loblaw statement also mentioned potential costs of a billion dollars, which Thomas said refers to additional costs for Loblaw’s customers.

Loblaw is not the only grocer expressing concerns about the code. Walmart Canada spokesperson Sarah Kennedy said in an email in late October that the company supports initiatives benefiting customers but "recognizes adding unnecessary burdens that could increase food costs for Canadians, especially during inflationary times."

Grocers have been under pressure from the federal government to stabilize food prices after a series of high inflation and interest rate hikes that impacted household budgets.

Michael Graydon, CEO of Food, Health and Consumer Products of Canada and co-chair of the steering committee developing the code, urged the two companies to give the code a chance. He said without their onboard support, the code would be less effective.

Graydon added that the code is nearing completion, with plans to have it overseen and operated by the non-profit organization by the end of the first quarter of 2024.

The Loblaw letter also pointed to specific sections of the bill, saying they would make it difficult for retailers to hold suppliers accountable, create uncertainty in the supplier-retailer relationship, and pose risks to pricing, availability, and discount programs.

However, he and Gary Sands, executive vice president of the Canadian Federation of Independent Grocers and a committee member, rejected the billion-dollar figure cited by Loblaw.

Sands said if he believed the code would be inflationary, he would sound the alarm too — "but we don’t think that’s true."

The code development committee was created in response to industry calls to address fees charged by major grocery retailers to suppliers, an issue that came to light in 2020. That year, Walmart Canada announced an increase in fees, and a national buying group representing Metro Inc. told suppliers to expect the same. It was not long after that Loblaw also raised its fees.

Michael von Massow, a food economics professor at the University of Guelph, also said it is not surprising to see two of the biggest names in the market — one the largest Canadian grocer, the other a major U.S. player — express their concerns about the Food Code of Conduct.

Metro and Empire Company Limited, owners of Sobeys, reaffirmed their commitment to adopting the code in statements on Monday. Costco Canada did not respond to a request for comment.

If Loblaw and/or Walmart Canada ultimately decide not to sign the code, Graydon said another route may be necessary to address sector issues.

Quebec’s Minister of Agriculture and Food, André Lamontagne, who co-chaired a working group announced in 2020 to consider fees charged by retailers to suppliers, said it took several years of hard work to get the code to where it is today.