Canadians clamp down to save on groceries as experts say food price hikes will continue

Even economists were dismayed to see food inflation rising at the fastest pace in more than 40 years in August, with new figures from Statistics Canada showing the price of groceries continuing to rise seemingly unabated.

The new figures left many consumers concerned about how long the trend will continue, and while there are some signs that food inflation could start to moderate in the coming months, many of the factors contributing to rising prices remain. .

Meanwhile, some Canadians have already started taking increasingly drastic measures to save on groceries, such as eating less or skipping meals altogether.

In response to rising grocery costs, about 75 percent of Canadians have changed the way they shop for food in the past year, according to a poll released Tuesday. New habits include checking weekly flyers for deals and coupons, switching to 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 Analysis Laboratory, in association with consumer insights firm Caddle landed on the same day that Statistics Canada reported that food price inflation in August hit a pace not seen since 1981.

While the growth of the general consumer price index slowed slightly to 7.0% last month (from 7.6% in July), the year-over-year increase in food prices was 10.8%.

“What we’re seeing from this data … is that the average Canadian is beyond feeling the pinch. It’s like they feel a blow to the body,” said Ransom Hawley, CEO of Caddle, who noted that the survey was conducted between September 8 and 10.

Nearly 24 percent of those surveyed 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 parents. Even more troubling, she said, was that 7.1 percent said they now skip meals.

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“I think it’s past the point of, ‘Okay, I’m going to tighten my belt a little bit.’ This is changing consumer behavior, which can actually affect their health,” Hawley said.

“People are fighting. They are finding ways to navigate through this storm of food inflation, but there is a sense of desperation for many Canadians,” said Sylvain Charlebois, director of the Dalhousie Agri-Food Laboratory.

Canada’s big three supermarket chains – Loblaw, Empire (which owns Sobeys) and Metro – have said in recent months that they are seeing consumers shift some of their purchases from their premium-brand stores to discount chains from which they they are also proprietary, like No Frills. , FreshCo and Food Basics, respectively.

People are also making fewer impulse purchases, shifting their spending to less expensive substitutes (for example, from beef to pork) and stocking up during promotions, said Andrew Walker, a spokesman for Empire.

“We fully understand that customers simply won’t and often can’t accept cost increases at some of the levels we’ve seen, while also paying more at the pump and for other essentials,” he said.

Grocery store CEOs indicated during recent calls with financial analysts that they see some signs that inflation may have peaked and could improve in coming months.

However, Walker noted that some pieces of the food inflation puzzle remain problematic, including shipping delays, transportation slowdowns, labor shortages, and shortages of raw materials and packaging.

“While fuel costs have come down recently, they also remain a pressure point. This is being seen throughout the industry,” she said.

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In response to changing consumer behavior, Hawley said retailers are more likely to promote their own private label products and offer more rewards through loyalty programs, rather than implement extensive price reductions.

Charlebois said consumers can also look forward to more targeted deals and discounts in the coming months.

“We all have to eat,” said Simon Somogyi, a professor of food business at the University of Guelph, who noted that while there is some evidence that people are eating less, it’s not such a big difference in demand as to trigger a readjustment. pricing by food retailers. “I don’t think we’ll see the impact of lower food demand on the price.”

Whether Canada’s big grocery stores have taken advantage of inflation to raise their prices has become a subject of heated debate in recent months. All three major networks strongly deny such claims.

A Star investigation earlier this year found that the three companies’ gross profit margins — the difference between what they charge for products and how much they pay for those products, plus costs such as labor — rose slightly during the pandemic.

The research found that even slight increases in profit margins accounted for hundreds of millions of dollars in additional profit for businesses, and concluded that if gross profit margins had held steady at 2019 levels, shoppers would have saved $. 1.4 billion on their grocery bills during the previous one. year.

Grocers told the Star that it wasn’t true that their higher margins were due to charging higher prices, but instead pointed to operating efficiencies, lower costs and changing consumer habits, including increased sales at their pharmacies.

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Last week, Empire CEO Michael Medline called claims that grocers are profiting from inflation “reckless and inflammatory attacks.”

“I’m tired of these armchair quarterbacks who make little effort to understand even the basics of our business, but are comfortable sitting on the sidelines pontificating about how Canadian companies are making unreasonable profits thanks to inflation,” Medline said, speaking at company meeting. annual meeting of shareholders. “This is absolutely not true.”

Charlebois said he investigated the “greed” issue and found no evidence of abuse by shopkeepers.

“Now, with that being said, I actually think there is work to be done when it comes to the grocery business establishing a new social contract,” he said Wednesday.

One way to show empathy for consumers would be for retailers to voluntarily freeze the price of certain key staples for a period of a few months, something he says some grocers in Europe have done.

“We expect a grocery store to come up with a bold strategy like freezing prices,” Charlebois said, contrasting that with certain grocery stores that offer price matching, in which case the price can still be high even if it’s the lowest in the market. market. “Freezing prices would actually send a clear signal regarding food inflation.”

The three major supermarket chains did not comment Wednesday on the idea of ​​temporarily freezing prices on basic items.

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