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Published by Pierre Paul on April 13th, 2024

TODAY'S TOPIC:

Why are Canadian food prices so high?

The problem in numbers: In 2023, Canadian food prices rose by a concerning 5.9%. In 2022, that number was even worse, at 10.3%. In an economy where healthy inflation is measured at about 2%, those are some rocky numbers. Food inflation is impacting the lives of all Canadians. If you aren’t rolling in dough (because you went to kindergarten instead of investing in property 25 years ago), you’ve likely had to improvise, adapt, and overcome during these trying times. To survive this recent food-pocalypse, Canadians have had to adopt more cautious shopping habits. They've had to use more coupons, swap out their favourite brands for cheaper alternatives, and unfortunately, eat less than usual. It's of no surprise to anyone why visits to Canadian food banks last year, reached an all time high.

So how do we fix this? Who's responsible? And are plastic bags ever coming back? We answer two of those questions below, but since grocery prices are likely to remain high for a while, Kellogg’s CEO, Gary Pilnick, has a quick-fix for you: Cereal for dinner (yes, he's completely serious).

Who’s to blame for $28 cottage cheese? Who do we beat up? The first culprits in the case against food prices are grocers. Thanks to Canada’s love affair with oligopolies, this conveniently narrows down our suspects to just five companies: Loblaws, Sobeys, Metro, Walmart, and Costco. Together, these corporations account for more than 75% of all food sales in Canada. Ever since food prices "took-off" in 2021, these corporations have faced allegations of profiteering, greedy markups and price gouging.

Watch a customer react to high grocery prices.
Press play to watch

Price gouging? Markups? What are you nerds talking about? Price gouging is just as bad as it sounds. It’s when retailers (or anyone for that matter) charge unreasonable prices to make a fat profit. A markup, on the other hand, is the difference between what it costs to produce an item and the price at which it is sold. The larger the markup, the bigger the profits, and the worse the price gouging. According to the Bank of Canada, grocers marked up their prices in 2020, and coincidentally, the last few years have been some of their most profitable years, ever. So, are the big grocery chains to blame for hyper food inflation?

A dating show
but it's grocery chains.
Press play to watch

Is it time to stage a coup against big grocers? Not so fast. I love a coup as much as the next person, but these companies aren’t entirely to blame for high avocado prices. Yes, markups did increase in 2020, but it wasn’t an attempt to take advantage of customers. Instead, it was an effort to mitigate the potential costs and risks of COVID-19. If grocers could talk, they would say, “We were scared, so we gave ourselves some headroom in case shit hit the fan.” Grocery chains did score major profits during (and long after) the pandemic, but according to some reports, it wasn't due to mischievous price gouging. The pandemic sparked fear in the hearts of many, which led to uncertainty, stockpiling, panic buying, and extra revenue for grocers. On top of that, the closure of restaurants during the pandemic led to a higher reliance on grocery stores for food-related needs. A trend that seems to have stuck around long after restaurants have reopened.

If we can’t blame grocery stores, who do we blame? Maybe the earth is cursed, maybe Mars is still in retrograde, but what's certain is that the last few years have been a tumultuous time for Canada and other economies around the world. To put it simply, it has become more difficult and more expensive to carry out business. Those wildfires that spread across Canada last year led to road closures, destroyed acres of crops, and created a host of logistical issues in trucking and agriculture. President Vladimir Putin, who governs the biggest country in the world, felt that 11% of the Earth's landmass wasn’t enough. The war in Ukraine is felt around the world, emotionally and economically. Russia is one of the largest oil producers in the world, Ukraine is one of the largest exporters of wheat, put these two at war and those commodities are going to be a lot harder to get and a lot more expensive. Lastly, we can’t forget about the COVID-19 restrictions, which led to labor shortages, supply chain disruptions, and border constraints.

These collective factors have led to higher costs of doing business, which are reflected through these higher-than-normal grocery prices.

Will it be like this forever? The short answer is no, there is some light at the end of the tunnel. Inflation is slowing down; Canada's annual CPI dropped from its 8.1% high in June 2022 to 2.8% in February 2024. The Food and Agriculture Organization, a UN-run group that monitors food prices around the world, swears (on their mother's grave, but don't quote me) that food prices are dropping globally. Some fed-up customers have taken to the streets demanding price freezes. And what can you do while you wait for things to settle down? Make use of those coupons, swap out those pesky brand names for cheaper alternatives, and if you’re up for the challenge, cereal for dinner.

Spencin is late on his potato payments, Loblaws pays him a visit.
^{Press play to watch}

The Sketchy Newsletter is written and produced by Pierre Paul. This piece was published on April 13th, 2024.

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