Higher food prices in Canada not a bad thing

Higher food prices lead to better quality and service and more selection than ever before

Reading Time: 3 minutes

Sylvain CharleboisWhy do Canadian consumers face escalating food prices while most of the industrialized world is seeing lower food inflation rates? And should we be concerned?

Again this year, Canadian consumers had to cope with higher grocery prices: the cost of food in stores rose by 4.1 per cent, which was significantly above the nation’s overall inflation rate. The average Canadian household paid about $325 more in 2015 for the same products, year over year.

And recent forecasts project that the average Canadian household will pay an additional $365 for the same food over the next 12 months.

In most of Europe, food inflation barely reached one per cent in the past year. In some regions of Europe, supplies exceed demand for many commodities due to Russian embargoes that began more than a year ago. This is the case for dairy and meat products, in particular. Food distributors are desperately fighting to maintain profit margins while trying to expand sales.

The U.S. is still the champion of the cheapest calories in the world — most households spend less than seven per cent of their budget on food. That is less than half of what European households spend. But using only the United States as a benchmark when looking at food prices is unwise. On economics alone, the country’s population density and sugar-centric food trends make the American market different from ours, at least from a pricing perspective.

In recent years, Canadians have seen higher food prices, with meat increasing by 30 per cent in the last two years. Yet in Canada, we still have among the cheapest food basket in the world relative to salaries. Only a handful of countries offer a better deal than Canada’s food prices in relation to consumers’ wealth.

However, Canadian food prices are slowly catching up to other countries.

So who wins with higher prices?

Food distributors, for one. Most food retailers in Canada have posted impressive financial results this year, since they face lower competition and generate higher profit margins. Food retailers continue to protect margins and generate bottom-line increases, no easy task. Shareholders are also obvious beneficiaries. But consumers also gain from a financially healthy food distribution sector.

With incredibly low profit margins, price wars generate casualties, similar to those witnessed in Canada in the 1970s and early 1980s. A highly competitive food marketplace forces everyone to compete on price. Everything else — service, taste, experience, variety, for example — becomes secondary.

With a better balance of power in the marketplace, and better management, the industry can respond more effectively to consumer needs.

Because the industry has become more responsive in the past few years, we can expect certain dominant trends to continue into the New Year. Consumers can look forward to more supply chain transparency, more focus on animal welfare, and greater attention given to gut health and vegetable proteins.

One trend that is missing in the industry, however, is the movement toward female leadership. Given that the majority of food consumers are still women, it is surprising that few females have influential roles in the industry.

The gender imbalance is most obvious, even embarrassing, when attending key industry events and award ceremonies. There you notice that perhaps 90 per cent of the industry’s key roles are held by men.

Certainly the current leaders are very capable, but if the voice of the consumer is key (as indeed it is), then women need stronger roles in the food retail upper echelon. If that happens, the industry will only get stronger.

So yes, shopping for food is getting more expensive in Canada, but the quality and service we receive from the industry have never been better.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

Sylvain is a Troy Media contributor. Why aren’t you?

© Troy Media


higher food prices

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

Sylvain Charlebois

Sylvain Charlebois is a Canadian researcher and professor in food distribution and food policy at Dalhousie University in Halifax, Nova Scotia, Canada. He is Dalhousie's past Dean of the Faculty of Management and is a professor and Director of the Agri-Food Analytics Lab.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.