Even economists were stunned in August when they saw food inflation rise at its fastest pace in more than 40 years, with new figures from Statistics Canada showing that grocery prices are continuing a seemingly unabated rise.
The new numbers have left many consumers worried about how long the trend will last, and while there are some signs that food inflation could moderate in the coming months, many of the factors contributing to the price hike still exist.
Meanwhile, some Canadians have already started taking increasingly drastic measures to save on groceries, including eating less or skipping meals altogether.
In response to the rising cost of groceries, about 75 percent of Canadians have changed the way they buy food in the past year, according to a survey published Tuesday. New habits include checking weekly flyers for deals and using coupons, switching to in-store brands, shopping at discount and dollar stores, and buying foods that are about to expire.
The survey of 5,000 Canadians, published by Dalhousie University’s Agri-Food Analytics Lab, in collaboration with the Consumer Insights Agency Caddle, landed on the same day Statistics Canada reported that food price inflation was picking up in August at a pace not seen since 1981.
While the growth of the total consumer price index slowed slightly last month to 7.0 percent (from 7.6 percent in July), the year-on-year increase in food prices was 10.8 percent.
“What we see from this data… is that the average Canadian isn’t getting into trouble. It’s like they feel a blow,” said Ransom Hawley, CEO of Caddle, who noted that the study was conducted between September 8 and 10.
Nearly 24 percent of respondents said they are cutting back on the amount of food they buy, and Hawley noted that female consumers are doing so in greater numbers, a potentially worrying trend for children and single-parent families. Even more concerning, he said, was that 7.1 percent said they now skip meals.
“I think it’s past the point of, ‘Okay, I’m going to tighten my belt a little bit.’ This changes consumer behavior, potentially affecting their health,” Hawley said.
“People are having a hard time. They are finding ways to navigate this food inflation storm, but there is a sense of despair for many Canadians,” said Sylvain Charlebois, director of the Dalhousie Agri-Food Lab.
Canada’s three major supermarket chains, Loblaw, Empire (which owns Sobeys) and Metro, have said in recent months that they have seen consumers shift some of their shopping from their premium brand stores to discount chains they also own, such as No Frills. FreshCo and Food Basics, respectively.
People are also making fewer impulse purchases, shifting spending to cheaper alternatives (e.g. from beef to pork) and stocking up on promotions, said Andrew Walker, an Empire spokesperson.
“We fully understand that customers simply don’t want and often don’t want to accept cost increases at some of the levels we’ve seen, while also paying more at the pump and for other essentials,” he said.
Supermarket CEOs have indicated in recent talks with financial analysts that they see signs that inflation may have peaked and could improve in the coming months.
Walker noted, however, that some pieces of the food inflation puzzle are still problematic, including shipping delays, transportation delays, labor shortages, and shortages of raw materials and packaging.
“While fuel costs have fallen recently, they also remain a pressure point. You see that across the industry,” he says.
In response to the shift in consumer behavior, Hawley said retailers are more likely to promote their own store-brand products and offer more rewards through loyalty programs, rather than push through broad price cuts.
Charlebois said consumers can also expect more targeted offers and discounts in the coming months.
“We all need to eat,” said Simon Somogyi, a food industry professor at the University of Guelph, who noted that while there’s some evidence that people eat less, it’s not such a big difference in demand that it would lead to price review by food retailers. “I don’t think we’ll see the impact of lower food demand on the price.”
Whether Canada’s major grocers have taken advantage of inflation to raise their prices has become a topic of heated debate in recent months. The dominant three chains all vigorously deny such claims.
A Star survey earlier this year found that the three companies’ gross profit margins (the difference between what they charge for goods and how much they pay for those products, other costs such as labour) have increased slightly during the pandemic.
The study found that even a small increase in profit margins accounted for hundreds of millions of dollars in additional profits for the companies, and concluded that if gross profit margins had remained stable at 2019 levels, shoppers would have $1.4 billion. saved on their grocery bills over the past year.
The grocers told the Star that it was not true that their higher margins were the result of higher prices, but pointed to operational efficiencies, lower costs and changing consumer habits, including increasing sales in their pharmacies.
Last week, Empire CEO Michael Medline called claims that grocers profit from inflation “reckless and incendiary attacks.”
“I’m tired of these armchair quarterbacks who make little effort to even understand the basics of our business, but sit comfortably on the sidelines positing how Canadian companies are making unreasonable profits on the backs of inflation,” said Medline, speaking on the company. annual shareholders’ meeting. “This is absolutely not true.”
Charlebois said he was investigating the issue of “greed” and found no evidence of abuse by the grocers.
“Having said that, I actually think there is still some work to be done when it comes to drafting a new social contract in the supermarket,” he said on Wednesday.
One way to show empathy for consumers would be for retailers to voluntarily stop the price of certain staple foods for a period of several months, something he says some grocers in Europe have done.
“We hope there will be a grocer with a bold strategy, like freezing prices,” Charlebois said, unlike certain grocers that offer price customization, in which case the price can still be high even if it’s the lowest on the market. the market. “Price freezes would actually send a clear signal regarding food inflation.”
The three major supermarket chains did not comment on the idea of a temporary price freeze on basic items on Wednesday.
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