Canadians take drastic steps to save on groceries as experts say food price hikes will continue

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

The new figures left many consumers concerned about just 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 the spike in prices still persist.

Meanwhile, some Canadians have already begun taking increasingly drastic steps to save on groceries, including eating less or skipping meals altogether.

In response to the rising costs of groceries, about 75 percent of Canadians have changed how they buy food over 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 food that is about to expire.

The survey of 5,000 Canadians, published by Dalhousie University’s Agri-Food Analytics Lab, in partnership with consumer insights firm Caddle, landed on the same day that Statistics Canada reported that food price inflation in August came in at a rate not seen since 1981.

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

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

Almost 24 percent of survey respondents said they’re cutting back on the amount of food they purchase and Hawley noted that female consumers are doing so in larger numbers, a potentially worrying trend for children and single-parent families. Even more concerning, he said, was that 7.1 percent said they are now skipping meals.

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

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

Canada’s three big grocery chains, Loblaw, Empire (which owns Sobeys) and Metro, have said in recent months that they’re seeing consumers shift some of their shopping from their premium brand stores to discount chains that they also own, such as No Frills. , FreshCo and Food Basics, respectively.

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

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

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

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

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

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 implement broad price reductions.

Charlebois said consumers can also expect more targeted deals and rebates in the coming months.

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

Whether Canada’s big 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 deny such claims vigorously.

A Star investigation earlier this year found 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) went up slightly during the pandemic.

The investigation found that even slight increases in profit margins accounted for hundreds of millions of dollars in additional profit for the companies, concluding that if gross profit margins had remained steady at 2019 levels, shoppers would have saved $1.4 billion on their grocery bills over the previous year.

The grocers told the Star it was not true that their increased margins stemmed from charging higher prices, instead pointing 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 are profiting off of inflation “reckless and incendiary attacks.”

“I am 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 reaping unreasonable profits on the backs of inflation,” Medline said, speaking at the company’s annual shareholder meeting. “This is absolutely not true.”

Charlebois said he looked into the issue of “greedflation” and did not find evidence of abuse on the part of the grocers.

“Now, that being said, I actually think there’s some work to do 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 put a voluntary freeze on the price of certain key staple foods for a period of a few months, something he said some grocers have done in Europe.

“We hope one grocer will come out with a bold strategy like freezing prices,” Charlebois said, contrasting that with certain grocers offering price matching, in which case the price may still be high, even if it’s the lowest in the market. “Freezing prices would actually send a clear signal in relation to food inflation.”

The three major grocery chains did not comment Wednesday on the idea of ​​a temporary price freeze on staple items.

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