Canadian food retailers may be quenching their thirst for competition, and causing food inflation in the process.
That is the conclusion of Guelph-based agricultural marketing consultant Kevin Grier.
Food inflation is caused by two factors.
One is commodity price changes such as the loss of U.S. vegetable production that underlies a 17 per cent increase during the first three months of the year, he told Real Agriculture.
The second cause of food inflation is increased prices by retailers to boost profits.
Consumer packaged goods price increases of four per cent “are the bell weather” showing if retailers have increased margins.
The packaged goods, usually located in the centre aisles, range from cookies and condiments to ketchup.
The bell weather, in his view, suggests retailers may be easing up a bit on competition.
“There’s only one way you can compete on Heinz ketchup or Oreo cookies. Price. It’s the same if it’s a high-end store or a discount store.
“When they start increasing (packaged goods) it makes me think they’re not competing against each other as hard as they often do.”
The commodity price increases for meat, fresh fruit and fresh vegetables plus consumer-packaged goods are a recipe for continued food inflation in the four per cent range.
Fresh fruit and vegetables make up about 10 per cent of the average food basket.
Grier said Statistics Canada data shows the grocery and supermarket sales increase of four per cent exceeded the general merchandise food sales increase of two per cent for the first time in a while.
General merchandisers like Walmart and Costco and dollar stores have been gaining market share. From 2013 to 2018 these retailers averaged 10 per cent food sales gains compared with three per cent for grocery and supermarket food sales.
If grocery and supermarket retailers ease up on competition, Walmart and Costco will increase market share.
Ron Walter can be reached at [email protected]
