The rise in Canadian grocery retail prices

grocery basketFrom peanut butter to mattresses, the prices of consumer goods in Canada are rising. While the pandemic is an overwhelming factor in the recent price hikes, it’s not the only cause. Several major food manufacturers and brands have cited factors from weather to the Suez Canal crisis as the reason for price increases. What does this mean for the Canadian food industry?

The pandemic cannot be ruled out as a top contributing factor to inflating prices, namely because it disrupted traditional supply and demand. At the outset of the pandemic, factories and production plants quickly began to reduce production due to economic uncertainty. Now, just over a year into the pandemic, these same factories are struggling to meet new and revived demand, while dealing with restrictions on their workforce. With Canadians still stuck at home, rising disposable income has contributed to growing demand for products in a variety of industries – food and beverage included. 

Throughout the grocery retail industry, major parent companies and top food manufacturers like Coca-Cola, General Mills and Hormel Foods have all increased prices since the beginning of the pandemic. Reasons for these pandemic-related price hikes include increased COVID safety restrictions, equipment and precautions, and disruptions at the manufacturer level, like COVID-19 factory outbreaks. On the other hand, many companies are increasing prices for reasons not directly tied to the pandemic. For instance, The J.M. Smucker Company, the manufacturer of Jif and Adam’s peanut butter, has increased its peanut butter prices in Canada because of winter storms, transportation shortages, and shipping fees and delays. In February 2021, the company reported that it would execute pricing actions in response to rising costs and competitive supply disruptions, including raising the price of its Jif peanut butter, an action quickly copied by its competitors.

In March 2021, Statistics Canada reported on the price increase in the food and beverage industry. According to this report, food prices were up 11.4 per cent year-over-year in March. Likewise, according to “Canada’s Food Price Report,” “annual food expenditure for the average Canadian family of four is predicted to be about $13,907 in 2021” a figure that’s increased $695 from 2020. Finally, the report found that the average Canadian adult can expect to pay about $160 more annually for groceries. Price increases for Canadians’ groceries are something to watch in the next few months, especially as the country transitions from pandemic to post-pandemic life. It will be interesting to watch the decisions consumers will make about what does and does not go into their grocery baskets as prices across many other sectors are rising as well, and if Canadian food retailers respond by passing along higher prices directly to their consumers.